Lloyd's Maritime and Commercial Law Quarterly
THE ROME CONVENTION AND LETTERS OF CREDIT
Marconi v. Pan Indonesia Bank
Whilst the Uniform Customs and Practice for Documentary Credits (“UCP 500”) has harmonized considerably the substantive principles governing the issue and operation of letters of credit, it does not purport to be a comprehensive code.1
Accordingly, those issues, which fall outside the scope of UCP 500, will be determined according to the substantive principles of the legal system selected by the forum’s choice of law rules.2
For an English court, these are contained in the Rome Convention 1980 (“the Convention”).3
In Marconi Communications International Ltd
v. Pt Pan Indonesia Bank Ltd
4
the Court of Appeal (Potter, Buxton and Hooper LJJ) had its first opportunity to apply the Convention to a letter of credit dispute.
The claimant had agreed to supply telephone equipment and services to an Indonesian company, PTPA, payment to be by means of a letter of credit “established and advised through” Standard Chartered Bank (“SCB”), an English bank. The contract of sale also envisaged that payment under the letter of credit would follow the presentation of the necessary documents at the counters of SCB as advising bank. Upon PTPA’s request, the letter of credit in dispute was issued by an Indonesian bank, Hastin Bank, and duly advised to the claimant by SCB. According to its terms, the letter of credit was “available by negotiation of beneficiary’s drafts” but did not nominate any specific bank to perform this function. Several days later, the defendant Panin Bank, another Indonesian bank, added its confirmation to the credit. Following shipment of the goods, the requisite documents and drafts were presented to the defendant by SCB, acting as the claimant’s agent for
1. The current version is the Uniform Customs and Practice for Documentary Credits (1993 Revision), ICC Publication No. 500 (hereinafter “UCP 500”).
2. The courts regularly deal with issues arising out of letters of credit for which the UCP 500 makes no provision. The most important recent examples include the effects of the beneficiary’s fraud upon the operation of the credit (see United City Merchants (Investments) Ltd
v. Royal Bank of Canada (The American Accord)
[1983] 1 AC 168), the circumstances in which the credit may be tainted by illegality (see Mahonia Ltd
v. JP Morgan Chase Bank
[2003] 2 Lloyd’s Rep 911), the principles of interpretation for letters of credit (see Sirius International Insurance Co
v. FAI General Insurance Ltd
[2004] UKHL 54; [2004] 1 WLR 3251; [2005] 1 Lloyd’s Rep 461) and the remedies available to a transferee of a letter of credit against the transferring bank (see Jackson
v. Royal Bank of Scotland
[2005] UKHL 3; [2005] 1 WLR 377; [2005] 1 Lloyd’s Rep 366).
3. EEC Convention on the Law Applicable to Contractual Obligations [1980] OJ L266/1. The Convention is given the force of law in the UK by virtue of the Contracts (Applicable Law) Act 1990 and applies to contracts concluded after 1 April 1991: SI 1991 No. 707. Equally, the Convention will determine contractual choice of law issues arising before the courts of other Contracting States: see Plender & Wilderspin, The European Contracts Convention
, 2nd edn (2001) (hereafter “Plender & Wilderspin”), paras 1.32–1.42.
4. [2005] EWCA Civ 422.
417