What Is Compliant Presentation under the Law of Documentary Letters of Credit?A Critical Analysis of Article 14 of the UCP 600

Abstract

 Documentary letters of credit are among the most popular methods of payment in international transactions. The key to their success is in reducing the risk for exporters by replacing importers’ financial undertakings with a guarantee of payment from a bank. Within the framework of a complicated process, a bank will guarantee to honour the seller’s presentation of complying documents with terms of credit on behalf of the creditworthy buyer, who will compensate the bank based on another contract. By applying two principles of autonomy and strict compliance, documentary credit mitigates the existing commercial risk of trade between a buyer and seller who are in different countries and have no information about the financial capacities of each other’s businesses. These two principles are regulated under the Unified Customs and Practices for Documentary Letters of Credit (the UCP), which was promulgated by the International Chamber of Commerce for the first time in 1933. The constant revisions of the UCP (current version UCP 600), which reflected current market practices, resulted in a global turnout of traders and its recognition as one of the most successful sets of rules introduced by the private sector. The main idea behind the introduction of the UCP (as confirmed by ICC officials) was to harmonise rules applicable to international LC transactions at the global level. However, it should be noted that the UCP has no power of law, and in case of any conflict between its provisions with national law or absence thereof among its provisions, national law will prevail. Therefore, it is of crucial importance that its degree of harmonisation with national laws in preventing possible losses to traders and bankers active in the practice of international trade finance be defined.

This paper studied general requirements for compliant presentation within 14 articles of the UCP 600 in comparison with requirements under English Law. In order to provide a complete picture to the reader, this paper analysed the respective sections of other ICC publications, including ISBP 745745, DOCDEX decisions, and ICC Banking Commission Opinions along with the UCP. The main purpose behind this paper is two-fold: Firstly, it tries to provide a legal analysis of the general framework of compliance requirements for documents under the UCP 600. Secondly, it strives to find existing conflicts between respective provisions in the UCP 600 and English Law. Recognition of such conflicting areas can be used as advice for the drafting committee of the UCP to achieve their goal of further harmonising the practice of international trade finance.