Study On The Legal Issues Of Fraud Of Bank Guarantees In International Trade

As a modern international credit guarantee, bank guarantee develops on the basis of overcoming the shortcomings of the traditional security, satisfying the transaction convenience and security needs of the parties and balancing the benefits of the parties, it is considered as genius'invention and the life blood in international trade. However, due to its unique attributes, bank guarantee is often utilized to make fraud by the unscrupulous traders. So far western countries have accumulated a large amount of fraudulent cases of bank guarantee; fraud has become an important field of study on bank guarantee. Banks widely use bank guarantee in practice in China, while there are no laws and regulations about bank guarantee and there is no in-depth research on fraud in China. This article is focused on fraud on bank guarantee; in combination with the case law and relevant legislation of western countries, the article is trying to do research on the concept of fraud, the principle of fraud exception and the judicial relief measures. The author hopes the research may have a little benefit for the establishment of the legal system of fraud on bank guarantee in China.There are four chapters in this article. The first chapter is the summarized part. Firstly, the chapter introduced the concept, legal attributes and types of bank guarantee; secondly, it talked about the reasons of the fraud; thirdly, due to the similarities between frauds of bank guarantee and letter credit, the chapter talked about the differences between them; finally, it introduced the establishment and theoretical foundation of the principle of fraud exception.The second chapter, the important part of this article, mainly talked about the fraud on bank guarantee and the principle of fraud exception. Firstly, the chapter introduced the concept of fraud in western countries, United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, and China, and then made a conclusion that western countries and convention have the similar guiding principle that the beneficiary's demand for payment is fraudulent if it is clearly established that it has no conceivable basis under the underlying relationship. Although there are no laws and regulations about bank guarantee in China, the court of China has accept the principle of fraud exception and the guiding principle like the western countries. Secondly, the chapter overviewed the possible types of fraud, and reviewed specific situations and responses of the courts. Finally, the chapter talked about the position of the bank. The bank maintains its neutral position; it should not and also has no capacity to decide whether fraud has been established. The bank can never been liable to the account party if it does its duty with reasonable care.The third chapter talked about the judicial relief measures of fraud on bank guarantee. Firstly, it introduced the different measures between common law countries and civil law countries. Based on the cases of judicial relief measures in China, the chapter pointed out the shortcomings of judicial relief measures in fraudulent cases. Secondly, the chapter talked about the factors the court should consider when it makes the judicial relief measures.The fourth chapter concerned bank guarantee in China. Firstly, it introduced the practices and legislation of bank guarantee in China. Bank guarantee are widely utilized in bank practice, while there are no laws and regulations about bank guarantee; the legislation is very underdeveloped. Secondly, the chapter talked about the legal practice and legislation on fraud in combination with the fraudulent cases in China. Finally, it made some suggestions that China should establish the legal system about bank guarantee, should formulate laws and regulations about fraud, and should improve the judicial relief measures of fraud on bank guarantee.