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Abstract
This article examines how the issue of fraud in letters of credit (which constitutes a critical exception to the autonomy principle) should be characterised in a conflict of laws analysis; and consequently, which law should apply to determine if fraud has been established. It argues that the fraud issue has thus far been incorrectly subsumed within the letter of credit contract, rather than being correctly characterised as a separate and independent issue. On the basis of fundamental conflict of laws principles and policies, this article advocates that the fraud issue should be characterised separately as a tortious/delictual issue. It then discusses how some of the difficulties of such a conflicts characterisation may be adequately addressed.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Intraco Ltd v Notis Shipping Corporation (The Bhoja Trader) [1981] 2 Lloyd’s Rep 256, 257.
2 For a general discussion of LCs, see Christopher Hare and Dora Neo (eds), Trade Finance: Technology, Innovation and Documentary Credits (Oxford University Press, 2021); Peter Ellinger and Dora Neo, The Law and Practice of Documentary Letters of Credit (Hart Publishing, 2010); Ali Malek and David Quest, Jack: Documentary Credits (Tottel Publishing, 4th edn, 2009); John F Dolan, The Law of Letters of Credit: Commercial and Standby Credits (AS Pratt & Sons, 1st supp, 4th edn, 2007); James E Byrne and others, UCP 600: An Analytical Commentary (Institute of International Banking Law & Practice, 2010).
3 Christopher Hare, “On Autonomy” (2018) NUS Centre for Maritime Law Working Paper 18/03, 2 https://law.nus.edu.sg/wp-content/uploads/2020/04/012_2018_Christopher-Hare.pdf accessed on 4 April 2022.
4 Xiang Gao, “The Fraud Rule in the Law of Letters of Credit Revisited” in Hare and Neo, supra n 2, para 6.55.
5 The Uniform Customs and Practice for Documentary Credits (2007 Revision) ICC Publication No 600 (UCP).
6 Malek and Quest, supra n 2, para 1.23. However, it has been argued that it would be a futile exercise to codify fraud in the UCP because it would conflict with fraud in domestic law: see Janet Ulph, “The UCP 600: Documentary Credits in the 21st Century” [2007] Journal of Business Law 355, 371.
7 See Xiang Gao, supra n 4, paras 6.13–6.44; Xiang Gao, The Fraud Rule in the Law of Letters of Credit: A Comparative Study (Kluwer Law International, 2002).
8 See eg United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 (HL); Brody, White & Co Inc v Chemet Handel Trading (S) Pte Ltd [1992] SGCA 66, [1992] 3 SLR(R) 146.
9 See Uniform Commercial Code §5–109 (Unif Law Com 1995); Dora Neo, “Injunctions to Restrain Payment on Independent Guarantees: ‘Unconscionability’ to Bolster the Fraud Exception” in Hare and Neo, supra n 2, para 8.14; Bank of Nova Scotia v Angelica-Whitewear Ltd [1987] 1 SCR 59, 83 (Supreme Court of Canada).
10 See Malek and Quest, supra n 2, para 9.18; Royal Bank v Darlington [1995] OJ No 1044 (Ontario Court of Justice (General Division)).
11 Crédit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd [2022] SGHC(I) 1 [21]; cf Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another suit [2023] SGHC 220.
12 United City Merchants, supra n 8, 183.
13 360 NE 2d 943 (NY Sup Ct 1976).
14 There is considerable debate – beyond the scope of this article – as to what the subject matter of characterisation should be: see eg Christopher Forsyth, “Characterisation Revisited: An Essay in the Theory and Practice of the English Conflict of Laws” [1998] Law Quarterly Review 114.
15 For a general discussion on characterisation, see Lawrence Collins and Jonathan Harris (eds), Dicey, Morris and Collins on The Conflict of Laws (Sweet & Maxwell, 16th edn, 2022) paras 2-001-2-041; Paul Torremans (ed), Cheshire, North & Fawcett: Private International Law (OUP, 15th edn, 2017), ch 3; Martin Davies and others, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths Australia, 10th edn, 2020), paras 14.1–14.52.
