Documentary Credits:
There are occasions when neither an ICC opinion nor DOCDEX will solve a problem. In such circumstances, the involved parties may turn to the courts. This can be a very expensive and time-consuming option and will include a wide range of costs relevant to the legal process.
It is worth bearing in mind that over the years many courts have used the content of existing ICC opinions and DOCDEX decisions as the basis for their deliberations and conclusions - this has helped in providing uniformity in the interpretation of UCP articles. Courts tend to take note of previous decisions in other jurisdictions regardless of the location of the judgement.
Use of an arbitration or mediation service is far more likely to occur in disputes between a buyer and seller, relating to a contract of sale than a dispute concerning the status of documents under a documentary credit and the UCP.
UCP 600 does not include an article for Governing or Applicable Law. However, this does not prevent an applicable law condition being included within the terms and conditions of a credit, but such inclusion is fairly rare. The exclusion of an article in respect of applicable law partially derives from the fact that a credit is considered to be autonomous, i.e. a separate transaction from any underlying sales contract.
The natural consequence of this is that it is left to a court to decide which law would be applicable - in most circumstances, this is determined to be that of the place where the obligations under the credit are most valid.
Guarantees:
In respect of demand guarantees subject to URDG 758, both a governing law and a jurisdiction article apply.
Unless there is a condition to the contrary within the guarantee or counter-guarantee text, the governing law of a guarantee will be that of the place of business of the guarantor, and of a counter-guarantee will be that of the place of business of the counter-guarantor. This does not restrict the parties from choosing whichever law they wish to apply as long as it is specifically stated within the guarantee or counter-guarantee text.
A similar approach is applied for jurisdiction. Disputes between a guarantor and a beneficiary, under a guarantee, are to be settled by a competent court at the place of business of the guarantor. Disputes between a counter-guarantor and a guarantor, under a counter-guarantee, are to be settled by a competent court at the place of business of the counter-guarantor. This does not restrict the parties from choosing whichever jurisdiction they wish to apply as long as it is specifically stated within the guarantee or counter-guarantee text.
Bank Payment Obligations:
An applicable law article is included within URBPO 750 stating that governing law will be that of the location of the branch or office of the Obligor Bank specified in the Established Baseline. The article goes on to state that the rules supplement the applicable law to the extent not prohibited by that law.
As further stated, Obligor Banks do not have to comply with any obligations pursuant from a BPO if such obligation would place them in contravention of any applicable law or regulatory requirements. As an Obligor Bank is dealing with data and not with documents, its review of certain pieces of data for compliance is also to be in accordance with local or international laws, including any sanctions regulations which are applicable to it.
An Obligor Bank is not required to act if the result of a Data Match or Mismatch would result in a breach of applicable law or regulatory requirements that may follow from any filtering process that may be attached to a TMA. There is a need to achieve certainty as to which law will apply when interpreting and enforcing the URBPO. However, a Buyer's Bank or Recipient Bank may select another governing law in the Baseline.