Study Of The Legal Issues Of The Negotiation Credit

Letter of credit is a custom formed through long-term practice by merchants, which is generated and developed in combination with business criterion of banks. Among various credits, negotiation credit is the most common used credit for international trade and has been extensive employed in response to the development of economic globalization. Thanks to the continuous efforts made by International Chamber of Commerce (ICC), major issues of negotiation credit has been regulated in Uniform Customs and Practice for Documentary Credits (UCP), International Standard Banking Practice for the Examination of Documents under Documentary Credits (ISBP) and a series of pertinent opinions issued by ICC. However, there are still some other issues, which have not been taped, and as a result, different countries have different theory when addressing these issues.The latest edition of UCP, i.e. UCP600 came into force as the day of July 1, 2007. In this edition, the theory of purchase has been introduced in Article 2 to define the concept of negotiation and the function of financing thereof has been confirmed. This definition of negotiation is regarded as one of the main changes of UCP600 compared with UCP500 and this change has provided new approach to solve a bunch of theoretical questions. Therefore, it is important to analyze several aspects of legal issues of negotiation credits with this definition as a guide, and make an estimate of questions and impacts brought by the implementation of UCP600.This dissertation intends to introduce the evolution the negotiation definition, explain the relevant legal issues of negotiation credits and anticipate the impact of UCP600 by means of historical analysis, logical analysis, empirical analysis and normative analysis. Furthermore, suggestions of how enterprises and courts of China shall adapt to the changes of UCP600 also have been presented in this article on the basis of legislation and practice of negotiation credits in China.The dissertation is divided into four chapters, which mainly include the following:Chapter One detailed introduces the concept and category of negotiation credits and describes the evolution of definition of negotiation from UCP500 to UCP600. In UCP600, the definition of negotiation has been made clear as "purchase of drafts and/or documents", which seems more to the point than "give consideration" in UCP500. However in terms of the way of "purchase of drafts and/or documents", "agreeing to advance funds" still has some uncertainty and this will be determined by opinions of ICC in the future.Chapter Two discusses the rights and obligations of negotiation bank in the process. The rights include compensation against issuing bank, recourse against beneficiary when meet refusal from issuing bank and disclaimer over four matters provided for in UCP600. The aforesaid discussion focuses on the similarity and differences between UCP600 and UCP500. Priority has been given to the research on issues regarding recourse rights of negotiation bank.Chapter Three analyzes the difference between negotiation and export bills of exchange. By elaborating the legal nature of export bills of exchange, comparing it with negotiation in several aspects, the conclusion is that they are two practice with different legal nature in which bank involved has different status and rights. Chinese banks shall conduct negotiation business in conformity with the UCP600 rather than mix the two practices, or adopt settlement of exchange upon properly received instead of negotiation.Chapter Four introduces legislation status of negotiation in China. By commentary on major cases, this chapter summarizes the status and rights of negotiation bank as well as gives suggestion on how to become a qualified negotiation bank and obtain the exemption of fraud exception.