16 For discussion on the LC as a contractual matrix, see Sandra Booysen, “The Letter of Credit as a Contract” in Hare and Neo, supra n 2.
17 For the former approach, see eg United City Merchants, supra n 8; for the latter, see eg Czarnikow-Rionda Sugar Trading Inc v Standard Bank London Ltd [1999] 1 All ER (Comm) 890 (QB).
18 [2007] EWHC 2820 (QB), [2008] Bus LR 654.
19 Power Curber International Ltd v National Bank of Kuwait SAK [1981] 3 All ER 607 (CA). For further discussion, see text at n 42 below.
20 Convention on the Law Applicable to Contractual Obligations [1998] OJ C27/34 (consolidated version).
21 It was the established practice of English courts at this time to regard the law of the place of payment against presentation of documents as that which was most closely connected with the LC under art 4(5) of the Rome Convention, thus disapplying the presumption in favour of the principal place of business of the party effecting characteristic performance under art 4(2): see PT Pan Indonesia Bank Ltd Tbk v Marconi Communications International Ltd [2005] EWCA Civ 422, [2005] 2 All ER (Comm) 325.
22 This rule was statutorily provided for in the Private International Law (Miscellaneous Provisions) Act 1995 (UK) s 11.
23 Czarnikow-Rionda v Standard Bank London n 17.
24 Ash v Corp of Lloyds [1992] OJ No 1585 (Ontario Court of Appeal); Bonnie Sportswear (1978) Ltd v International Trading Co 1993 CarswellQue 1031, JE 93-1257, EYB 1993-68893 (Superior Court of Quebec).
25 Inflatable Toy Company Pty Ltd v State Bank of New South Wales Ltd BC9405157 (NSW Sup Ct) 9–14. While it is not clear whether the LC in this case provided for presentation in Australia or Taiwan, the reasoning of the Supreme Court of New South Wales suggested that it was treating the beneficiary as having presented in Taiwan.
26 95 Ohio St 3d 367 (Ohio Sup Ct 2002).
27 See Dolan, supra n 2, paras 4-14–4-16. See also Mohan Gopal, “English Courts and Choice of Law in Irrevocable Documentary Letters of Credit” in Ho Peng Kee and Helena HM Chan (eds), Current Problems of International Trade Financing (Butterworths, 2nd edn, 1990), 135.
28 In Common Law jurisdictions, it is generally the case that a court can only apply a foreign law if it is pleaded and proved. See Collins, supra n 15, para 9-002; Davies, supra n 15, paras 17.1–17.2.
29 See Byrne, supra n 2, 20.
30 See text at n 6 above.
31 Royal Bank v Darlington n 10 [14].
32 See text at n 8 above for the differences between the fraud exception in English and Canadian law.
33 [1998] 3 VR 380.
34 See Ellinger and Neo, supra n 2, 316; Collins, supra n 15, para 33–318, but see Charles Debattista, “Performance Bonds and Letters of Credit: A Cracked Mirror Image” [1997] Journal of Business Law 289.
35 [2015] SGHC 63, [2015] 3 SLR 38.
36 Ibid [26].
37 Ibid [49]–[60].
38 Ibid [63].
39 Ibid [64].
40 [1977] 1 WLR 399 (QB) 401–402.
41 Compagnie d’Armement Maritime SA v Compagnie Tunisienne de Navigation SA [1970] 3 WLR 389 (HL) 411–412.
42 Power Curber n 19. This controversial decision has since been overruled by the UK Supreme Court: see Taurus Petroleum Ltd v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq [2017] UKSC 64, where the Supreme Court held that the governing law of the LC framework should be the law of the issuing bank’s jurisdiction, which was regarded by the Court as the situs of the debt on an application of the general conflicts rule, rather than the place of payment against documents exception established by Power Curber. See also CH Tham, “Different Debts for Different Purposes” [2018] Lloyds Maritime and Commercial Law Quarterly 210; Shearman Sterling, “Situs of Debts under Letter of Credit” (2016) 31 Journal of International Banking Law & Regulation 15; GP Graham, “International Commercial Letters of Credit and Choice of Law: So Whose Law Should Apply Anyway?” (2001) 47 Wayne Law Review 201; PJ Rogerson, “The Situs of Debts in the Conflict of Laws — Illogical, Unnecessary and Misleading” (1990) 49 Cambridge Law Journal 441.
