THE RESOLUTION FOR LC DISPUTES IN VIET NAM (luận văn thạc sỹ luật)

HO CHI MINH CITY UNIVERSITY OF LAW THE MANAGING BOARD OF SPECIAL TRAINING PROGRAMS BACHELOR’S THESIS COMMERCIAL LAW MAJOR THE RESOLUTION FOR L/C DISPUTES IN VIET NAM Student Student ID Class Supervisor Do Thi Mai Hoang Ha 0955050051 CLC34 Dr Phan Thi Thanh Duong HO CHI MINH CITY 2013 I hereby affirm that this thesis is my own study under the supervisor’s guidance All of the information other than my idea to be used or quoted has been acknowledged by means of complete references I would bear full responsibility for my protest 31 July 2013 Do Thi Mai Hoang Ha ABBREVIATION ICC: International Chamber of Commerce‘s Commission L/C: Letter of Credit B/E : Bill of Exchange LCA: Law of Commercial Arbitration OCA: Ordinance of Commercial Arbitration UCC: Uniform Commercial Code UCP: The Uniform Customs and Practice for L/C URR: The Uniform Rules for bank-to-bank reimbursements under Documentary Credits eUCP:The Uniform Customs and Practice for Documentary Credits for electronic presentation ISBP: The International Standard Banking Practice for the examination of documents under L/C TABLE OF CONTENT INTRODUCTION CHAPTER 1: OVERVIEW OF RESOLVING DISPUTES IN L/C 1.1 Letter of credit (L/C) 1.1.1 Definition 1.1.2 Two fundamental principles of letter of credit transaction 1.1.3 Process of Letter of credit transaction 1.1.4 Relationships between the parties 1.2 Overview of resolving disputes and popular disputes in L/C 10 1.2.1 Content of dispute arising out of L/C 10 1.2.2 Principle of resolving disputes in documentary credit 11 1.2.3 Method of resolving disputes in L/C 12 1.3 Legislation system governing Letter of credit transaction 16 1.3.1 International law 16 1.3.2 National law 21 1.4 Study on Chinese, Japan and USA legislation 24 CHAPTER 2: REALITY OF SOLVING DISPUTE ARISING OUT OF L/C AND RECOMMENDATIONS FOR IMPROVEMENT 33 2.1 Reality of resolving disputes arising out of L/C in Vietnam 33 2.1.1 Reality of Vietnamese stipulation on the method of resolving disputes 33 2.1.2 Popular disputes of L/C in Viet Nam and reality of resolution 37 2.1.3 Comment on the reality of resolving disputes of L/C in Vietnam 41 2.2 Recommendation for improvement on resolving disputes in 45 2.2.1 Developing dispute resolution stipulation concerning L/C 45 2.2.2 Improving the efficiency of dispute resolution method in L/C 47 2.2.3 Some specific recommendations for participants in L/C 48 CONCLUSION BIBLIOGRAPHY INTRODUCTION The necessity of research In term of theory: The method of L/C is used more and more popularly in international payment One of effective tools to improve and ensure the efficiency of this method is to build and perfect the system of law regulating L/C Studying Vietnamese system of law on the basis of international law has the huge meaning on theory which supplies the scientific basis for learning about international law and domestic law – the combination of both system of law regulating this international payment method - In term of reality: In international payment activities, L/C method is used mostly due to the safety, harmony which meets the benefit‘s demand of participating parties However, many disputes will arise if the safety and harmony is not ensured Studying the method of solving disputes is requisite in this period when the number of disputes between Vietnamese enterprise and foreign partners increase more and more in quantity and complexity Therefore, studying the experiences of foreign law systems and relevant international rules for the improvement of Vietnamese law in this matter is necessary and meaningful For the above-mentioned reasons, the topic ―THE RESOLUTION FOR L/C DISPUTES IN VIET NAM” is chosen for the author‘s graduation thesis Because of time limitation, it is difficult for me to offer a perfect study in this subject Nevertheless, the author shall the best to research as deep as possible on several typical issues including overview of resolving disputes arising out of L/C, legal framework concerning the resolution of disputes in L/C, some shortcomings and recommendations for improvement All comments and advices are always welcomed to assist the author improve the thesis for the best contribution to legislation on L/C transaction in Viet Nam A review of the research literature In recent years, the issue of L/C have attracted many concerns not only from economic persective but also from the legal perspective Because the transaction by L/C can develop vibrantly only if there were a perfect legal framework Here are some remarkable books and articles:  Associate Professor, Doctor Nguyen Thi Quy, Cam nang giai quyet tranh chap toan quoc te bang L/C  M.A Nguyen Trong Thuy – Arbitrator of Vietnam International Arbitration Center, Toan tap UCP 600 – Phan tich va binh luan toan dien tinh huong tin dung chung tu  Associate Professor, Doctor Hoang Ngoc Thiet (2002), National Political Publishing House, Ha Noi, Tranh chap tu hop đong xuat nhap khau, An le tai va kinh nghiem  M.A Nguyen Ngoc Duy My, Giai quyet tranh chap thuong mai o Viet Nam  M.A Nguyen Huyen Cuong - Judge of Economic Court in People's Court of Ha Noi city, Thuc tien giai quyet tranh chap thuong mai quoc te - nhung kho khan vuong mac va kien nghi Such books and articles only focus on