A Study On The Protection Of Creditor Bank’s Right Under Letter Of Credit

With the rapid development of China’s foreign trade, inward documentary bills under letter of credit have been widely used by domestic banks for importers to provide financing service. However, inward document bills develop much faster in trade practice than in law, combined with little legal research in our country, which lead to the realization of the creditor’s right of bank faces great risks. Therefore, the protection of creditor bank has aroused wide concern of domestic scholars.At present, domestic academic studies mainly focus on the question of what kind of rights banks have to the documents and related goods under the credit. For this focal issue, Chinese academics are divided into four kinds of theories, namely, the mortgage, the pledge, the lien and the ownership. But these four theories mentioned above have some degree of conflict with the mandatory provisions of our existing law. So it is difficult to provide a strong theoretical foundation for the protection of creditor bank. International research on this issue has been conducted mainly in two ways:trust receipt and transferring security. Many countries have confirmed these two ways through legislation or judicial precedent. For the protection of creditor bank’s right, the related study taken by domestic scholars is still inadequate, so this question deserves further research. In this thesis, the protection of creditor bank’s right was further analyzed and discussed based on the current legal system in our nation and useful experiences from foreign countries.This article is composed of four parts, and specific details go as follows:The part one introduces the concept related with inward documentary bills, which consists of four points. Firstly, this article briefly introduces the meaning, basic procedure and the cause of inward documentary bills. Secondly, it analyzes the parties involved in the inward documentary bills and their behavior characteristics. Then it fully discusses the principal character of inward documentary bills. Finally, it introduces the possible risks to creditor banks in the inward documentary bills business.In part two, this article focuses on the question of what kind of rights banks have to the documents and related goods under the credit. Through the analysis of four representative domestic theories, the mortgage, the pledge, the ownership and the lien, it draws a conclusion that neither of them can effectively guarantees the realization of the creditor’s rights, regardless of ownership or security right.The part three introduces the foreign laws and practice operation in the field of inward documentary bills, through which it aims to find out a better way to protect creditor bank’s right. Specifically, it includes two points. The first point is the introduction of the guarantee system of Germany and Japan, and the dilemma in our existing legal system. The other point is the introduction of the trust receipt system of Britain and its localization in China.The forth part is the conclusion part. In this part, creditor bank’s right protection measures were discussed from three stages respectively, which are beforehand, underway and afterwards.