Is it poosible to incorporate a clause in the SBLC (subject to ISP98) allowing beneficiary to transfer the LC by its own, without refeering to the issuing/confirming bank ?
I know for compliance reason we should not allow beneficiary to transfer an L/C by its own but i like to know is there any restriction in ISP98 or UCP 600 to transfer the L/C by the beneficiary.
Regards,
Shahed
SBLC transfer by the Beneficiary
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RobReissner
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SBLC transfer by the Beneficiary
Shahed,
Both UCP600 Art. 38 and ISP98 Rule 6 are based on the understanding that a (SB)LC may be transferred by respectively a nominated bank or person. I.e. always a party other than beneficiary. Apart from that I would, for more than one reason, deem it completely undesirable to grant beneficiary that position.
Regards,
Rob Reissner
Both UCP600 Art. 38 and ISP98 Rule 6 are based on the understanding that a (SB)LC may be transferred by respectively a nominated bank or person. I.e. always a party other than beneficiary. Apart from that I would, for more than one reason, deem it completely undesirable to grant beneficiary that position.
Regards,
Rob Reissner
SBLC transfer by the Beneficiary
Sorry for not noticing this earlier.
While most SLCs in the US are straight and non-transferable, several important SLC types are transferable by demand.
So-called financial standbys that support rated debt obligations typically run to a trustee bank and allow that bank to demand transfer to a substitute trustee bank. Similarly, SLCs given in lieu of security deposits under lease agreements typically provide that the LC issuer must recognize a successor landlord (or successor managing agent).
The transfer on demand feature is is typically done by including in the SLC an undertaking to recognize a transfer if it is preceded by the presentation of a signed and dated transfer demand in the form attached to the SLC. A transfer demand form is attached to the SLC and recites that a transfer of the underlying obligation has occurred and that the LC transferee is the new underlying obligee, that all rights are transferred, that a transfer fee accompanies the demand, etc.
The SLC text or the demand form might or might not condition transfer or payment to a transferee on compliance with sanctions' laws, as compliance with sanctions' law goes without saying.
Regards Jim
[edited 12/29/2009 7:12:08 PM: two typos]
While most SLCs in the US are straight and non-transferable, several important SLC types are transferable by demand.
So-called financial standbys that support rated debt obligations typically run to a trustee bank and allow that bank to demand transfer to a substitute trustee bank. Similarly, SLCs given in lieu of security deposits under lease agreements typically provide that the LC issuer must recognize a successor landlord (or successor managing agent).
The transfer on demand feature is is typically done by including in the SLC an undertaking to recognize a transfer if it is preceded by the presentation of a signed and dated transfer demand in the form attached to the SLC. A transfer demand form is attached to the SLC and recites that a transfer of the underlying obligation has occurred and that the LC transferee is the new underlying obligee, that all rights are transferred, that a transfer fee accompanies the demand, etc.
The SLC text or the demand form might or might not condition transfer or payment to a transferee on compliance with sanctions' laws, as compliance with sanctions' law goes without saying.
Regards Jim
[edited 12/29/2009 7:12:08 PM: two typos]
SBLC transfer by the Beneficiary
Jim,
I agree that compliance with sanctions law prevailing in the jurisdiction within which the issuing office is located goes without saying. (Having said that, if the standby is subject to a different law this could still presumably cause problems e.g. a foreign court ordering the issuer to take action in contravention of its own jurisdiction’s sanctions law. The issuer logically would then be faced with the choice of being in contempt of court or breaching its own jurisdiction’s law.)
However, many issuers feel obliged to apply the sanctions law of other jurisdictions, particularly that of the USA. This even when the standby (the subject under discussion) is, on its face, not even ‘cross-border’ or when the standby is expressly subject to a law other than that of a US state. Therefore, I would expect any bank that has this approach to seek to avoid the overriding of Rule 6.02(b)(iii) (ISP98) or sub-Art. 38(a) (UCP600) as appropriate.
Happy New Year & regards, Jeremy
[edited 12/30/2009 9:38:51 AM]
I agree that compliance with sanctions law prevailing in the jurisdiction within which the issuing office is located goes without saying. (Having said that, if the standby is subject to a different law this could still presumably cause problems e.g. a foreign court ordering the issuer to take action in contravention of its own jurisdiction’s sanctions law. The issuer logically would then be faced with the choice of being in contempt of court or breaching its own jurisdiction’s law.)
However, many issuers feel obliged to apply the sanctions law of other jurisdictions, particularly that of the USA. This even when the standby (the subject under discussion) is, on its face, not even ‘cross-border’ or when the standby is expressly subject to a law other than that of a US state. Therefore, I would expect any bank that has this approach to seek to avoid the overriding of Rule 6.02(b)(iii) (ISP98) or sub-Art. 38(a) (UCP600) as appropriate.
Happy New Year & regards, Jeremy
[edited 12/30/2009 9:38:51 AM]
SBLC transfer by the Beneficiary
Jeremy makes a good point that a cross-border SLC issuer might wish to provide expressly that its undertaking to recognize a transferee is subject to "sanctions" laws. My prior post described financial standby practices which involve US beneficiaries and US branches of US and non-US issuing banks (and typically include an express choice of local law).
In April 2008 I wrote a rather longish letter to the IFSA on the topic of sanctions' clauses. It reflected my views that sanctions' clauses are generally unnecessary, that most of the clauses being added to LCs created more problems than they solved, and that banks that insisted on saying something in their cross border LCs should consider adding choice of law language, e.g.:
"This letter of credit is issued subject to UCP600/ISP98 and is governed by the laws of ___________ (including, without limitation, United States, European Union, United Nations, and foreign sovereign judicial orders and government regulations that mandate dishonor of letter of credit obligations and that are enforceable under the chosen governing laws)."
OR, if a choice of law clause is not feasible, then a targeted sanctions' clause, e.g.:
"We disclaim liability for delay, non-return of documents, non-payment, or other action or inaction compelled by a judicial order or government regulation applicable to us."
Happy new year to all. Jim
In April 2008 I wrote a rather longish letter to the IFSA on the topic of sanctions' clauses. It reflected my views that sanctions' clauses are generally unnecessary, that most of the clauses being added to LCs created more problems than they solved, and that banks that insisted on saying something in their cross border LCs should consider adding choice of law language, e.g.:
"This letter of credit is issued subject to UCP600/ISP98 and is governed by the laws of ___________ (including, without limitation, United States, European Union, United Nations, and foreign sovereign judicial orders and government regulations that mandate dishonor of letter of credit obligations and that are enforceable under the chosen governing laws)."
OR, if a choice of law clause is not feasible, then a targeted sanctions' clause, e.g.:
"We disclaim liability for delay, non-return of documents, non-payment, or other action or inaction compelled by a judicial order or government regulation applicable to us."
Happy new year to all. Jim