Independence principle and its exception in letter of credit law: Suggestions for Vietnam

Abstract

Even though the letter of credit was invented from a long time ago, however, its legal personalities are very new to the Vietnam Legal Framework. The International Chamber of Commerce (``ICC'') has issued principles for the documentary credit which is the Uniform of Customs and Practice (``UCP'') since 1933 and kept updating it until now, the latest version of UCP is UCP 600 which is presented in 2007. However, the UCP has not systematized many aspects of documentary credit yet and ICC considered those problems as subjects of domestic regulations. The diversification in different national laws leads to confusion thus causing many problems to merchants in international trade. Some countries do not have specified codifications to regulate the letter of credit so these countries treat UCP as ``quasi-law'' while other countries have their own legal framework for letter of credit law and even have fraud rules included. It is quite interesting that the United States which is a common law country is the first country to embody the operation of letter of credit in the Uniform of Commercial Code (``UCC'') and regulates the fraud rule within the same Code. This paper will try to explain and compare the principle of independence in the UCP and UCC, clarify the definition and regulations of fraud rule in UCC and evaluate the legal regulations of Vietnam law for the independence principle in a letter of credit.