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( Source of the document: ICC Digital Library )
Unusually, our page 3 story features a debate. The subject, UCP 600 article 12, is not a new one in DCInsight. But it's one that continues to excite interest from readers.
In this case, our two correspondents have diametrically different views on the precision with which article 12 is drawn.
One view, eloquently expressed by Rupnarayan Bose, contends that article 12 doesn't necessarily protect holders of deferred payment undertakings from the fraud defence and points to the primacy of negotiable instruments law. The other, by Jim Barnes, stresses that "Negotiable instruments law... is a poor substitute for ... L/C law based on the 'independence' of L/C obligations."
This argument calls to mind others in past issues of Insight, in which commentators have pointed out that certain articles of the UCP are at variance with laws passed in a range of countries. The question then arises: do the UCP, as voluntary rules of practice, have to mimic laws, whether on bills of exchange, insurance or other topics, or is the UCP a unique set of rules for a specific product that follow rules of their own? Of course, if there's a conflict, adherents of the UCP have always accepted that laws trump rules of practice in every case.
Also in this issue we include a special section on the Bank Payment Obligation (BPO), the joint SWIFT/ICC product that, in the words of André Casterman, looks set "to revolutionize trade finance". Taking account of the rise of electronic banking and the increasing move to open account, the two organizations are developing rules that place a legal obligation on the issuing bank to pay the recipient bank subject to the successful electronic matching of compliant data. It's no exaggeration to say that when the BPO rules are operational, they could constitute the most significant development in trade finance since the UCP first came into effect in 1933.