Any views?
If a letter of credit was issued subject to UCP 600 and Confirmed by a bank in Country X.
If a dispute arose under the LC in country X would the provisions of UCP 600 prevail or local national law.
My own view is that most local national law is generallly descriptive in nature whereas UCP are operational rules of practice.
However, should it come to a crux then local law would moste likely prevail.
Any experiences?
Thank you
Svetlana
[edited 1/30/2008 6:33:08 AM]
[edited 1/30/2008 6:33:36 AM]
UCP 600 and National Law
UCP 600 and National Law
Svetlana,
If you have not already, you need to get some legal text books on documentary credits, such as ‘Documentary Credits’ by (Judge) Raymond Jack & others, 3rd ed., published by Butterworths.
Anyway, the UCP will always have to yield to the mandatory (as opposed to the ‘dispositive’) provisions of the law applicable to the D/C.
If you have not already, you need to get some legal text books on documentary credits, such as ‘Documentary Credits’ by (Judge) Raymond Jack & others, 3rd ed., published by Butterworths.
Anyway, the UCP will always have to yield to the mandatory (as opposed to the ‘dispositive’) provisions of the law applicable to the D/C.
UCP 600 and National Law
Dear Mr.Smith
Thank you and I will get the valued publication without delay.
I think you are agreeing that the local national law will prevail which I believe is the correct answer as UCP are rules of practice.
Please excuse my lack of understanding and my not so perfect use of English language, but what is meant by ‘dispositive’ provisions of the law?
Does this mean the wording of the law will prevail except where items are not covered by the law and then the UCP provisions that applied to the instrument will apply?
Thank you
Svetlana
Thank you and I will get the valued publication without delay.
I think you are agreeing that the local national law will prevail which I believe is the correct answer as UCP are rules of practice.
Please excuse my lack of understanding and my not so perfect use of English language, but what is meant by ‘dispositive’ provisions of the law?
Does this mean the wording of the law will prevail except where items are not covered by the law and then the UCP provisions that applied to the instrument will apply?
Thank you
Svetlana
UCP 600 and National Law
‘Rules of law … are of two kinds: dispositive (ius dispotivum) and mandatory (ius cogens). Dispositive (or suppletive) rules are those designed to regulate the rights and obligations of contracting parties on matters for which they have not provided in their agreement. Such rules may therefore be freely varied or excluded in their entirety by the terms of the contract.’
‘Commercial Law’, Roy Goode, 3rd ed., Penguin.
[edited 1/30/2008 3:55:57 PM]
‘Commercial Law’, Roy Goode, 3rd ed., Penguin.
[edited 1/30/2008 3:55:57 PM]
UCP 600 and National Law
The law of country X should apply to the obligations of the confirming bank, but the obligations of the issuing bank should be governed by the law of the place of issuance. I say "should", because each court looks to its own rules to decide which laws apply to which obligations. Most courts will give effect to whatever laws are chosen, failing which, a court may look to general contract conflict-of-laws rules or special LC based conflict-of-laws rules.
UCP 600 and National Law
Jim,
I am not sure why you say ‘should’. I find the English courts’ approach -in essence that the law applicable to the issuing bank’s obligations is that of the jurisdiction where the nominated bank is located- is far better. This is because when there is a injunction against the issuing bank -granted by a court in the jurisdiction where the issuing bank is located (in a ‘post-honour’ situation)- preventing it paying the nominated bank, the nominated bank can correctly argue that as the issuing bank’s obligations are governed by another law (i.e. not that of the jurisdiction in which the issuing bank is located) the court injunction is of no effect on the issuing bank’s obligations. The nominated bank can then successfully recover in its own jurisidiction (provided the issuing bank has assets in it, such as an account with the nominated bank) without needing to bother about the lifting of the injunction against the issuing bank and without the issuing bank being legally able to prevent this. (In my experience issuing bank’s simply make no attempt to protect a nominated bank that has honoured in good faith etc. by trying to get injunctions lifted.) I have been successfully involved in such circumstances twice in the last few years in England.
Regards, Jeremy
[edited 2/5/2008 10:49:30 AM]
I am not sure why you say ‘should’. I find the English courts’ approach -in essence that the law applicable to the issuing bank’s obligations is that of the jurisdiction where the nominated bank is located- is far better. This is because when there is a injunction against the issuing bank -granted by a court in the jurisdiction where the issuing bank is located (in a ‘post-honour’ situation)- preventing it paying the nominated bank, the nominated bank can correctly argue that as the issuing bank’s obligations are governed by another law (i.e. not that of the jurisdiction in which the issuing bank is located) the court injunction is of no effect on the issuing bank’s obligations. The nominated bank can then successfully recover in its own jurisidiction (provided the issuing bank has assets in it, such as an account with the nominated bank) without needing to bother about the lifting of the injunction against the issuing bank and without the issuing bank being legally able to prevent this. (In my experience issuing bank’s simply make no attempt to protect a nominated bank that has honoured in good faith etc. by trying to get injunctions lifted.) I have been successfully involved in such circumstances twice in the last few years in England.
Regards, Jeremy
[edited 2/5/2008 10:49:30 AM]
UCP 600 and National Law
Jeremy,
I say "should", because this is the conflict of laws approach codified in revised UCC Article 5 (and also in the URDG). Alternative approaches were considered and rejected. (I was substantially involved in drafting the revised UCC conflict of laws provisions.)
The English case law alternative approach leads to favoring the law of the place where the beneficiary, as well as nominated bank, is located--laws with which the issuer may be unfamiliar. It is awkward to establish conflict of laws rules by focusing on extraordinary defenses (such as local government or court order) rather than ordinary defenses to honor (such as strict or not so strict compliance and preclusion).
Regards, Jim
I say "should", because this is the conflict of laws approach codified in revised UCC Article 5 (and also in the URDG). Alternative approaches were considered and rejected. (I was substantially involved in drafting the revised UCC conflict of laws provisions.)
The English case law alternative approach leads to favoring the law of the place where the beneficiary, as well as nominated bank, is located--laws with which the issuer may be unfamiliar. It is awkward to establish conflict of laws rules by focusing on extraordinary defenses (such as local government or court order) rather than ordinary defenses to honor (such as strict or not so strict compliance and preclusion).
Regards, Jim
UCP 600 and National Law
I can see 'where you are coming from', Jim. However, in the case of URDG Articles 27 & 28 these are always overridden by guarantors (that know what they are doing) in the case of 'indirect' guarantee transactions, i.e. where the g'tor has had a counter-g'tee issued in its favour. Similarly, I have no doubt that -given an express choice- a nominated bank would want the issuing bank's obligation's governed by the law of the 'place of business' of the nominated bank.
[edited 2/8/2008 10:43:53 AM]
[edited 2/8/2008 10:43:53 AM]