CML Working Paper: Problems in Determining the Proper Law of the Contract in Confirmed Letters of Credit

Abstract

This paper focuses on confirmed letters of credit in Anglo-common law jurisdictions. Although these are covered by the UCP 600, many key issues must be decided by domestic law. Letters of credit do not frequently contain express choice of law clauses. Not every jurisdiction has the same law on exception(s) to the autonomy principle, sanctions, and other issues. Courts are thus left to grapple with the issue of determining the proper law of the contract(s) in the context of letters of credit. Problems arise from the multi-contractual nature of confirmed letters of credit, the possibility of multiple laws governing the contracts that make up a confirmed letter of credit, and the difficulties in arriving at a single law to govern those contracts. Jurisdictions applying the common law approach must also address the conflicts rule against a floating choice of law. This brings into the debate: when is a letter of credit formed? Holding that formation occurs upon communication to the beneficiary, Sinopec International (Singapore) Pte Ltd v Bank of Communications Co Ltd [2021] SGHC 245 applied the place of contemplated presentation as the relevant connecting factor, rather than the place of actual presentation. But Kuvera Resources Pte Ltd v JPMorgan Chase Bank NA [2022] SGHC 213 accepted that formation occurs upon a complying presentation. Given that the Kuvera formulation has not been applied beyond Singapore, the proper law problems present prior to Kuvera will be discussed.

Keywords: bankers’ credits, commercial credits, documentary credits, letters of credit, private international law, conflict of laws, applicable law, governing law, proper law, choice of law.

Available at SSRN: https://papers.ssrn.com/abstract=5903464 
or download the paper at: CML Working Paper Series

For more information about the author, visit his web profile here.

CML Research Associate Leung Liwen discussed the debate: when is a letter of credit formed? Sinopec International (Singapore) Pte Ltd v Bank of Communications Co Ltd [2021] applied that the place of contemplated presentation as the relevant connecting factor, rather than the place of actual presentation. But Kuvera Resources Pte Ltd v JPMorgan Chase Bank NA [2022] accepted that formation occurs upon a complying presentation. Given that the Kuvera formulation has not been applied beyond Singapore, the proper law problems present prior to Kuvera will be discussed.