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Fraud in the documents and the underlying contract in letters of credit under Jordanian and English law: a new prerequisite?

Kamal Jamal Alawamleh (Faculty of Law, University of Petra, Amman, Jordan)
Shadi Helo Abu Helo (Faculty of Law, University of Petra, Amman, Jordan)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 16 November 2020

Issue publication date: 5 August 2021

152

Abstract

Purpose

This study aims to examine the application of the fraud exception to the autonomy principle that governs the work of letters of credit in both Jordanian and English law. While it has been reiterated that the application of such exception before the English courts is difficult, this study highlights and critically analyzes some of the reasons that lie behind such a difficulty. Moreover, this study compares the English approach with the Jordanian approach to this specific area of law to find out what each can benefit from the approach of the other. The extent to which both approaches have been successful in applying such an exception will be examined thoroughly in this paper.

Design/methodology/approach

To examine how effective is the approaches followed by the English and Jordanian Courts in applying the fraud exception in this context, this work makes use of the secondary data available in this regard as the main method to complete such an examination. By critically analyzing and comparing the various data contained in these sources, this work identifies the problems associated with such approaches.

Findings

This work suggests that while the autonomy principle in letters of credit has what shall maintain its role as an important principle, the fraud exception application shall be facilitated. It further submits that the English Courts attitude to this specific area of law is somehow ambiguous and intertwined as it does not distinguish between two different stages that are existent in this context, namely, the submission of the documents stage “the prerequisite” that in case of submitting genuine, truthful and complying documents would activate the autonomy principle and the following stage which starts after activating the autonomy principle and which to it a fraud exception can be applied.

Originality/value

This work proposes that a beneficiary of a letter of credit shall satisfy a prerequisite before it can be said that he is protected under the autonomy principle. Such a prerequisite dictates that he shall submit genuine, truthful and complying documents to activate the autonomy principle and once the beneficiary submits such documents it can be said that the autonomy principle, which fraud is an exception to it, has been activated. Furthermore, this work proposes that English Courts shall adopt an approach similar to the Jordanian approach in relation to the application of the fraud exception, whereas the latter requires proving neither the beneficiary’s fraudulent intent nor his knowledge of it but rather applies a more realistic test concerned merely with the goods’ quality and quantity.

Keywords

Citation

Alawamleh, K.J. and Abu Helo, S.H. (2021), "Fraud in the documents and the underlying contract in letters of credit under Jordanian and English law: a new prerequisite?", Journal of Financial Crime, Vol. 28 No. 3, pp. 672-685. https://doi.org/10.1108/JFC-08-2020-0164

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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