43 Power Curber n 19, 612.
44 Ibid. See also the judgments of Griffiths LJ and Waterhouse J, who agreed with Lord Denning MR.
45 Offshore International n 40.
46 Power Curber n 19, 398 (Lord Denning MR), 399 (Griffiths LJ), 400–401 (Waterhouse J).
47 See Sinotani Pacific Pte Ltd v Agricultural Bank of China [1999] SGCA 53, [1999] 2 SLR(R) 970 [19]–[23].
48 See Taurus n 42.
49 See Taurus n 42 [32]. See also HL Boulton & Co SACA v Banque Royale de Canada [1995] RJQ 213 (Superior Court of Quebec) [60].
50 Collins, supra n 15, paras 2-010–2-012; Torremans, supra n 15, 43–45. See also Forsyth, supra n 14; Ernest G Lorenzon, “The Qualification, Classification, or Characterization Problem in The Conflict of Laws” (1941) 50 Yale Law Journal 743.
51 Furthermore, in the case of the European Regulations which govern conflict of laws, it has been suggested that characterisation is reduced to being a mechanical exercise in statutory interpretation: see Collins, supra n 15, para 2-007.
52 Ibid para 2-013.
53 Joseph Morse, “Characterization: Shadow or Substance” (1949) 49 Columbia Law Review 1027.
54 Davies, supra n 15, para 12.19.
55 See text at n 14 above.
56 Paul A Freund, “Characterization with Respect to Contracts in the Conflict of Laws” in University of Michigan Law School, Lectures on the conflict of laws and international contracts delivered at the Summer Institute on International and Comparative Law, University of Michigan Law School, August 5–20, 1949 (1951) 159.
57 [2001] EWCA Civ 68, [2001] QB 825 [28].
58 Ibid. See also Chaplin v Boys [1971] AC 356, 392 (HL), where Lord Wilberforce acknowledged that policy considerations play a role in characterisation.
59 The conflict-of-laws or choice-of-law revolution refers to the shifting in American choice-of-law thinking away from the traditional single-connecting factor approach and towards a multifactorial approach which focused on the weighing of interests and policies. This movement away from single connecting factors also diminished the importance of how an issue was characterised. See generally Symeon C Symeonides, Choice of Law (Oxford University Press, 2016) chs 5–6.
60 Eugene F Scoles and Peter Hay, Conflict of Laws (West Publishing Co, 2nd edn, 1992), 53.
61 See Restatement (Second) of Conflict of Laws (Am Law Inst 1971) §7 cmt d note; Sampson v Channell 110 F 2d 754 (1st Cir 1940), cert den 310 US 650 (1940). See also Freund, supra n 56.
62 Davies, supra n 15, para 14.47.
63 A context-specific approach to characterisation should be preferred over one which relies on abstract qualities, in order to avoid ad hoc decisions: see Davies, supra n 15, para 14.47.
64 Willis LM Reese, “Choice of Law in Torts and Contracts and Directions for the Future” (1977) 16 Columbia Journal of Transnational Law 1, 39.
65 John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36, (2000) 172 ALR 625 [44], [136]; Tolofson v Jensen [1994] 3 SCR 1022 [65] (Supreme Court of Canada).
66 See Restatement n 61, §6(f).
67 Case C-350/14 Lazar v Allianz SpA, Opinion of A-G N Wahl, EU:C:2015:586 [1], [23], which states that improving legal certainty and predictability is a primary objective of the Rome II Regulation.
68 Maisie Ooi, “Rethinking the Characterisation of Issues relating to Securities” (2019) 15 Journal of Private International Law 575, 604; Michael Douglas, “Characterisation of Breach of Confidence as a Privacy Tort in Private International Law” (2018) 41 University of New South Wales Law Journal 490, 524.
