US UCC Article 5’s Non-Variable Provisions
How UCC Article 5 governs letters of credit in the US, its non-variable provisions, and the legal nuances that affect issuers and beneficiaries.
Recent ICC Doxdex decisions (Nos. 367, 373, 382) interpret ISP98 rules, aiding parties in standby LC transactions.
The International Chamber of Commerce (ICC) offers resolution of disputes related to trade finance instruments by a specialized procedure for rendering decisions that is confidential, quick and less costly than a court proceeding or arbitration called Documentary Instruments Dispute Resolution Expertise (DOCDEX). Docdex decisions are rendered by a panel of three experts chosen by the ICC’s Alternative Dispute Resolution (ADR) Centre from a list maintained by the ICC Banking Commission. Panelists are chosen for their expertise, knowledge, and experience of the trade finance issues involved. Their decisions are scrutinized by an ICC Technical Advisor. Docdex decisions involve real transactions, but evidence is purely documentary presented by submissions. There are no formal hearings or oral testimony. See the ICC’s Docdex website for rules and information on how the Docdex procedure works.
A Docdex decision is non-binding on the parties involved unless they privately agree to be bound by it. In fact, a respondent named in the claim before the Panel need not respond to it. Nevertheless, the decision of an objective expert Docdex panel on the facts and questions involved applying ICC trade finance rules can facilitate resolution of disputes short of formal litigation. Although Docdex decisions are confidential, they are summarized on a no-names basis and available from the ICC.
Three Docdex decisions released in 2023 involved factual situations relating to application of the ISP98 Rules (ICC Publication No. 590). Docdex decisions are identified by number. The three decisions relating to the ISP98 are Nos. 367, 373, and 382. They are discussed briefly and summarized below. They should be of interest to bankers, applicants, and beneficiaries involved in standby letter of credit transactions. Based on information available for over 173 Docdex decisions to date, these three are the only Docdex decisions dealing with ISP98 matters. In my view, each of the decisions are consistent with the IIBLP’s Official Commentary on the International Standby Practices.
Docdex Decision No. 367 deals with how an issuer should respond to a drawing on its standby letter of credit (SBLC) when temporary injunction against the drawing is lifted.
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