DOUBLE INVOICING IN INTERNATIONAL TRADE: THE FRAUD AND NULLITY EXCEPTIONS IN LETTERS OF CREDIT – ARE THE AMERICA ACCORD AND THE UCP 500 CROOKS’ CHARTERS!?

Abstract

This article: First, (a) re-examines the fraud exception rule in letters of credit transactions with specific reference to the United City Merchants v Royal Bank of Canada (the American Accord) and against the background of a recent commonwealth decision accepting nullity as a new exception; (b) evaluates its impact on over/under invoicing under the WTO Agreement on Pre-shipment Inspection of Goods in International Trade (PSI); and (c) assesses its implication on the IMF Agreement on Exchange Control implemented in the UK by the IMF Agreement Regulations 1946 made under the IMF Agreement Acts 1945 as amended. Secondly, it argues that the current UCP 500 is outmoded and inadequate to meet current needs and is therefore in need of urgent revision. Thirdly, it recommends, inter alia, that in accordance with the said commonwealth decision, fraud by third parties should be recognised by English law as an independent and separate nullity exception. Fourth, and finally, it concludes that the status-quo acts as an unwitting Crooks’ Charter for money launderers, documentary fraudsters and other white collar crimes.