69 See Montrod Ltd v Grundkötter Fleischvertriebs GmbH [2001] EWCA Civ 1954, [2002] 1 WLR 1975 [58]; Beam Technology (Mfg) Pte Ltd v Standard Chartered Bank [2002] SGCA 53, [2003] 1 SLR(R) 597 [29]. Interestingly, the English and Singapore Courts both agreed on the requirement for certainty but disagreed on whether this could justify a nullity exception to the autonomy principle.
70 John Henry Merryman and Rogelio Pérez-Perdomo, The Civil Law Tradition: An Introduction to the Legal Systems of Europe and Latin America (Stanford University Press, 4th edn, 2019).
71 United City Merchants n 8, 183. This forms the basis for the autonomy principle – the buyer cannot stop payment on grounds of an issue with the underlying contract.
72 Szetjn v Henry Schroder Banking Corp 31 NYS 2d 631 (NY Sup Ct 1941).
73 Ellinger and Neo, supra n 2, 144–146.
74 United City Merchants n 8.
75 See text at n 69 above. See also Nicholas Creed, “The Governing Law of Letter of Credit Transactions” (2001) 16 Journal of International Business & Law 41.
76 See text at n 42 above.
77 Sinotani n 47 [19].
78 Ellinger and Neo, supra n 2, 353; Malek and Quest, supra n 2, para 13.47; Michael Brindle and Raymond Cox (eds), Law of Bank Payments (Sweet & Maxwell, 5th edn, 2018), para 7–136.
79 Such as the place of contracting, currency, language, and place of performance, among others: see Compagnie Tunisienne n 41, 399–400 (Lord Morris).
80 Sinotani n 47 [19]; Power Curber n 19, 398.
81 See generally Symeonides n 59, chs 5–6.
82 UCC §5-116(b) (Unif Law Com 1995). There is a potential problem of circularity here because one would technically have to determine that the UCC as enacted in a particular State is the applicable law before the particular provision is applicable. However, US courts have applied §5–116(b) as though it formed a part of the forum’s conflict of laws rules: see eg BCM Electronics Corporations v LaSalle Bank N.A, 2006 WL 760196 (ND Ill 2006).
83 AJE Jaffey, “The Foundations of Rules for the Choice of Law” (1982) 2 Oxford Journal of Legal Studies 368, 387.
84 Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 [130], where Kirby J relied on the ordinary expectations of parties as a justification for applying the lex loci delicti rule to international torts.
85 Ibid; Tolofson v Jensen n 65 [43].
86 Davies, supra n 15, para 12.20; See also Douglas, supra n 68, 524, and Ooi, supra n 68, 599–601, where the author uses the concept of “market expectations” in her critique of choice-of-law rules for securities.
87 Andrea Markstein, “The Law Governing Letters of Credit” (2010) 16 Auckland University Law Review 138.
88 Restatement n 61, §6(d).
89 Reese, supra n 64, 37–38.
90 Joint Report of the English and Welsh and Scottish Law Commission, Private International Law: Choice of Law in Tort and Delict (Law Com No 193, 1990) para 3.2.
91 Such a view would be consistent with the position in Europe, and ostensibly English common law, that issues going to reality of consent to contract (such as fraud) are governed by the putative governing law of the contract: see Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations [2008] OJ L 177/ 6 (Rome I), art 10(1); Collins, supra n 15, paras 32-107—32-108.
92 Peter E Nygh, “The Reasonable Expectations of the Parties as a Guide to the Choice of Law in Contract and in Tort” (1995) 251 Hague Collected Courses 356, 358.
93 Ellinger and Neo, supra n 2, 337.
94 UCP, supra n 5, arts 2, 12.
95 Ibid art 8.
96 Ibid art 7(a), 8(a).
97 Nominated and confirming banks are agents of the issuing bank: see Bank Melli Iran v Barclays Bank (Dominion, Colonial & Overseas) [1951] 2 Lloyd’s Rep 367, 376 (KB); Grains and Industrial Products Trading Pte Ltd v Bank of India and another [2016] SGCA 32, [2016] 3 SLR 1308 [75]; Dolan, supra n 2, para 2.08[3].
