Examining the Theory of Single Law Governing Multiple Relationships Existing in International Documentary ‎Credits Laya Joneydi

Document Type : Research Paper

Authors

1 Associate Professor, Department of Private Law, Faculty of Law & Political Sciences, University of Tehran, Tehran, Iran

2 Ph.D in Private Law, Faculty of Law & Political Science, University of Tehran, Tehran, Iran (Email: rasoolbahrampoori@gmail.com)

Abstract

According to the theory of one governing law for multiple relationships existing in international ‎documentary ‎credits, the law applicable to all relationships in a letter of credit must be the same and the law of a single country governs all such relationships. Since "payment of letter of credit" is made in the country of residence of the advising bank (in unconfirmed letters of credit) or the confirming bank (in confirmed letters of credit), it is assumed that such country has the closest connection with all the above relationships and its law governs these relationships.
This theory has been recognized in the courts of some developled countries and a number of authors have accepted the said approach and tried to promote it, nevertheless, considerable reflexions on the theory are capable of being raised. The main grounds of the theory are necessity of taking into account the commercial expectations of the beneficiaries and the banks involved in the letter of credit, as well as the assumption of a close relationship between the country where payment is made and all relations existing in the letter of credit. Both bases have been questioned and challenged. In this study, the theory is examined in an analytical-descriptive ‎method and it ‎seems that such kind of approach regarding law ‎applicable to multiple relations ‎involved in letter of credits is somehow ‎dogmatic and has been proposed with the ‎aim of expanding the legal ‎competence of developed countries and application of ‎their legal ‎systems to all aspects of letters of credit and disputes arising out of ‎them. ‎The authors of this essay are of the opinion that the legal ‎analysis leads to ‎preference of application of a multifactorial and ‎flexible conflictual approach i.e ‎‎"center of gravity of the disputed ‎relationship/s". Application of  the law of ‎‏"‏center ‎of gravity‏"‏‎, as ‎relevant conflict of law rule, provides the opportunity of ‎determining ‎the substantive law governing the legal relationships by ‎examining various ‎connecting factors and figuring out the proper law ‎through taking into consideration ‎all circumstances surrounding the ‎relationship/s in dispute. This conflictual ‎approach is a well-known ‎approach in private international law and recognized in ‎most of legal ‎systems and seems to be justifiable through a reasonable ‎interpretation ‎of paragraph 2 of Article 27 of the International ‎Commercial ‎Arbitration Law.

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References

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Comparative Law Review
Volume 12, Issue 2
December 2021
Pages 501-521

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