1. Introduction – 2. Introducing letters of credit and the UCP600 – 3. The two basic principles of letters of credit – 4. The doctrine of strict compliance and the UCP600: a relaxation – 5. The autonomy principle and the UCP600 – 6. The autonomy principle and fraud exception: a trade-off – 7. Conclusion
Documentary credit is the most common mode of payment for goods in the export trade and a primary instrument for financing international commerce.
The operation of documentary credit has been highly harmonized by the Uniform Customs and Practice for Documentary Credits (“UCP”). Such “set of rules” (as defined in Article 1 of the latest version of the UCP, the “UCP600”), to a certain extent, coincides with the common law regime.
Under both the UCP600 and the common law, documentary credits are based on two fundamental principles: the doctrine of strict compliance and the autonomy of letters of credit. The latter is naturally at variance with so-called fraud exception.
In the present work we will consider two issues: (i) how do the UCP600 deal with the doctrine of strict compliance and the autonomy principle and (ii) what are the effects of the UCP600’s attitude towards the autonomy principle on fraud exception. It is suggested that these two issues are strongly intertwined with each other.