98 UCP, supra n 5, art 2.
99 Cf Sinopec International (Singapore) Pte Ltd v Bank of Communications Co Ltd [2021] SGHC 245 [75], where the Court took the view that in the case of such a LC, parties would contemplate presentation in the beneficiary’s place of business, and thus expect the law of that jurisdiction to govern the LC.
100 Frans P de Rooy, Documentary Credits (Kluwer Law and Taxation Publishers, 1984), 58.
101 Malek and Quest, supra n 2, para 7.2.
102 See eg Marconi n 21, where Standard Chartered Bank acted as collecting bank. See also the role of Commerzbank in Montrod n 69.
103 Restatement, supra n 61, §6(e). See also Christopher Forsyth, “‘Mind the Gap Part II’: The South African Supreme Court of Appeal and Characterisation” (2006) 2 Journal of Private International Law 425.
104 Collins, supra n 15, para 2–039.
105 Standard Chartered Bank v Pakistan National Shipping Corp [1995] 2 Lloyd’s Rep 365, 374 (QB).
106 Restatement, supra n 61, §6(2) cmt h.
107 Luther L McDougal III, Robert L Felix, Ralph U Whitten, American Conflicts Law (Transnational Publishers, 5th edn, 2001), ch 11.
108 Torremans, supra n 15, 31; David F Cavers, “Symposium: Conflict of Laws Round Table: The Value of Principled Preferences” (1971) 49 Texas Law Review 211, 215.
109 Ellinger and Neo, supra n 2, 375. Thus, the governing law of the underlying contract does not influence the governing law of the LC.
110 Angelica-Whitewear n 9 [11]; Felicity Monteiro, “Documentary Credits: The Autonomy Principle and the Fraud Exception: A Comparative Analysis of Common Law Approaches and Suggestions for New Zealand” (2007) 13 Auckland University Law Review 144, 144.
111 See Brody n 8 [19]; Angelica Whitewear n 9 [41].
112 Offshore International n 40, 404.
113 See Part B1 above.
114 For the purposes of this article, dépeçage is used in the sense of a recognition that “not all issues arising out of contractual relations will necessarily be governed by the same law”: see Collins, supra n 2, para 32–024.
115 Torremans, supra n 15, 55. See also Symeon C Symeonides, “Issue-by-Issue Analysis and Dépeçage in Choice of Law: Cause and Effect” (2014) 45 University of Toledo Law Review 751; Willis LM Reese, “Dépeçage: A Common Phenomenon in Choice of Law” (1973) 73 Columbia Law Review 58.
116 McDougal, supra n 107, 352.
117 See eg Trafigura Beheer BV v Kookmin Bank Co [2006] EWHC 1450 (Comm), [2006] 2 All ER (Comm) 1008, where an express choice of law clause in a LC was applied to a claim in the tort of deceit. See also TM Yeo, “The Effective Reach of Choice of Law Agreements” (2008) 20 Singapore Academy of Law Journal 723.
118 Torremans, supra n 15, 44; See also AH Robertson, Characterization in the Conflict of Laws (Harvard University Press, 1940), 33.
119 Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387, 407 (CA).
120 Power Curber n 19.
121 See text at n 46 above.
122 Richard Gwynne, “The Governing Law(s) of a Letter of Credit” [2018] Lloyds Maritime and Commercial Law Quarterly 450, 452; Geoffrey Wynne, “Documenting around Letters of Credit”, Trade Finance, March/April 2017, https://www.sullivanlaw.com/assets/htmldocuments/Trade%20Finance%20-%20Documenting%20around%20Letters%20of%20Credit%20-%20GGW%20-%20March%20April%202017.pdf.
123 See Taurus n 42.
124 Furthermore, since LCs in most cases do not contain an express choice of law, there is much less scope to argue that parties have built up significant expectations. Still less can it be argued that these expectations are being protected by a court’s ex post facto imposition of a governing law on the contract in the absence of such a choice.
125 Taurus n 42.
126 The acceptance of documents and payment on the credit are separate functions which will not necessarily be performed by the same nominated bank: see Grains n 98 [70]–[71]. See also UCP, supra n 5, art 12(a), which makes clear that a bank which has been nominated to accept presentation of documents is not necessarily also the bank which must pay under the LC.
