It is interesting to recall that back in September 1994, the ICC Banking Commission noted, pursuant to the release of UCP 500, that various banks had been applying unilateral and incorrect interpretations to certain of its articles. It was stated that by prejudicing the proper and correct application of the UCP 500, the effect had been to seriously interfere with the use of the documentary letter of credit issued in accordance with the UCP, as the means for effective and secure settlement of trade transactions on a worldwide basis.
As a result, the Banking Commission authorised the issuance of four 'Position Papers' to emphasise the need to correctly interpret and apply UCP 500 sub-article 9(d)(iii) - Amendments; sub-article 10(b)(ii) - Negotiation; sub-article 13(c) - Non- documentary conditions; and the related sub-articles of articles 23, 24, 25, 26, 27, 28, 29 and 30 - Transport Documents.
The Banking Commission strongly urged ICC National Committees, and associated organisations, to distribute the Position Papers as widely as possible to help in ensuring the future smooth running of the documentary credit issued under the protection of UCP 500. However, it became clear that not all practitioners were aware of the content of the Position Papers and that the hoped-for results were not fully realised.
As regular readers of these blogs will be aware, during the ICC Jakarta Banking Commission meeting in April 2017, and as a result of consultation with ICC membership, the ICC Banking Commission recommended three work-streams to be taken forward in respect of documentary credits:
This was in response from ICC National Committees, which evidenced that any existing problems lie not with UCP 600, but with their application, i.e., practice ("international standard banking practice") of the rules. It was highlighted that 50% of the problems applied to the presented documents and that it was a justifiable assumption that a greater understanding of ISBP 745 would help alleviate these problems and greatly reduce this percentage. It was further stated, with regard to the remaining 50%, that it was difficult to see how a revision of UCP would make a material difference as many of these causes were outside the scope of correction by the beneficiary.
This blog focuses on the first work-stream mentioned above, i.e. ‘Guidance'. Such work will inevitably result in the release of some form of ‘Guidance Paper' - the key will be to ensure that, on this occasion, the content reaches the intended audience. It is fortunate that, in the evolving digitalised world, there are far more opportunities to ensure that this can be fulfilled.
We will keep you updated as this progresses.