Conclusion
5.50
The use of documentary credits to finance international sales transactions has been declining steadily in recent years.[545] In some regions, such as South America, continental Europe, and the UK, use of this instrument as a means of obtaining payment continues to stagnate.
Part of the reason for the dwindling interest in the letter of credit appears to derive from the unsatisfactory approach to the interpretation and application of certain UCP provisions and common credit terms. As discussed above, both the UCP and letters of credit themselves are international contractual documents, so that complex issues of interpretation can arise. These can be overcome. The starting point entails a proper appreciation of the predominant object of construction, namely ascertaining the meaning that the credit's terms (including those UCP provisions that are incorporated by reference) would convey to a reasonable person in the class of persons likely to participate in the operation of the credit, such as international bankers, experienced international merchants, and trade-finance professionals. Accordingly, the UCP 600 should be construed purposively and in an international spirit in order to inject sustainable life and meaning into its provisions. Conversely, provincial banking practice and textualism should be avoided where possible. Applying the principles of contractual interpretation also involves a recognition that the codified rules of banking practice in the UCP have no freestanding, self-executing statutory flavour; they need incorporation into a credit in order to govern the parties' rights and obligations (albeit that, even absent incorporation, the UCP may have limited application to a credit as evidence of the prevailing practice regarding the examination and handling of documents tendered for payment). As the UCP is effectively a set of standard terms incorporated by reference into a credit, it only applied to the extent that its provisions advance the ostensible commercial purpose of the credit's express terms; in the event of inconsistency, the UCP is disregarded. Ultimately, the UCP aims to serve the objectively ascertainable business interests and expectations of the parties to the credit, not any separate intention disclosed by the code's literal wording.5.51 Much the same suggestion applies to ICC publications, which are released to assist document-checkers handling documents in banks' trade-finance departments. Prudent and cautious use should be made of this published guidance when dealing with the requirements of the UCP 600. Presenting nominated banks and beneficiaries need to eschew unthinking employment of their precepts. From the beneficiaries' perspective, it is clear that overconfident reliance on this secondary material as the foundation for claims asserting the wrongful dishonour of a presentation is fraught with considerable litigation risk. From the nominated bank's perspective, an over-reliance on the express words of the UCP and inadequate attention to the secondary material may cause a bank to take a course that would result in liability. For example, the course of action prescribed by article 14(h) of the UCP 600, when an examining bank is confronted with a non-documentary stipulation, is expressed in the clearest words. An examining bank would, however, be well-advised to give due attention to the current version of the ISBP.[546] In substance, this supports the view that non-documentary conditions cannot just be ignored outright, but actually demand careful consideration from the document-scrutineer: it is only the absence of reasonable documentary proof regarding compliance with a non-documentary condition that furnishes a valid ground for the document-checker to reject the tendered documents and refuse payment. Merchants who have the contractual advantage of an absolute promise of payment against complying documents must be alive to the requirements of the credit they seek to enforce and cannot blame such rejection on anyone else.
More on the topic Conclusion:
- Conclusion
- Conclusion
- Conclusion
- Conclusion
- Conclusion
- Conclusion
- Conclusion
- Conclusion
- Conclusion
- Hare C., Neo D. (eds.). Trade Finance: Technology, Innovation and Documentary Credit. Oxford University Press,2021. — 417 p., 2021