The Legal Standards, Rules, and Requirements for the Examination and Verification of Documents in Documentary Credits (An Analytical Study) In Light of the Libyan Law and the Uniform Customs and Practice for Documentary Credits (UCP 600, 2007) and the International Standard Banking Practice (ISBP No. 745, 2013)

Abstract

The system of documentary credits is considered an effective factor in the prosperity of economic activities, particularly at the international level, due to its significant role in instilling confidence between the parties to international commercial contracts, as well as among the broader circles of global trade participants. This importance arises from the fact that the parties involved in commercial transactions are often geographically distant and unfamiliar with each other. Consequently, this financial instrument has created—or restored—the much-needed trust between the exporter and the importer, thanks to the intermediary role played by commercial banks as safe and reliable entities that guarantee the proper execution of international sales contracts and protect the rights of both parties.

Accordingly, documentary credits have become a desirable and widely accepted means of payment and credit within the international trade environment. Hence, this study aims to clarify the mechanism of the documentary credit contract by identifying the legal standards, rules, and requirements that commercial banks must adhere to when examining, verifying, and scrutinizing the documents related to the letter of credit. The importance of these documents stems from the fact that banks do not deal directly with the goods or commodities underlying the primary contract between the seller and buyer but rather operate on the basis of the legal documents specified by the applicant in the credit opening agreement. These documents must be presented by the beneficiary to the issuing bank when requesting the disbursement of the credit amount.

Thus, the significance of the documentary credit documents and their pivotal role in executing the credit contract between the issuing bank and the beneficiary become evident. The bank bears the duty and obligation to examine and verify these documents in accordance with the legal standards, rules, and conditions established by the Uniform Customs and Practice for Documentary Credits (UCP) and the International Standard Banking Practice (ISBP), both of which have also been referenced in commercial laws and regulations in many countries, including the Libyan Commercial Activity Law under its sixth chapter.

Given the importance and sensitivity of the obligation to examine and verify documents in line with these standards, rules, and conditions, this study addresses the legal standards, rules, and requirements governing the examination and verification of documentary credit documents. It adopts an analytical methodology and follows a balanced scientific structure that meets the objectives of the study, addresses its main problem, and answers its key questions through three main sections: the first section defines the documents of the credit and the standards for their conformity; the second outlines the mandatory legal rules governing the examination and verification of such documents; and the third discusses the general legal conditions for completing the process of document examination and verification.

The study concludes with a summary of its key findings and provides several practical and academic recommendations. The researcher has also expressed personal viewpoints on the various issues and questions raised throughout the study whenever deemed scientifically necessary.