Preface

The collection of essays focuses on an area that, whilst fundamentally important in practice, has received relatively limited academic airtime. This is surprising given the knotty doc­trinal, conceptual and practical difficulties that the trade finance area can throw up.

This pivotal moment for trade finance led to the holding of a symposium entitled Trade Finance for the 21st Century, in March 2018. This event was hosted and funded by the Centre for Banking & Finance Law at the Faculty of Law, National University of Singapore. Speakers were invited to present papers relating to topics such as persistent difficulties in traditional trade finance and to consider technological and innovative ways of developing trade finance mechanisms. The presentations were followed by responses from invited com­mentators with expertise in different aspects of trade financing, and discussion amongst the participants.

The symposium highlighted six core themes relevant to modern trade finance. The first theme was the impact of technology and digitization, both in relation to traditional forms of financing (such as the documentary letter of credit) and newer solutions (such as the bank payment obligation). Increased use of technology has given rise to other issues re­garding the application of domestic law principles and the role and significance of the con­flict of laws. The second theme concerned the reform of the frameworks within which trade finance operates. In particular, whilst the UCP regime has undoubtedly been successful, there are some persistent issues (such as the meaning of ‘negotiation’, the standard of docu­mentary compliance or the form required of transport documents) that should be remedied through a further revision of the UCP 600. Unfortunately, this looks increasingly unlikely. Accordingly, there is need to find alternative frameworks, whether legal, contractual or technological, within which trade finance activity can operate. The third theme related to financial innovation, whether the development of the BPO, the use of blockchain tech­nology for trade finance or the use of supply-chain financing, syndication or securitization structures to provide liquidity and manage risk. The fourth theme concerned the role that national law still plays in trade finance, despite the harmonizing tendency of the UCP re­gime. Accordingly, national law still has to determine such important issues as the contrac­tual nature of the letter of credit, whether nominated and other banks qualify as agents and how one determines the law applicable to a particular letter of credit. This stems from the fact that the UCP regime represents a restatement of international banking practice, rather than international banking law, so that, without the underpinnings of domestic law, trad­itional trade finance structures would be inoperable.

The chapters in this volume were accordingly drafted in light of these six symposium themes, which in turn informed this volume's overall structure. Part I focuses upon trad­itional trade finance mechanisms, such as the documentary letter of credit and perform­ance bond. Whilst these mechanisms are undoubtedly facing challenges from technology and innovation, they remain (and are likely to continue to be) the most significant aspect of the trade finance landscape. That said, traditional trade finance faces a number of per­sistent problems: the difficulties of keeping the UCP regime relevant and workable; the fun­damental nature of the letter of credit; and the problems of documentary compliance, fraud, “soft clauses” and foreign stop orders.

Whilst constant innovation is important, its limits must be recognized: for every innova­tive success, there will be countless failures. Accordingly, some of the forms of innovation considered in this volume may take root and become a dominant force in trade, others may disappear into obscurity.

Indeed, the tripartite structure of this volume is itself innovative in the academic trade fi­nance field. Whilst there are authoritative academic publications dealing with letters of credit and (to a lesser degree) performance bonds, little academic attention has been given to the place of those traditional trade finance instruments within the broader, developing trade finance context. Indeed, the academic conversation in the trade finance area has be­come rather muted since the advent of the UCP 600. This volume will hopefully show that the letter of credit remains an important (but not the only) player in the trade-finance game and retains an academic vibrancy that is worthy of further critical investigation.

We would like to thank the contributors for their interesting and informative chapters, and our publishers, Oxford University Press, for their support and hard work on this volume. We would also like to thank the participants and commentators at our symposium for their helpful contributions to the development of the chapters in this volume. We are grateful to the Centre for Banking & Finance Law at the Faculty of Law, National University of Singapore, for funding this research project.

Christopher Hare and Dora Neo