Provisions of the Supreme People s Court on Certain Issues Concerning Trial of Cases
2014-04-27 18:49:14
Provisions of the Supreme People s Court on Certain Issues Concerning Trial of Cases Involving Letter of Credit Disputes
Promulgating Institution: Supreme People"s Court
Document Number: Fa Shi [2005] No. 13
Promulgating Date: 11/14/2005
Effective Date: 01/01/2006
Validity Status: Valid
These Provisions are formulated in regard to relevant issues concerning the trial of cases involving letter of credit disputes in accordance with the General Principles of Civil Law of the People"s Republic of China, the Contract Law of the People"s Republic of China, the Security Law of the People"s Republic of China, the Civil Procedure Law of the People"s Republic of China and all other applicable laws and with reference to the ICC (International Chamber of Commerce) Uniform Customs and Practice for Documentary Credits and all other relevant international customs and practice.
Article 1 For the purposes of these Provisions, "cases involving letter of credit disputes" means the cases involving disputes arising from or in connection with the issuing, advising, amendment, cancellation, confirmation, negotiation, reimbursement or otherwise.
Article 2 When the people"s courts try the cases involving letter of credit disputes, if the parties have agreed on the applicable international customs and practice or any other provisions, their agreed-on provisions shall prevail; or otherwise, the ICC Uniform Customs and Practice for Documentary Credits and other relevant international customs and practice shall apply.
Article 3 These Provisions shall apply to (i) overdue payment disputes arising between the applicants and the issuing bank from the application for issuing of letters of credit, (ii) disputes arising between the principals and agents from entrustment to issue letters of credit, (iii) disputes arising from the guarantors" providing guarantee for the application for issuing letters of credit or for entrustment to issue letters of credit, and (iv) disputes arising from financing under letters of credit.
Article 4 The relevant laws of the People"s Republic of China shall apply to (i) overdue payment disputes arising from issuing of letters of credit, (ii) disputes arising from entrustment to issue letters of credit, (iii) disputes arising from guarantee for the application for issuing letters of credit or for entrustment to issue letters of credit, and (iv) disputes arising from the financing under letters of credit, except where the parties to the contracts involving foreign elements agree otherwise on the applicable laws.
Article 5 After the issuing banks undertake to honor, negotiate or fulfill any other obligations under the letters of credit, if the documents appear to comply with the terms of the letters of credit and the documents appear to comply with each other, the issuing banks shall fulfill the obligation to pay within the specified time limits specified on the letters of credit. If the parties contest the underlying transactions between the applicants and beneficiaries, the people"s courts shall not support such contest, except as provided in Article 8 of these Provisions.
Article 6 When the people"s courts try the cases involving letter of credit disputes, the documents shall, if required, be examined in accordance with the applicable international customs and practice and other provisions agreed on by the parties; in the absence of the agreement thereon by the parties, whether compliance appears to exist between the documents and the terms of the letters of credit and between the documents shall be determined in accordance with the ICC Uniform Customs and Practice for Documentary Credits and the relevant standards produced by the ICC. If incomplete compliance appears to exist between the documents and the terms of the letters of credit or between the documents but has not led to any controversy, such incomplete compliance shall not be determined as non-compliance.
Article 7 The issuing banks shall have the right and obligation to examine the documents independently and have the right, at their sole discretion, to decide whether compliance appears to exist between the documents and the terms of the letters of credit and between the documents and to decide whether to accept or refuse the non-compliance between the documents and the terms of the letters of credit and between the documents. If the issuing banks discover any non-compliance under the letters of credit, they may, at their sole discretion, decide whether to advise the applicants to accept the non-compliance. Whether the applicants decide to accept the non-compliance shall not affect the ultimate decision of the issuing banks as to whether to accept the non-compliance, except where the issuing banks and the applicants agree on otherwise. If the issuing banks explicitly express their acceptance of the non-compliance to the beneficiaries, they shall fulfill the payment obligation. If the issuing banks refuse to accept the non-compliance and the beneficiaries request the issuing banks to fulfill the payment obligation under the letters of credit on the grounds that the applicants have accepted the non-compliance, the people"s courts shall not support such request.
