Research On The Problems Of Judicial Remedies On Letter Of Credit Fraud

Letter of Credit (L/C) is the major payment in the international trade, but the rules that he adheres to provides the cheaters with the opportunity to fraud. Almost every country all over the world has collected abundant experiences in preventing and controlling L/C Fraud, among which, the most outstanding achievements are the establishment of the principle of the"Fraud Exception", the principle of"Exception of the Fraud Exception", injunction and the principle of"Injunction Exception", which are worthwhile for our country to borrow. Except the recently published regulation on several issues concerning the L/C Fraud by highest people's court, we have no uniformed legislation governing L/C Fraud in our country and the most frequently used in the practice to punish L/C Fraud are freezing order and attachment. Sometimes in the criminal cases, the security bureau and prosecution also attach the accountancy item under the L/C, which are not in line with the requirement of the law and affect the development of the international trade and the reputation of the bank in our country. The frequent occurrence of L/C fraud and the bad effects on the international trade make it necessary to make a study on the judicial remedies.With the help of the method of comparison, reasoning and case analysis, this paper introduces the experiences of countries under the common law and civil law system, with the hope to provide beneficial references for our country's legislation and judicial practice.This paper is divided into four chapters. The first chapter mainly introduces judicial remedies of L/C Fraud—the nature and characteristics of injunction, and the several kinds of injunctions which are frequently used in the case of L/C Fraud. The differences between the injunction, freezing order and the attachment are discussed. This chapter also explains the theoretical bases to grant injunction and the three stages of the development of the theory:"the theory of prohibiting the power of the court into L/C","the theory of limiting the power of the court into L/C"and"the theory of the court's remedy according to law"and then assesses the advantages and the disadvantages of the three theories.The second chapter carries on the substantive research on injunction, expatriates the conditions to grant injunction in British, the United States, Germany, France and Switzerland and makes assessment on the conditions to grant injunction in different countries. The main factors for the countries under the common law system to regard"fraud"are the fraud must be material and the subject must have the intention to cheat and they have enlarged the scope to apply the principle of strict compliance, which are worthwhile for our country to borrow. The author also illustrates the difference between fraud and the breach under the contract. A comparison between material compliance and the facial compliance is drawn and put forward that the material compliance can meet the needs of the reality. In this chapter, the reason for the court to grant injunction is the existence of Fraud Exception is also illustrated. When the Exception of the Fraud Exception exists, the court will not grant injunction, which is the Injunction Exception, the main purpose of which is to defend the interests of the third party who joins in the business. The application of the principle of"Exception of Fraud Exception"strengthens the principle of independence of L/C, protects the interests of the third party and secures the function of injunction. All of these set a good example for our country.The third chapter discusses the procedure of granting injunction. In this chapter, the procedures of granting injunction in British and the United States are illustrated in detail, the Mareva Injunction's advantages and disadvantages are also discussed and the procedure of its being granted sets a good example for our country. In addition, this chapter also illustrates the requirements of proof, the burden of proof and the remedial procedure of injunction, the appealing of injunction and the adjustment and withdrawn of it. The attitude of British, the United States, Germany, France and Switzerland to grant injunction is explained. The subject of remedy in L/C fraud case is the interests that the beneficiary has got, and the object that the court interferes in is the behavior of the beneficiary which is worthwhile for our country to borrow. In the end, a conclusion is drawn that the requirement and the procedure of granting injunction are worthwhile for our country to borrow.The fourth chapter puts forward several suggestions to perfect the remedial measures in our country. The disadvantages of the stipulations regarding the judicial remedies on L/C Fraud in the substantive law, procedural law and the related regulations, the defects of the recent judicial explanation are also discussed. The judicial remedies should abide by the principle of L/C business, and the prudent attitude towards the use of"Fraud Exception"should be maintained. The appellant should be the issuing bank and other banks should be listed as the third beneficiary in the procedure, which do good to the hearing of the case and the protection of the third party. The perfection of legislation on L/C Fraud, the coordination of the discrepancies between the laws, clearing the cause of action to grant injunction, the time limit to grant injunction, the jurisdiction of the case concerning the L/C Fraud and the issues concerning the jurisdiction and the related legal facts, the necessity of dividing the civil procedure and the criminal procedure concerning the L/C Fraud and the importance of dividing the power of judge are also illustrated in detail. In the end, the judicial explanation of the highest people's court is strongly recommended and the trend of the judicial explanation should be aim at the needs of the concrete cases.