Actual Problems of
Economics and Law




DOI: 10.21202/1993-047X.10.2016.3.123-150

скачать PDF

Authors :
1. Hamed Alavi, Lecturer; PhD candidate, Faculty of Law
Tallinn Law School, Tallinn University of Technology; Universitat Autònoma de Barcelona, Spain

Exceptions to principle of autonomy in documentary letters of credit; a comparative view

Objective: comparative analysis of exceptions to the principle of autonomy of documentary letters of credit.

Methods: dialectical method, systemic method, analysis, synthesis, comparison.

Results: it is proved that documentary letters of credit are among the most popular methods of payment in international trade which facilitate the process of transaction by replacing risk of payment by applicant buyer with the guarantee of bank. It is proved that operation of documentary letters of credit (LC) is subjected to two globally recognized principles of autonomy (independence) and strict compliance. A rule is identified, according to which courts in different countries started to recognize exceptions to the principle of autonomy in international LC transaction despite their reluctance in interfering in function of autonomy principle.

Scientific novelty: the article views the principle of autonomy and recognized exceptions to it in comparative aspect, proves the to recognize exceptions to the principle of autonomy in international LC transaction among common law jurisdictions, lists the exceptions recognized by courts and analyzes the attitude of the courts in other common law jurisdictions.

Practical significance: the paper is addressed to researchers and educators, practicing lawyers, graduate and post-graduate students, and everyone interested in the principle of autonomy of documentary letters of credit.

Keywords :

Civil law; Documentary letter of credit; Principle of autonomy; Principle of strict compliance; International trade; Methods of payment; International transactions

Bibliography :

1. Arkins J. R. C. (2000). Snow white vs. Frost white: The New Cold War in Banking Law, Journal of International Banking Law, J.I.B.L., 2000, 15(2), 30–41.
2. Dolan J. F. (1996). The Law of the Letter of Credit: Commercial and Standby Credits, Fourth Ed, Warren, Gorham & Lamont Incorporated, USA, 250.
3. Enonchong N. (2011). The independence principle of letters of credit and demand guarantees. Oxford University Press.
4. Gao X., & Buckley, R. P. (2003). Comparative Analysis of the Standard of Fraud Required under the Fraud Rule in Letter of Credit Law, A. Duke J. Comp. & Int'l L., 13, 293.
5. Garcia RLF. Autonomy principle of the letter of credit (2009), Mexican Law Review, 69.
6. Trade Finance Fraud – Understanding the Threats and reducing the Risk, A Special Report prepared by the ICC International Maritime Bureau (Paris), 2002, p. 9.
7. Buckley R. P. & Gao X. (2002), p. 663 referring to Anon ”Fraud in the Transaction”: Enjoining Letters of Credit during the Iranian Revolution’ 93 (1980) Harvard Law Review. p. 92.
8. Schmitthoff’s Export Trade – The Law and Practice of International Trade (12th ed., 2012) Sweet & Maxwell, p. 210.

9. Gao X., The fraud rule in the law of Letters of Credit (2002), The Hague, p. 30.
10. Lu Lu. The Exceptions in Documentary Credits in English Law. (2011), p. 75.
11. Kelly-Louw M., 2008. Selective legal aspects of bank demand guarantees (Doctoral dissertation), 222.
12. Ellinger P., Noe D., The Law and Practice of Documentary Letters of Credit, (2010), 170.
13. Donnelly K. ‘Nothing for nothing: a nullity exception in letters of credit’ (2008) 4 JBL 316, 317.
14. Guest A. (Gen ed). Benjamin's Sale of Goods, 6th edn (Sweet & Maxwell 2002) [19-034].
15. Malek A. and Quest D., 2009. Jack: Documentary Credits, Tottel Publishing, 250.
16. Neo D.‘A Nullity Exception in Letter of Credit Transactions’ (2004) Singapore Journal of Legal Studies 46, 71.
17. Goode R. M. Commercial Law , Second Edition (London, Penguin 1995), 1009.
18. Hooley R. ‘Fraud in Documentary Credits: is there a nullity exception’ (2002) Cambridge Law Journal, 279, 281.
19. Goode R. Commercial Law (4th edn, Penguin, 2009) 1104–1106.
20. Alavi, H. (2016). Comparative study of Unconscionability exception to the principle of autonomy in law of Letter of Credits. Acta Universitatis Danubius. Juridica, 12(2). 94.

21. Pierce A. Demand Guarantees in International Trade (Sweet & Maxwell, 1993), 198.
22. Fedotov A. ‘Abuse, unconscionability and demand guarantees: new exception to independence’ (2008) 11 Int'l Trade & Bus L Rev, 49, 62.
23. Loi K. ‘Two decades of restraining unconscionable calls on performance guarantees’ (2011) 23 SAcLJ 504, 512.
24. Mugasha A. ‘Enjoining the Beneficiary’s Claim on a Letter of Credit or Bank Guarantee’ (2004) 5 JBL 515.
25. Enonchong N. The Autonomy Principle of Letters of credit: an Illegality exception? (2006) LMCLQ.
26. Mc Laughlin G. Standby Letters of Credit and Guaranties: An Exercise in Cartography (1993) 34 Wm.
27. McLaughlin G. Letters of Credit and Illegal Contracts: The Limits of the Independence Principle (1989) 49 OHIO ST LJ, 1197.
28. Stowe H. ‘The “Unruly House” has Bolted’ (1994) 57 MLR 441; R Buckley, ‘Law’s Boundaries and the Challenge of Illegality’ in R Buckley (ed), Legal Structures (Chancery Wiley Law publications 1996), 233.

Citation :

Alavi H. Exceptions to principle of autonomy in documentary letters of credit; a comparative view, Actual Problems of Economics and Law, 2016, vol. 10, No. 3, pp. 123–150. DOI: http://dx.doi.org/10.21202/1993-047X.10.2016.3.123-150

Type of article : The scientific article

Date of receipt of the article :

Date of adoption of the print :

Date of online accommodation :