Article 8 It shall be determined that letter of credit fraud is committed under any of the following circumstances:
(1) Where the beneficiaries falsify any documents or present any documents containing false information;
(2) Where the beneficiaries maliciously refuse to deliver goods or deliver valueless goods;
(3) Where the beneficiaries conspire with the applicants or any third parties to present any false documents without actual underlying transactions; or
(4) Any other letter of credit fraud.
Article 9 If the applicants, the issuing banks or any other interested parties discover any circumstance as provided in Article 8 of these Provisions and believe that such circumstance will cause to them losses and damages difficult to remedy, they may apply to the competent people"s courts for suspending the payment under the letters of credit.
Article 10 If the people"s courts determine that any letter of credit fraud has been committed, they shall render a ruling to suspend the payment or a judgment to terminate the payment under the letters of credit, except otherwise under any of the following circumstances:
(1) Where the nominated or authorized persons of the issuing banks have made the payment as directed by the issuing banks;
(2) Where the issuing banks or their nominated or authorized persons have accepted the bills under the letters of credit in good faith;
(3) Where the confirming banks fulfill the payment obligation in good faith; or
(4) Where the negotiating banks have negotiated in good faith.
Article 11 If, prior to fining an action, the parties apply for suspending the payment under the letters of credit and the following conditions are satisfied, the people"s courts shall accept their applications:
(1) The people"s courts, which accept the applications, have the jurisdiction over the said cases involving letter of credit disputes;
(2) The evidential materials provided by the applicants prove the existence of any of the circumstances as provided in Article 8 of these Provisions;
(3) If measures are not taken to suspend the payment under the letters of credit, the lawful rights and interests of the applicants will suffer losses and damages difficult to remedy;
(4) The applicants provide reliable and sufficient guarantee; and
(5) No circumstances as provided in Article 10 of these Provisions exist.
If, during the proceedings, the parties apply for suspending the payment under the letters of credit, the conditions provided for in Items (2), (3), (4) and (5) of the preceding paragraph shall be satisfied.
Article 12 If the people"s courts accept the applications for suspending the payment under the letters of credit, they must render a ruling within 48 hours; in the case of a ruling to suspend the payment, they shall immediately enforce the ruling. The ruling rendered by the people"s courts to suspend the payment under the letters of credit shall specify the applicants, respondents and third parties.
Article 13 If the parties have any objection to the ruling rendered by the people"s courts to suspend the payment under the letters of credit, they may apply to the people"s courts at the next higher level for review within ten days of service of the ruling. The people"s courts at the next higher level shall render a ruling within ten days of receipt of the application for review. During the review period, the enforcement of the original ruling shall not be suspended.
Article 14 When trying the cases involving letters of credit fraud, the people"s courts may, if necessary, hear the letters of credit disputes and the underlying transactions concurrently. If the parties file an action on the grounds of fraudulent underlying transactions, the issuing banks or the negotiating banks related to the case or any other interested parties otherwise legally related to the letters of credit may be identified as third parties. The third parties may apply for participating in the proceedings and the people"s courts may also notify the third parties to participate in the proceedings.
Article 15 If, after hearing the merits, the people"s courts determine any letter of credit fraud was committed and no circumstances as provided in Article 10 of these Provisions exist, they shall render a judgment to terminate the payment under the letters of credit.
Article 16 If the guarantors request exemption from guarantee liabilities on the grounds that the issuing banks or the applicants accepted the non-compliance without their consent, the people"s courts shall not support such request, except as provided in the guarantee contracts otherwise.
Article 17 If the applicants and the issuing banks amend the letters of credit without the consent of the guarantors, the guarantors shall only be held liable within the time limit and scope as specified in the original guarantee contracts or under the applicable laws, except as provided in the guarantee contracts otherwise.
Article 18 These Measures shall come into effect as of January 1, 2006.
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