Letter of Credit Forum

Since coming into existence of the ICC guidelines regarding the examination of documents, the main duty of the LC bank consists of determining whether the documents appear on their face to comply with the LC provisions. The obligation to strictly follow the issuer's instructions is a consequence of the credit being an instrument of documentary payment.  Furthermore, the banks lack the industry specific knowledge and experience to determine the importance of seemingly minor deviations. 

The globally recognized principle of compliance does not allow for equitable considerations. Lord Summer's remark made in the 1927 case of Equitable Trust Company of New York ./. Dawson Partners Ltd, (27 Li.L.Rep. 49) still applies: "there is no room for documents which are almost the same or which will do as well."

The discussions in the United States legal community whether to use strict or substantial compliance are of less practical relevance than the doctrines' names might suggest. In the end the discussion focusses on the acceptable exceptions from strict compliance. These exceptions are typically fraud related. It seems however, that a general doctrinal approach to resolving the issue of allowable discrepancies does and will not exist. Rather, a case by case approach to discrepancies as has been utilized in the past seems most appropriate. 

A purely literal comparison of LC provisions and presented documents however is not sufficient. Currently still disputed is in how far to allow the interpretation of documents within the context of the Credit.