Application Of The Principle Of Fraud Exception In The Letter Of Credit

As an important payment instruments and financing means in international trade, the banking credit can substituts for commercial credit in the letter of credit, which has better solved the problem of transaction risk-sharing between the two sides, to promote eand guarante the rapid development of international trade.Beginning of the19th century, as the frequently interaction of international trade, the parties urgently need a more secure, fast payment, credits came into being and gradually in the universal promotion and application. The biggest advantage of letter of credit is its unique independent abstract principles, this principle as a cornerstone of the letter of credit, which guarantees realization of payment functions. At all levels of courts in the world in processing credit dispute is priority applies to it. However, independent abstract principles also provided opportunities for some criminals to commit fraud, when it protect the letter of credit.Since the1980s, the sharp increase in cases of credit card fraud, which seriously damage to the smooth progress of the international trade and credit trading mechanisms, to resolve this behavior, the principle of fraud exception in the letter of credit came into being.The principle of fraud exception of letter of credit in first established in United States judicial practice,subsequent to development in various countries and regions. Fraud exception principle is not the negation of the independent abstract principles, but only a supplementary in exceptional circumstances. It refers to the fraud that has already occurred, allowing banks to protest, the court issued the ban order. The international community did not form a unified standards and rules. When applying on fraud exception principle of letter of credit, states aims to achieve the balance of the transaction interests of the parties, so it had strict standards on the principle of fraud exception. As letter of credit fraud with respect to the formulation of specific legislation is not perfect in our country, there are many issues to be resolved. Therefore, the author puts forward her own proposal on the basis of the previous scholars’study on fraud exception principle of letter of credit to do her bit for perfecting our country’s letter of credit fraud exception legislation and judicial practice.This article is divided into four parts discusses the principle of fraud exception. The first part, overview on fraud exception principle of letter of credit. From the fraud exception principle of concept, analysis of the reasons, theoretical basis. The second part is about comparison analysis of the fraud exception doctrine of letter of credit. Through understanding the establishment and development of the fraud exception doctrine of letter of credit in common law and civil law countries,as well as analyzing international commercial practices and the relevant provisions of the International Covenant, the author try to compare their strengths and weaknesses in the application.The third part, on the study of the application of on fraud exception pricnple letter of credit application. From the applicable conditions, applicable legal consequences, burden of proof and applicable exclusions presented their views. The fouth part, briefing on the principle of fraud exception in China’s legislation and judicial practice, on the basis of analysis the existing problems, make perfect recommendations.