127 Offshore International n 40, 404.
128 Michael A Jones (ed), Clerk & Lindsell on Torts (Sweet & Maxwell, 23rd edn, 2020), para 17–35.
129 United City Merchants n 8, 183–184.
130 See text at n 90 above.
131 This is true at least in jurisdictions requiring fraud to be on the documents presented. As for jurisdictions which more broadly recognise fraud in the underlying transaction, see Part D3(a) below.
132 See Part C2 above.
133 This resolves the concern highlighted by Ackner J in Offshore International n 40, 404.
134 See text at n 12 above for an illustration of the two different formulations. See also United City Merchants n 8 (UK) and Brody n 8 (Singapore); cf Mid-America Tire n 26 (US) and Bonnie Sportswear n 24 (Canada).
135 See eg Bonnie Sportswear n 24.
136 See eg Ash v Corp of Lloyds n 24.
137 See text at n 11 above.
138 UCP, supra n 5, art 4(a).
139 Ibid art 4(b).
140 This package typically consists of the invoice, transport documents and insurance documents, but may also include others such as a packing list and numerous certificates: see Malek and Quest, supra n 2, para 3.11.
141 See eg Bonnie Sportswear n 24.
142 Further, a bank engaging in such action would clearly be investigating the underlying facts, thereby exceeding the scope of its duty to examine the documents presented and “[not to] take into account matters or circumstances that are extraneous to the documents”: see Abani Trading Pte Ltd v BNP Paribas and another appeal [2014] SGHC 111, [2014] 3 SLR 909 [21].
143 Royal Bank v Darlington n 10 [186].
144 Ibid [197]. Furthermore, art 14(b) of the UCP, supra n 5, provides only five banking days for the bank to make the determination of whether to accept presentation.
145 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 568 (HCA); Davies, supra n 15, paras 20.17–20.18.
146 Tolofson v Jensen n 65.
147 The lex loci delicti rule is statutorily embodied in the Private International Law (Choice of Law in Tort) Act 2017 (NZ) s 8.
148 See eg Rickshaw Investments Ltd and Another v Nicolai Baron von Uexkull [2006] SGCA 39, [2007] 1 SLR(R) 377.
149 Ibid.
150 Trafigura n 117. This case was decided before the current regime of the Rome II Regulation, on the basis of the Private International Law (Miscellaneous Provisions) Act 1995 (UK), which statutorily codified the lex loci delicti rule. See also Adam Rushworth and Andrew Scott, “Rome II: Choice of Law for Non-contractual Obligations” [2008] Lloyds Maritime and Commercial Law Quarterly 274, 297.
151 Trafigura n 117 [104]–[116].
152 See text at n 117 above.
153 See text at n 106 above.
154 Restatement, supra n 61, §§145–149.
155 See text at n 82 above.
156 See Graham, supra n 42, 229–230.
157 Societe Anonyme Marocain De L'industrie Du Raffinage v. Bank of America 31 NYS 3d 924 (NY Sup Ct 2016). However, the reasoning in this case was not entirely clear, as the Court first determined Pennsylvania law was applicable on the basis of the place of issuance and presentation, before proceeding to the seemingly superfluous step of applying §5–116(b) of the UCC as applied in Pennsylvania.
158 The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc) (EU Exit) Regulations 2019, SI 2019/834 reg 4.
159 Collins, supra n 15, paras 2-042–2-043.
160 Council Regulation (EC) 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) [2007] OJ L199/40 Art 4(1).
161 See Marconi n 21 [44]–[54].
162 See text at n 86 above.
163 See eg Banco Santander SA v Bayfern Limited [2000] 1 All ER (Comm) 776 (CA), where the beneficiary’s fraud was discovered before it was due to be paid under a deferred payment LC, but after it had already been paid through the confirming bank’s early discounting of the LC. See also Standard Chartered Bank v Sin Chong Hua Electronic & Trading Pte Ltd [1991] SGHC 121, [1991] 2 SLR(R) 445.
