Summary of Expert Report by Gary Collyer

Filed Before the Korean Supreme Court in Keb Hana Bank V. Korean Export Insurance Corporation

Summary prepared for the ABA’s UCC Letter of Credit Subcommittee Meeting by Carter Klein* 15 September 2022

Gary Collyer, known for his work with the ICC Banking Commission, prepared at the request of KEB Hana Bank (KEB) a 40-Page Report submitted in support of KEB’s position in the standby LC case before the Korean Supreme Court filed by KEB against the Korea Export Insurance Corporation (KEIC).

KEB sought to enforce KEIC’s counter-guarantee issued to KEB backing KEB’s standby LCs of approximately USD 100 million issued to the Libyan Housing Authority to support the ultimate applicant’s 5,000 unit housing development project in Libya. The standbys were confirmed by Sahara Bank. Due to the Libyan civil war and the need for parties to discuss their differences on resumption of the project, the beneficiary, confirming bank and KEB each sent extend or pay demands to keep the standbys in force. KEIC declined to extend its counter-guarantee and refused to pay KEB on the ground that no default certificate accompanied the demand to pay. The Korean Supreme Court ruled that the demand to pay was proper and KEIC should pay KEB since it did not extend its counter-guarantee.¹

Although Gary Collyer’s Expert Report will not be made available for publication, I have read it and believe it contains a number of salient points. In my view, the following observations based on its content are worth mentioning:

1. Prior to implementation of ISP98, Gary Collyer was chair of a small ICC working group appointed to study whether the rules drafted specifically for standby letters of credit should be adopted by the ICC.
2. In the first few years following implementation, the ISP was seldom used for standby LCs issued outside the US. At that time, the UCP remained the preferred rules for standbys.
3. Today, the majority of global standby LCs are estimated to be governed by the International Standby Practices, ISP98.
4. If given the option, the ISP98 should be the rules of choice for an applicant, issuer, confirmer or nominated person of a standby, if only for the fact that they are written specifically for use with a standby.
5. Two standby LCs to the Libyan Housing Authority (LHA) for nearly USD 100 million in total were issued by KEB in 2008 and confirmed by Sahara Bank, a local bank in Libya, to secure performance of a 5,000 unit housing project before the Libyan civil war broke out.