Letter of Credit

LETTER OF CREDIT: INTERNATIONAL PRACTICE

(Common law countries) AND MONGOLIAN LAW

      Introduction

      In an international sales contract the payment has an important place. Even if the contract is done, it does not guarantee that the seller will be paid or the buyer will have quality goods. In the increasingly competitive field of international sales, an exporter’s credit terms have become almost as important as the quality of his product, its price, and the time of delivery.¹ Letter of credit is the crucial element to secure the international transaction.

   

           The first publicly known Mongolian case in letter of credit was Daewoo International Corporation v Mongol Post Bank {2007}. This case had influence of Mongolian domestic politics and Mongol-Korean relationship. I will analyze this case in this paper and support my ideas about influence of International Private law by an another case Marubeni Hong Kong and South China Ltd. v Mongolian Government [2004] EWHC 472 (Comm.) (12 March 2004). Lack of regulation of letters of credit or Mongolia’s international law approach to letters of credit would be benefit from Common law countries practice of letters of credit.

PART I. THEORETICAL BASIS OF LETTERS OF CREDIT

1. The history and nature of letters of credit

   2. International regulation on letters of credit

 3. Fundamental principles of letters of credit

          PART II. International (common law countries) practice and Mongolian law on letters of credit

           Daewoo International Corporation v MongolPost Bank, Court of Chingeltei district, Ulaanbaatar

       

      Marubeni Hong Kong and South China Ltd. v Mongolian Government [2004] EWHC 472 (Comm.) (12 March 2004)

     Conclusion

     Bibliography

1. Books/Articles/Reports

Agasha Mugasha, Letters of credit and Bank Guarantees (2003)

Boris Kozolchyk, Commercial Letters of Credit in the Americas (1966)

Charles W.Mooney, Jr., Reade H.Ryan, Jr., Letters of Credit and Bankers’

Acceptances (1986)

Jeffrey J Browne, ‘The Fraud Exception to Standby Letters of Credit in Australia: Does it Embrace Statutory Onconscionability?’ 5 Bond Law Review (1999)

John F.Dolan, The Law of letters of credit (1991, 2^nd edition)

Ian Jeffries, Mongolia: A guide to economic and political developments, (2007)

Koudriachov S., ‘The Application of the Letter of Credit Form of Payment in

International Business Transactions’ 10 International Trade law Journal (2001)

Lazar Sarna, Letters of credit: The law and current practice (1986, 2^nd ed.)

M.Pryles, J.Waincymer, M.Davies, International Trade Law: Commentary and Materials (2004)

Mandakhbat Sereenov, ‘Some Legal and Practical Issues of International Comercial Arbitration in Mongolia’ (the Research paper No02, The University of Melbourne, 2007)

Mandakhbat Sereenov, ‘International Law as a source of Australian Law’(The Research Paper No01, The University of Melbourne, 2007)

Mendsaihan T., Fundamentals of Private International Law (2002)

Monhjargal Tegshjargal, Civil Law of Mongolia, (2004)

Narangerel Sodovsuren, Legal System of Mongolia, (2004)

Nicholas Kouladis, Principles of Law Relating to Overseas Trade (1994)

Ray August, ‘International Business Law: Text, Cases and Readings’ (1993)

Ronald J. Mann, Payment Systems and Other financial Transactions (1999)

Ross Buckley, ‘Potential Pitfalls with letters of credit’ 70 Australian Law Journal (1996)

William E. Butler, The Mongolian Legal System: Contemporary legislation and documentation (1982)

Xiang Gao, The fraud rule in the law of letters of Credit: A Comparative study (2002)

1. Case Law

Boral Formwork&Scaffolding Pty Ltd v Action Makers Ltd [2003] NSWSC 713,

Daewoo International Corporation v Mongol Post Bank [2007] Mongolia

1. Legislation

The Constitution of Mongolia (1992)

The Civil Code of Mongolia (2002)

The Civil Code of Mongolian People’s republic (1963)

The Civil Procedure Code of Mongolia (2002)

UCP500, UCP600 (ICC)

UN Convention

Trade Practice Act (Commonwealth)

Uniform Commercial Code (USA)

All Mongolian Legislation on <www.legalinfo.mn>

1. Other

A Letter of Credit <http://www.anod.mn/en/pages.php?cat=3&title=25&page=44; http://www.capitronbank.mn/index.php?action=collection.collection;

http://www.creditbank.mn/Section2/Default.aspx;

http://www.erelbank.mn/service.cfm?language=mongol; http://www.ubcbank.mn/en/main.php?menuID=107;

http://www.zoosbank.mn/persavacctv.php;

http://www.tdbm.mn/index.php?mid=176&module=menu&cmd=content_more&id=141&mid=308&smid=177>
¹ Boris Kozolchyk, Commercial Letters of Credit in the Americas (1966) 32
² Letter of Credit (2007) <http://www.anod.mn/en/pages.php?cat=3&title=25&page=44; http://www.capitronbank.mn/index.php?action=collection.collection;

