Legal Regulation to Combat Fraud in Documentary Credits under the Libyan Commercial Activity Law No. 23 of 2010

Abstract

This study examines the legal regulation of fraud in documentary credits under Libyan Commercial Activity Law No. 23 of 2010, focusing on whether Articles 740–751 provide sufficient protection to documentary credit parties, especially where the beneficiary or another party exploits the independence principle and the rule that banks deal with documents rather than goods. The issue is significant because documentary credits remain a major instrument for financing foreign trade and effecting payment in Libya, while official data issued by the Central Bank of Libya for 2023 showed that documentary credits represented the overwhelming majority of accepted foreign-exchange coverage requests. This increases the practical danger of fraud unless accompanied by adequate legislative and regulatory safeguards. The study adopts an analytical method in reading the Libyan statutory provisions and a comparative method in drawing on recent open-access Arabic legal scholarship. It concludes that Libyan law successfully affirms the independence principle, documentary compliance, and the supplementary role of international uniform customs and practice. However, it does not expressly regulate the fraud exception, nor does it establish a detailed mechanism to suspend payment where serious evidence of forgery or material fraud exists. Accordingly, the study recommends introducing a specific legislative or regulatory rule on documentary credit fraud, strengthening urgent judicial relief, raising banks’ standards of professional care, and integrating documentary credit operations with modern compliance and digital verification requirements.