finding and analyzing the reason of arising disputes in the transaction of L/C and make advisings from economic aspect Currently, there are many book or reference materials for L/C, however, in economic aspect Then, there are several researches, especially in Ho Chi Minh City University of Law, regarding some different issues of L/C including:  Bachelor thesis of Van Thi Thu Hang (2005), Solution to improve the effectiveness of L/C to imported goods during competitive process and globalization,  Bachelor thesis of Le Thuy Duong (2004), Letter of credit: risks and solutiion to reduce risk at commercial bank,  Bachelor thesis of Phan Le Dai Guong (2003): The usual risks of transaction by L/C – solution to reduce risk,  Bachelor thesis of Bui Thi Hong Phuong (2007): Some basic changes of UCP 600 in comparision with UCP 500,  Bachelor thesis of Nguyen Thi Duyen (2007): UCP from reality of bank‘s performance There are many thesis relating to L/C, however there are hardly the thesis which focus on the issue of resolving disputes in L/C As we know, in Vietnam, there are still not any specific law on L/C, especially on resolving the disputes in it But with the development of internationally commercial relationship nowadays, it is necessary to build and own a effective law which plays an important role in settling such disputes Thus, to inherit and absorb above-mentioned researches, the graduation thesis ―The resolution for L/C disputes in Viet Nam” hopes to supply a general understanding of dispute resolution methods which are stipulated in law and suggest some recommendations for legal – makers to amend and supplement a specific law in L/C The author will consider them from the sides of both the parties in L/C transactions and the State agencies which must supervise them strictly to avoid harmful impacts Delimitation of thesis The author focus on analyzing the stipulation of international practices, international custom, national law on international payment (Letter of Credit) Simultaneously, this thesis also studies some real cases relating to L/C over the world and in Vietnam when signed an internationally commercial contract Purposes of the thesis First of all, the thesis will give a general understanding of some fundamental academic issues in relation to L/C as well as the method of resolving disputes This is the first step for further research into specific regulations Secondly, under a comparative view, the thesis will study the stipulations of documentary credit in some national laws It will be a valuable experience for the law – maker in the process of building the further stipulation necessary and suitable for the reality of Vietnam Subsequently, the author focuses on analyzing the stipulation of Vietnamese law on the relevant matters in order to point out its insufficiency of regulations, upon which the author will give several preliminary recommendations suitable for the circumstances in Vietnam and bringing it close to the outside legal world Methodology For the thesis‘s objective mentioned above, the author will combine various kinds of method mainly including analytical method, synthetic method and comparative method Analytical method is division the whole of reseached subject into many sepatate contingents for reseaching, then their properties and nature will be found; as a result, we could understand the main complex subject coherently from understanding those parts In terms of synthetic method, from analysis‘ outcome from many aspects, we synthesize them all and make a whole picture which could induce our subject fully and people are able to have an overview about it as well The last but not least, comparative method is used for comparing and contrasting aspects of the problems in order to find out similarities and difference for getting objective view about subjects In chapter 1, synthetic and analytical methods were used in order to provide an overview of the dispute resolution in L/C by synthesizing information from various sources and studying the international stipulation in practices, customs or treaties relating to L/C transaction In chapter 2, analytical method was mainly utilized for analysis Vietnamese legislation on L/C in order to find shortcomings Additionally, comparative method also used to compare Vietnamese and international practices or customs, then find suitable solutions for the shortcomings of Vietnamese Law Scientific significance and the value of the thesis’s application This thesis will be one of reference sources for all who really want to learn about L/C, especially L/C transaction in Vietnam Besides, it could be used for improving Vietnamese legislation on which is one of the most important factors inducing international payment to develop quickly and properly and restricting the adverse influence of the economy The structure of the thesis Besides the preamble, conclusion and reference material catalogue, the structure of graduation paper comprises chapters: Chapter 1: The basic theories of resolving disputes arising in L/C In chapter 1, author gives a general understanding of L/C from such knowledges, chapter continues to study the resolution method by studying the content of dispute in L/C, the method of resolving it After that, the author will research the applicable law Besides, Author