The ICC Banking Commission conducted its final meeting of 2024 virtually via Teams on 20-21 November. Four separate portions of the event open to Banking Commission members and ICC National Committee representatives took place.
Prominent Chinese lawyer Saibo Jin alerted delegates at the IIBLP Annual Survey of LC Law & Practice in Hong Kong on 8 May of a highly anticipated case currently pending with the Supreme People’s Court (SPC) in China.
In 2020, ANZ Bank, Manila Branch and ANZ Bank, Shanghai Branch v. China Power Engineering Co. started proceedings in the Commercial Court of the SPC. The case is a fraud dispute concerning a standby LC, counter-standby LC, and an injunction order and is being closely watched because the court will take up the legal definition of a standby letter of credit. While China has established rules in place governing legal provisions for commercial letters of credit and independent guarantees, it has no legal rules for standby LCs at present.
Jin also reported on noteworthy standby LC cases decided in recent years in China. On appeal, the Shanxi Province Higher People’s Court upheld a temporary injunction order against a standby LC by a reconsideration trial procedure (Case of Second Instance Number (2023) Jin Min Ta No. 12, 6 Mar 2023; Case of First Instance Number (2021) Jin Min Chu No. 809, 3 Aug 2021). In this case, the applicant of an ISP98 standby LC requested the court to stop payment of the standby issued by a Chinese bank based on the beneficiary’s demand alleged to be fraudulent. (Party names cannot be disclosed at present due to confidentiality reasons.) Parallel litigation of this case is also taking place in Queensland High Court (Australia).
In Ping An Bank v. Huishang Bank (Case Number (2019) Wan 01 Min Chu No. 2479, 10 Jan 2020), Hefei Intermediate People’s Court of Anhui Province ordered issuing bank to make payment of an ISP98 standby LC to the beneficiary. In reaching its decision, the court held that the issued standby LC was legal and effective and that the beneficiary’s payment demand satisfied all the requirements of the standby LC and ISP98 rules. (Case abstracted at Jul/Aug 2022 DCW 18).
In China Minsheng Bank, Guangzhou Branch v. Guangzhou Cuprite Metals Co. involving a right of recourse dispute, the Civil Decision of the First Instance of Guangzhou Intermediate People’s Court of Guangdong Province (Case Number (2013) Sui Zhong Fa Min Chu No. 42, 20 May 2016) the court held that the standby LC was issued subject to UCP600, stating: “No matter whether the document issued by the plaintiff in accordance with the application of [applicant] is an irrevocable letter of guarantee or standby letter of credit in name, it is in essence a document of guarantee in nature.”
In China Great Wall Asset Management Co., Jinan Office v. Korea Development Bank, Guangzhou Branch (Case Number (2015) Lu Zhi Fu Zi No. 18, 8 April 2015), a standby LC was issued according to UCP600, but the court regarded the standby LC as a “Guarantee Contract”.
