QUESTION
Dear Mr. Old Man,
Appreciate your reply to the following:
Can LC be subject to the country’s law in addition to UCP?
Best regards,
Zeev
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ANSWER
Dear Zeev,
I must admit that in my 20 years of experience with trade finance I have not yet come across any LC stipulating that it is subject to both the UCP rules and the local law.
The UCP is the rules designed for bank to handle LC transactions when the LC expressly states that it is subject to these rules while the local law would be applied in case of dispute, if any, between the issuing bank and the presenter.
I think that it is sufficient just to state that the LC is subject to UCP 600 and that there is no need to state that the LC is subject to the local law in addition to the UCP (though it is not wrong to state that it is subject to both).
Practice has shown that unless otherwise agreed between the concerned parties, the dispute between presenter and the issuing bank, would be settled by the competent court of the country of the issuing bank and the governing law applicable would be that of the country of the issuing bank. Dispute, if any, between the presenter and the confirming bank would be settled by the competent court of the country of the confirming bank and the governing law applicable would be that of the country of the confirming bank.
Last but not least, the local law prevails over the UCP rules.
Kind regards,
Mr. Old Man