also focuses on studying the stipulations of some countries which the international payment activities develop, such as China, America and Japan Such above theoretical issues are the premises for next chapter Chapter 2:The reality of resolving dispute arising out of L/C and recommendations for improvement In chapter 2, through studying some cases concerning the transaction of L/C, author goes to analyze and comment the efficiency of Vietnamese stipulation in reality From such weak points, author makes some recommendation for amending and supplementing Vietnamese law with a view to make it synchronize with the international rules in this field and suitable with the reality of this transaction in Vietnam CHAPTER 1: OVERVIEW OF RESOLVING DISPUTES IN L/C 1.1 Letter of credit (L/C) 1.1.1 Definition L/C Service is a method of payment by means of which one can cover the purchase of good and services In this type of service, the bank acts on behalf of the purchaser, guaranteeing the seller the payment of a sum of money in an established period in the commercial operation, against the reception of shipping or service documents, which comply with the terms and conditions established by the buyer as in letter of credit1 In this method, there are main parties: - The applicant: is the buyer, the importer of the goods The beneficiary: is the seller, the exporter of the goods The Issuing Bank or Opening Bank: is the bank issuing the letter of credit on the request of the importer This is the bank representing the importer, is responsible for the exporter They are often chose and stipulated in the contract If not stipulated advance, the importer has the right to The advising bank means the bank that advises the credit at the request of the issuing bank to inform the exporter (or the seller) about the opening of the letter of credit This bank is also responsible for sending the original letter of credit, also together with all the amendment of the letter of credit to the exporter The advising bank is often the agent or the branch of the issuing bank placing in the exporter‘s country 1.1.2 Two fundamental principles of letter of credit transaction There are two fundamental principles of LC which distinguish it from other payment instruments These are the principle of autonomy of the credit, and the List of documents commonly requested in a Letter of Credit: commercial invoice: transport documents, insurance document, generalized System of Preference Certificate of Origin, packing list, inspection Certificate, weight list The condition to provide payment service is stipulated in Art 1,2,3,4,5 of regulations on payment operations via organizations providing payment services (issued with decision 226-2002-qd-nhnn of the governor of the state bank dated 26 march 2002) The current law does not allow the organization which is not the credit organization to supply the international payment activity due to the complex process of international payment in general and by letter of credit in particular Meanwhile, payment is not the main activity of the credit organization, therefore, the level of risk is very high This stipulation is seen suitable in this period 2.1.2.5 Dispute concerning time limit for presenting document Case 6: Co B signed a contract with Co M in country P, payment by confirmed irrevocable L/C issued by Bank I of country P and advised by Bank A, Vietnam Before the expiry day of presenting documents, Co B sent documents to Bank A but was refused payment due to discrepancies Co B reserved the discrepancies and requested Bank A to get instruction of settling payment After having consulting with Co M, Bank I advised to accept the payment for these documents However, at the time of getting instructions from Bank I, the socio – political situation in country P got worse leading to the blockage of its account So, Bank A advised to stop payment for Bank B under the documents presented Co B assumed that refusal was invalid The confirming bank had an obligation of settling payment for the presented documents which were conformed to L/C In this case, because there were discrepancies in such documents, Bank A was exempted from paying liability Such actions complied with Art 16 of UCP 600: ―…When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank determines that a presentation does not comply, it may refuse to honor or negotiate.‖ Furthermore, the instruction of Bank I to honor for the presented documents in spite of discrepancies does not constitute an obligation of Bank A, because ―the undertaking of a bank to honor, to negotiate or to fulfill any other obligation under the credit is not subject to claims or defences by the applicant resulting from its relationships with the issuing bank or the beneficiary.