164 For illustrations of this situation, see Banco Santander n 163; Credit Agricole Indosuez v Generale Bank [1999] 2 All ER (Comm) 1009 (HC); European Asian Bank AG v Punjab and Sind Bank (No 2) [1983] 2 All ER 508 (CA).
165 See Angelica-Whitewear n 9 [10], where it is made clear that the autonomy principle is concerned with the independence of the issuing bank’s liability to pay the beneficiary from disputes in the underlying contract.
166 In the case of deferred payment LCs, arts 7(c) and 8(c) of the UCP, supra n 5 (which were amended to address complications such as those which arose in Banco Santander n 163) require the issuing bank and confirming bank respectively to reimburse their nominated bank at maturity, even if the nominated bank had prepaid before maturity. Thus, there is a contractual obligation to reimburse even if fraud is discovered after prepayment by the nominated bank.
If the issuing bank has arranged for a third-party bank to carry out the reimbursement, then one must also consider the application of the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (2008 Revision), ICC Publication No. 725 (URR). That reimbursement arrangement would be even further removed, as art 3 URR makes clear that the reimbursing bank is not concerned with the terms of the LC – by extension it is not concerned with whether a presentation was complying, let alone fraudulent.
167 But see Parts D3(b)(ii) and (iii) for issues with the different choice-of-law rules in the USA and EU.
168 See Ellinger and Neo, supra n 2, 164–165, Malek and Quest, supra n 2, paras 9.48–9.49, Brindle and Cox, supra n 78, para 7-058.
169 Ellinger and Neo, supra n 2, 165. This is because a claim of unjust enrichment generally requires (although there are a few exceptions) a direct transfer of value from the claimant to the defendant: see Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) [2013] SGCA 36, [2013] 3 SLR 801 [113]; ITC v HMRC [2017] UKSC 29, [2018] AC 275 [46]–[47].
170 Ellinger and Neo, supra n 2, 164.
171 Standard Chartered Bank v Sin Chong Hua Electric & Trading Pte Ltd [1991] SGHC 121, [1991] 2 SLR(R) 445 [25]–[29], where an issuing bank which was entitled to recover its payment to the beneficiary as money paid under a mistake was held to also be entitled to trace the money founded on a persistent equitable proprietary interest. Notwithstanding that authority, the availability of tracing in unjust enrichment is ambiguous and requires further development, not least because it is controversial whether unjust enrichment can give the claimant a traceable proprietary interest. For further discussion, see generally Wee Chiaw Sek Anna n 169 [112]–[128]; Stephen Watterson, “‘Direct Transfers’ in the Law of Unjust Enrichment” (2011) 64 Current Legal Problems 435; Lionel D Smith, “Tracing and Electronic Fund Transfers” in Francis D Rose (ed), Restitution and Banking Law (Mansfield Press, 1998).
172 There may be other important differences between the jurisdictions such as in the availability of different remedies and defences. See generally Gerhard Dannemann, The German Law of Unjustified Enrichment and Restitution: A Comparative Introduction (Oxford University Press, 2009).
173 Andrew Burrows, The Law of Restitution (Oxford University Press, 3rd edn, 2011), 27; Tang Hang Wu, Principles of the Law of Restitution in Singapore (Academy Publishing, 2019), para 01.021.
174 However, there is some debate as to the nature of this mistake: see Malek and Quest, supra n 2, para 9.49; Ellinger and Neo, supra n 2, 164.
175 Dannemann, supra n 172, 11.
176 See Kerr v Baranow [2011] 1 SCR 269 (Supreme Court of Canada) [32]; Restatement (Third) of Restitution and Unjust Enrichment (Am Law Inst 2011) §1 cmt b. However, the differences in position between US and English law may be more illusory than real, since §5–6 of the Restatement expressly provide for mistaken payment to be a positive ground for restitution.
177 In the US, consistent with the positions for contract and tort, the governing law for restitution is generally determined through a range of factors approach. However, significant weight is given to the pre-existing relationship between the parties: see Restatement, supra n 62, §221 cmt d.
178 This is notwithstanding that the LC framework does not fit comfortably with the Common Law contractual requirements of offer and acceptance, and consideration: see Booysen, supra n 2, paras 2.13–2.23.
179 See Part B2 above.