http://www.creditbank.mn/Section2/Default.aspx;

http://www.erelbank.mn/service.cfm?language=mongol; http://www.ubcbank.mn/en/main.php?menuID=107;

http://www.zoosbank.mn/persavacctv.php;

http://www.tdbm.mn/index.php?mid=176&module=menu&cmd=content_more&id=141&mid=308&smid=177> at 01 August 2007
³ Koudriachov S., ‘The Application of the Letter of Credit Form of Payment in International Business Transactions’ (2001) 10 International Trade Law Journal, 37
⁴ Agasha Mugasha, Letters of credit and Bank Guarantees (2003) 39
⁵ Xiang Gao, The fraud rule in the law of letters of Credit: A Comparative study (2002) 9
⁶ Agasha Mugasha, Letters of credit and Bank Guarantees (2003) 40
⁷ Xiang Gao, The fraud rule in the law of letters of Credit: A Comparative study (2002) 10
⁸ Agasha Mugasha, Letters of credit and Bank Guarantees (2003) 41
⁹ Xiang Gao, The fraud rule in the law of letters of Credit: A Comparative study (2002) 11
¹⁰ Agasha Mugasha, Letters of credit and Bank Guarantees (2003) 42
¹¹ Lazar Sarna, Letters of credit: The law and current practice (2^nd ed., 1986) 27
¹² Ibid, 1 
¹³ M.Pryles, J.Waincymer, M.Davies, International Trade Law: Commentary and Materials (2004) 306
¹⁴ Lazar Sarna, Letters of credit: The law and current practice (2^nd ed., 1986) 1 
¹⁵ M.Pryles, J.Waincymer, M.Davies, International Trade Law: Commentary and Materials (2004) 307
¹⁶ Lazar Sarna, Letters of credit: The law and current practice (2^nd ed., 1986) 55
¹⁷ Xiang Gao, The fraud rule in the law of letters of Credit: A Comparative study (2002) 18
¹⁸ Ronald J. Mann, Payment Systems and Other financial Transactions (1999) 217
¹⁹ A letter of credit, Ulaanbaatar bank http://www.ubcbank.mn/en/main.php?menuID=107 at 01 september 2007
²⁰ Ronald J. Mann, ‘The role of letters of credit in payment transactions’ 98 Michigan Law Review (2000), 2500
²¹ Ross Buckley, ‘Potential Pitfalls with letters of credit’ 70 Australian Law Journal (1996), 221
²² Ray August, International Business Law: Text, Cases and Readings (1993) 575
²³ Ibid, 575
²⁴ Ronald J. Mann, ‘The role of letters of credit in payment transactions’ 98 Michigan Law Review (2000), 2500
²⁵ Ian Jeffries, Mongolia: A guide to economic and political developments (2007) 1
²⁶ William E. Butler, The Mongolian Legal System: Contemporary legislation and documentation (1982) 13
²⁷ Mendsaihan T., Fundamentals of Private International Law (2002) 28
²⁸ Mandakhbat Sereenov, ‘Some legal and practical issues of International Commercial Arbitration in Mongolia’ Research Paper No2, The University of Melbourne, 2007) 11
²⁹ Monhjargal Tegshjargal, Civil Law of Mongolia, Ulaanbaatar (2004) 103 
³⁰ Narangerel Sodovsuren, Legal System of Mongolia (2004) 102
³¹ Marubeni Hong Kong and South China Ltd. v Mongolian Government [2004] EWHC 472 (Comm.), 3
³² Charles W.Mooney, Jr., Reade H.Ryan, Jr., Letters of Credit and Bankers’ Acceptances (1986) 120
³³ Nicholas Kouladis, Principles of Law Relating to Overseas Trade (1994) 222
³⁴ Jeffrey J Browne, ‘The Fraud Exception to Standby Letters of Credit in Australia: Does it Embrace Statutory Onconscionability?’ 5 Bond Law Review (1999) 2
³⁵ Nicholas Kouladis, Principles of Law Relating to Overseas Trade (1994) 223
³⁶ John F.Dolan, The Law of letters of credit, (1991,2^nd edition) 9-43
³⁷ Boris Kozolchyk, Commercial Letters of Credit in the Americas (1966) 284
³⁸ Boral Formwork&Scaffolding Pty Ltd v Action Makers Ltd [2003] NSWSC 713, 41
³⁹ Ibid, 42
⁴⁰ John F.Dolan, The Law of letters of credit, (1991,2^nd ed.) 11-28
⁴¹ Charles W.Mooney, Jr., Reade H.Ryan, Jr., Letters of Credit and Bankers’ Acceptances (1986) 120
⁴² Boral Formwork&Scaffolding Pty Ltd v Action Makers Ltd [2003] NSWSC 713, 74
⁴³ Mandakhbat Sereenov, ‘International law as source of Australian law’, (The research paper No01, The University of Melbourne, 2007) 1