‖ (Article 4.a, UCP 600) In this case, Co B had some advantages of asking money, however, lacking due diligence and knowledge of L/C‘s principle made Co B take lots of risks Therefore, Co B‘s request of asking for compensation was not accepted and in reality not settled by arbitration 2.1.3 Comment on the reality of resolving disputes arising out of L/C in Vietnam 2.1.3.1 Lack of content legislation as a basis for resolving dispute Currently, Vietnam still has no stipulation regulating the basic relationship originating from L/C transaction, such as the relationship among banks, importance of documents presented, rights and obligations of parties… The shortage of such stipulation creates a lot of difficulties for the dispute resolving organizations in determining responsibility of parties and prolongs the time for settling disputes and 41 made the inaccurate decisions Besides, for the disputes in which the violation activity was made by foreigner partner, Vietnamese organization had difficulty protecting the legitimate rights of Vietnamese enterprises or bank due to no direct legal basis With such above analysis, the author realizes the reality of Vietnamese law on payment by L/C have some characteristics: Vietnam hasn‘t ever had specific stipulations regulating payment by L/C, the stipulations are sporadic in many documents from Law, Decree to Decision which create difficulties for parties to follow it Furthermore, some legal norms are unspecic; the content is not detail and specific, therefore, leading to the various understanding and application of law and therefore, influences to the quality of dispute resolution - It still lacks many important, necessary legal norms to regulate the payment by L/C in Vietnam By analyzing, some issues which are not addressed in UCP are fraudulence, forgery, way to determine and solve in such cases The Vietnamese legal norms of payment through L/C haven‘t stipulated about this issues This is the controversial issues in applicable reality By way, we can see that the current Vietnamese stipulations are still vague and have many difficulties in application, especially to the complex transaction like L/C These current legal documents not meet the requirement of solving disputes arising day by day 2.1.3.2 Choosing the applicable law According to Vietnamese law, if parties can not agree the applicable law, rights and responsibility of party is determined in accordance with the law where the contract was performed Therefore, it is necessary to define the place for performance That job is not so easy As for the credit contract between issuing bank and beneficiary or issuing bank and confirming bank, what is the place of executing contract? Contractual relationship between parties in L/C is different, thus, the place of performance is not the same Furthermore, if the place for performance is not stipulated in contract, then the place will comply with Vietnamese law Article 284, sub 2(b) of Civil Law stipulates that in such case, It is the place of residence or head office of the obligee, if the object of the civil obligation is not an immovable property 42 In order to understand more the difficulty of defining the place for performance, we can analyze an example, that is a dispute which was solved by Ho Chi Minh People‘s Court concerning L/C between Vietnamese and Korea company L.G Company (Korea) and C&T (Vietnam) signed a sale contract of copper conductor In payment article of contract, it was irrevocable L/C for the beneficiary of L.G Bank V H issued L/C to the request of C&T Advising bank is ABN-AMRO, branch of Seoul Expiry date of L/C is at August 20th 1996 in Korea Accordingly, beneficiary must present documents to issuing bank and if they are conformed on the face, bank has to pay for beneficiary in due time As known, the method of L/C is an undertaking which issuing bank takes for beneficiary, thus, beneficiary has rights to request payment from bank provided that documents presented are conformity Article 284, item 2(b) of Civil law, place of performance is the place of head office, that is, the head office of Korea However, in such similar case, which was solved by Singaporean court, judge assumed in case there is no agreement of applicable law, it will be the law of which has closest relationship with contract As to credit contract between issuing bank and beneficiary, the place of payment has closest relationship with contract Therefore, relation between issuing bank and beneficiary will be regualted by the law in place of payment‖ Judge said that beneficiary has duty to present documents to issuing bank since L/C are only paid if issuing bank accept B/E Considering other factors of L/C, it can be seen that advising bank can negotiate L/C Supposing Korean beneficiary did not present documents to Vietnamese bank, insteadingly, to ABN-AMRO bank After examining, bank accepted negotiate and settled payment for beneficiary After that, ABN-AMRO has rights to request reimbursement from issuing bank Based on Article 284, item 2(b), the place of performance is Korea where the duty of reimbursement is carried out However, in reality, Korea Exchange Bank made negotiate Scholars thought that ― wherever L/C is negotiateed by advising bank or any bank, applicable law for the relation between advising bank and negotiateing bank doesn‘t change As Vietnamese bank couldn‘t afford to settle the due debit, negotiateing bank of Korea brought claim against Vietnamese bank to Ho Chi Minh People‘s Court As above analysis, the place 43 of performance between Vietnam and Korea is at Korea However, judge applied Vietnamese law without any further explanation In view of authors Do Van Dai and Mai Hong Quy, ― In order to help parties and court with choosing the applicable law for contract rightfully, we need clear stipulation of the