INTERNATIONAL TRADE FINANCE - Complicated Rules, Conventions and ICC Official Opinions on International Trade Finance

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  1. The names of the parties, as well as the data and information in the cases stated below, have been sanitized in order to protect the identity of the parties involved. The complexities of the cases have also been simplified to facilitate easy understanding of the key issues involved.
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International trade finance consists of collections (D/A & D/P), banker's acceptance, letter of credit, standby letter of credit, discounting, negotiation, forfeiting, factoring, trust receipt, banker's demand guarantee and letter of indemnity.

Each of the above mentioned tools in international trade finance works on different concepts and procedures. Each finance tool needs a separate set of rules to codify the international banking practice to avoid disputes. The Banking Commission of the International Chamber of Commerce (ICC) in Paris is the international organization responsible for drafting these rules. To name a few examples, here they are:

Collections
  1. Uniform Rules for Collections, ICC Publication No. 522 (URC 522).
  2. United Nations Convention on Contracts for International Sale of Goods, (CISG or the Vienna Convention).
  3. Incoterms 2000, ICC Publication No. 560.
  4. UNCTAD/CC Rules for Multimodal Transport Documents, ICC Publication No. 481.
Banker's Demand Guarantees
  1. Uniform Rules for Demand Guarantees, ICC Publication No. 458.
Letters of Credit
  1. Uniform Customs and Practice for Documentary Credits, ICC Publication No. 500 (UCP 500).
  2. Uniform Rules for Bank-to-bank Reimbursements under Documentary Credits,

ICC Publication No. 525 (URR 525).

  1. International Standard Banking Practice (ISBP), ICC Publication No. 645.
  2. eUCP, ICC Publication No. 500/3, Version 1.1.
  3. International Standby Practices (ISP98).
  4. United Nations Convention on Independent Guarantees and Stand-by Letters of Credit.

To clarify the interpretations and implications of certain Articles in ICC rules such as the UCP 500, the ICC Banking Commission in Paris has published the following statements and publications:

  1. Position Papers No. 1, 2, 3 & 4 on UCP 500.
  2. The Impact of the European Single Currency (Euro) on Monetary Obligations Related to Transactions Involving ICC Rules.
  3. The Determination of An "Original" Document in the Context of UCP 500 Sub-Article 20 (b).
  4. Examination of Documents, Waiver of Discrepancies and Notice under UCP 500.
  5. Transferable Credits and UCP 500.
  6. International Standard Banking Practice (ISBP) - Corrigenda.
  7. Statement Concerning Terms and Conditions on Bills of Lading.
  8. When A Non-bank Issues A Letter of Credit.
  9. Banking Commission Statement on A Future UCP 500 Revision.
  10. Decisions (1975 - 1979) of the ICC Banking Commission, ICC Publication No. 371.
  11. Opinions (1980 - 1981) of the ICC Banking Commission, ICC Publication No. 399.
  12. Opinions (1984 - 1986) of the ICC Banking Commission, ICC Publication No. 434.
  13. Opinions (1987 - 1988) of the ICC Banking Commission, ICC Publication No. 469.
  14. Opinions (1989 - 1991) of the ICC Banking Commission, ICC Publication No. 494.
  15. Opinions (1995 - 1996) of the ICC Banking Commission, ICC Publication No. 565.
  16. Opinions (1998 - 1999) of the ICC Banking Commission, ICC Publication No. 613.
  17. Case Studies on Documentary Credits under UCP 500, ICC Publication No. 535.
  18. Case Studies on Documentary Credits, ICC Publication No. 459.
  19. UCP 500 & 400 Compared, ICC Publication No. 511.
  20. ICC Guide to Documentary Credit Operations for the UCP 500, ICC Publication No. 515.
  21. ICC Guide to Collection Operations, ICC Publication No. 561.
  22. More Case Studies on Documentary Credits, ICC Publication No. 489.
  23. More Queries and Responses on UCP 500 (1997), ICC Publication No. 596.
  24. ICC Banking Commission Collected Opinions (1995-2001), ICC Publication No. 632.
  25. Collected DOCDEX Decisions (1997 - 2003), ICC Publication No. 665.

The existing universal rules governing letter of credit operations, the UCP 500, has been in use since 1992 and it needs to be updated to match the changing trade practices in surface, sea, air and multimodal transport, cargo insurance and commodity trade practices. It also has to reflect the important judicial decisions of precedent cases from USA, Canada, England and other countries, such as:

Glencore International AG, Bayerische Verinsbank AG v. Bank of China QBCMF 95/1469/B; Kredietbank Antwerp v. Midland Bank PLC, Karaganda Ltd., UK (1999; and Banco Santander SA v. Bayfern Ltd. and Ors., UK (2000).

The new rules for letter of credit, the UCP 600, will be voted for adoption on 24 - 25 October 2006 in Paris and will become effective as from 1st July 2007.

Importance of an Expert Witness in Trade Finance Litigations

In litigations on international trade finance, the rules, conventions, ICC official opinions and publications quoted above may be involved. It would be very difficult, if not impossible, for a lawyer engaged in commercial litigations to understand all of them and keep himself updated with the many changes over time.

Sometimes, depending on the nature of the disputes, breaches in one rule may lead to breaches in other rules. Hence, an expert witness is essential to help a litigant to explain to the court in what manner a party has violated these rules and their serious consequences. On the other hand, the expert witness may also tell the court the rights of a party under these rules, conventions and official opinions of ICC Banking Commission.

However, most expert witnesses appearing in the international trade finance litigations are bankers who have no training on how to perform the role of an expert witness. As a result, they are inclined to act as advocates and their experts report's are biased, without fulfilling their duty to the court to tell the whole truth and nothing but the truth or to remain at all times independent and impartial. They only state those facts and opinions favourable to their appointing clients and purposely neglect those unfavourable ones. Chances are that they may turn out to be advocates for the opponents.

 

 
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