Rules Governing the Examination of Documents in the Law of Documentary Letters of Credit

Documentary letter of credit which has been described as the lifeblood of the international trade is one of the most common methods of payment and financing in international transactions, due to its special features. In the documentary credit operation, the realisation of the credit depends on compliant presentation by the beneficiary and examination and determination of presentation compliance by the banks, and the phase of checking documents plays a key role in implementation of the said process. The examination of documents by the issuing bank, confirming bank and nominated bank is subject to certain rules and requirements which can be raised under the titles including applying reasonable care, reviewing documents on their face, prescribed time for examination, consistency of documents, additional documents and data and non-documentary requirements. Obviously, the exact identification of rules and regulations governing the examination of documents by banks is of great importance in order to reduce the risk of transactions and stabilize the validity of letters of credit, and causes the beneficiary, applicant and banks not to encounter unjustified non-payment, illegal payment and lack of reimbursement respectively. This article attempts to respond the difficulties and ambiguities in this area on the basis of the Uniform Customs and Practice for Documentary Credits, the International Standard Banking Practice, other opinions and decisions of the International Chamber of Commerce and leading judgments in the case law.