place of performance‖ For instance, it can be stipulated that the place of performance is the place of performing the most specific duty of contract, that is, the place of head quarter of that party On the other hand, it must be brought a list of specific duty of some common contract, for example, it is the duty of seller as to the sale contract, duty of trustee as to the trust contract… it should be note that in contractual relationship between issuing bank and beneficiary, beneficiary must present documents to issuing bank If such documents are conformed to the requirement of L/C, bank must settle in due time Therefore, the specific duty of credit contract is the payment of issuing bank, applicable law is of Vietnamese In contractual relationship betweeen issuing bank and negotiating bank, the specific duty is performed by negotiating bank, applicable law if of Korean As above analysis, it can be concluded that the viewpoint of judge in each country has a meaning to applicable law for contractual relationship in L/C transaction Due to its complexity of each contractual relationship in L/C, applicable law can be various and not the same Thus, should party agree explicitly, specifically the place of performance in L/C? Article 769, item of Civil law stipulates ―The rights and obligations of the parties to a civil contract shall be determined in accordance with the law of the country where the contract is performed, unless otherwise agreed upon.‖ If both parties can define applicable law, it can be seen other agreement Therefore, law which is chosen by parties can be applied to their contractual relationship The other Vietnamese documents also recognize the right of choosing applicable law So, it can be concluded that Vietnamese law allows parties to choose applicable law for their contract However, such above documents not stipulate explicitly the time when parties can carry out their rights of choosing To my view, parties can choose applicable law during the time of establishing contract or after that, for example, after arisng disputes Actually, the article of L/C which is issued by Vietnamese bank only stipulate UCP application without mentioning the applicable law of L/C It seems that banks 44 not take interest in the possibility of applying national law It is a mistake to assume that all issues relating to UCP are addressed by UCP There are many situation which the application of national law is necessary, for instance, in fraudulence Although choosing the applicable law can ensure the safety for parties in case of conflict, it isn‘t really so simple to carry out it Therefore, parties had better to agree the applicable law in advance 2.2 Recommendation for improvement on resolving disputes arising out of L/C in Vietnam 2.2.1 Developing dispute resolution stipulation concerning L/C Although some Vietnamese legal documents mentions about these issues concerning international payment transaction by L/C, some contents are quite vague, actually incompatible with the real situation and still lacks some important stipulations Improving Vietnamese law on L/C, therefore, becomes objective and necessary demands to promote free trade and advance to international standard, simultaneously, creates the solid legal basis for parties to carry out such professional skill safely and accurately * Requirement of improving Vietnamese law on L/C Firstly, specific law on L/C shall be compatible with international principle and practices, gradually carrying out the international undertakings of Vietnam meaning that the international principle and practices of UCP shall be put in domestic law as a legal foundation for enterprises and banks carrying out their actions to meet the demand of global integration Secondly, the compatibility and unification of legal documents on L/C with other relating legal documents must be concerned in relation between common law and specific law on the aspect of amending, supplementing and building new legal documents Furthermore, such characteristics must be shown in inherent contents of these documents Amending, supplementing any article or building a new document shall put in comparison with current documents to ensure the unification of laws Thirdly, Vietnamese law shall specify more stipulations on dispute resolution in case of conflict in UCP and Vietnamese law Thus, it is indispensible to own a specific document solving issues: the legal position of UCP to Vietnam parties in L/C; the conflict and method of resolving such conflict in Vietnamese and other countries‘ law 45 and international practices in L/C It must be an independent law which plays an important role as a solid basis for an efficient method of resolution Moreover, such law shall ensure the right of business for the enterprises, banking and other business object conforming to other international undertakings of Vietnam, especially to the article of bank when Vietnam participates in WTO Grasping thoroughly this requirement in legal documents of L/C not only promotes international payment activities but also enhances the prestige of Vietnam in international financial market Finally, in order for law on international payment in general and L/C in specific as a real tool for managing and regulating economics to the oriented way, the regulations