Many shortcomings of the Uniform Customs and Practice for Documentary Credits (1993 Revision: UCP–500) have surfaced during the last 10 years. This article discusses a reform. The main areas considered are (i) the desired scope of application of the Code; (ii) a new classification of letters of credit according to their tenor rather than the form assumed by the issuing bank’s undertaking; (iii) the position of negotiating banks; (iv) the tenets of strict compliance; and (v) the rejection procedure. Consideration is also given to the introduction of Articles dealing with jurisdiction and governing law and the desirability of an arbitration clause.

The current Uniform Customs and Practice for Documentary Credits—UCP–500 (1993 Revision)—is a set of standard terms used all over the world. It is incorporated in documentary credit transactions as a matter of course and has become well known in the business world at large. Notwithstanding the inauguration of the International Standby Practices (ISP98)1 —meant to be applied to Standby Credits and First Demand Guarantees—UCP–500 continues to be applied even to such instruments by most international banks, excluding those based in the United States. Despite this popularity, UCP–500 is neither a perfect nor an up-to-date Code. In the decade that has elapsed since the 1993 Revision superseded the previous version—UCP–400, promulgated in 1983—courts and writers have identified shortcomings. For a time, the Banking Commission of the ICC has rejected the call for a new revision, preferring a piecemeal reform to be instituted by the redrafting of just certain provisions. One reform in this spirit was the promulgation of the eUCP—a supplement to be incorporated into the letter of credit if it sanctions the tender of documents by electronic teletransmissions.2 More recently, the Banking Commission has resolved to revise the entire Code.3 It is believed that this approach is to be preferred: UCP–500 is ready for a thorough revision. Some of the major weaknesses of the Code are

30