Article: Recent Korean Case Law on a Back-to-Back Letter of Credit - Global Trade and Customs Journal View Article: Recent Korean Case Law on a Back-to-Back Letter of Credit by - Global Trade and Customs Journal Article: Recent Korean Case Law on a Back-to-Back Letter of Credit 19 5
A letter of credit is one of the primary payment methods in international trades. A letter of credit by its nature is separate from the underlying contract under which it is issued, which promote the utility of letters of credit in international trades. A letter of credit can be categorized into different types, one of which is master letter of credit and back-to-back letter of credit. When an exporter (or a trader) uses a letter of credit issued in his favour as a means by which to request his bank (usually an advising bank) to issue a separate letter of credit on his behalf in favour of the local supplier (or a real exporter), the former letter of credit is referred to as a master letter of credit, while the latter letter of credit is referred to as a ‘back-to-back letter of credit’ because the bank issues a ‘back-to-back letter of credit’ on ‘the back of’ a master letter of credit. A back-to-back letter of credit is relatively rare, and is thus not much introduced to the traders.
In FIM Bank v. Woori Bank and Kwangju Bank (2017), the Supreme Court of Korea ruled on various issues (i.e., governing law, definition of negotiation, requirements of negotiating bank, independence principle and fraud exception, presenting bank and fraud exception, etc.), including the concept of a back-to back letter of credit, arising out of letters of credit transaction involving back-to-back letters of credit. This paper analyses the court’s findings on and deals primarily with various issues concerning a letter of credit transaction involving a back-to back letter of credit.
Global Trade and Customs Journal