on L/C should be concerned in the principle of market economy orienting to socialism, ensure the transparency and easy to predict in commercial policies and fair competition in international market 21  Some recommendations on improving Vietnamese law on L/C To competent state organs: + Regularly update the documents on international customs concerningresolution in international commercial disputes and; + Compare the domestic legal documents with stipulations of other countries in order to facilitate the process of resolving disputes legally, conformed to the international customs and practices + Soon promulgate a specific legal documents regulating international payment by L/C and supplement necessary legal stipulations for remained issues Firstly, it should be stipulated the right of issung bank to commodity in case buyer does not accept to get good or lose liquidity Concerning the relationship, the applicant (buyer) is the owner of the goods, bank only performs the duty of payment for buyer In reality, there are many cases in which applicant goes bankrupt, dissolution and loses liquidity or deliberately unwilling to get goods However, the bank‘s duty of payment for beneficiary arises as soos as it accepts documents As to 21 In order to reach goal in the Project of developing and orienting in bank field to 2020 and Decision No th 112/2006 dated May 24 2006 of Prime Minister, L/C law must ensure the harmonization between safety in bank system and the right self – control in the activities of Commercial bank 46 this case, the right of bank to the goods and procedure to carry out their right should be stipulated clearly in law Secondly, it should be stipulated the rights and obligation of parties in case of fraudulence As analyzed, this issue does not addressed by UCP Therefore, in ordder to protect benefit of victims, Vietnam should learn the experience of China and USA in stipulating fraudulence and exceptions of it + To commercial bank: Issue, amend and supplement rules, regulations and the guidance in the process of professional skill in L/C transaction + Examine and collect the arising issues to make one‘s contribution to improve Vietnamese and international legal system in L/C 2.2.2 Improving the efficiency of dispute resolution method in L/C Firstly, it must specify the method of resolving in case of conflict between Vietnamese law, other country‘s law and international practice In author‘s view, it should be classified into each group and stipulated applicable law for each group For disputes concerning issuance, advising, amendment, revoking, confirming, negotiating L/C, it can be applied law which is chosen by both parties in advance or applied UCP if not agreed As for disputes betweeen applicant and issuing bank, disputes about guarantee and financing which are often abused for the aim of fraudulence, applicable law should be Vietnamese law Secondly, in order to improve the efficiency of each dispute resolving method, conciliation shall be governed by a specific law in conciliation which is required to be specific, explicit Further, it shall be equipped with judicial assisting mechanism in which conciliation result can be recognized by competent courts to ensure the possibility of implementing in reality Besides, it is necessary to build a team of capable conciliator and professional conciliation centers The award and the decision of arbitration or court should be strengthened the enforcement Various level of development in legislation itself is one of the reasons leading to the conflict of parties With the shortage in stipulation as displayed above, in drafting Decree guiding to implement Commercial Arbitration Law 2010, it shall be expressed clearly about the competence of Arbitration in solving disputes in which one of parties has commercial activities, and stipulation about the mechanism of implementing provisional remedy 47 measures as stipulated at item 2, Article 48 of Commercial Arbitration Law It is also seen that domestic law stipulating arbitrational litigation is not flexible and sufficient enough which is often applied by Civil Proceeding Law in reality Therefore, there should be a specific chapter in Civil Proceedings Law to regulate about arbitration Proceedings because of the complexity of disputes It should be concerned about the establishment of a court which specializing in commerce A court is the place which gathers judges having deep knowledge in international commerce, foreign languages It also needs the recognition and implementation of foreign arbitration award in Vietnam in unbiased and objective way in accordance with the standard of Convention New York 1958; resolving disputes must admire the international practices and standards 2.2.3 Some specific recommendations for participants in L/C In order to doing business effectively, parties need keep business morals and their prestige, simultaneously prevent most the possible risks It is often assumed that there are three basic elements in a successful contract: creditworthy partner, properly structured and documented contract and ability to affect claims Therefore, the general solutions for all parties participating in L/C are: Evaluate the creditworthiness of partners - Discover extraordinary issues in contract Make sure the content of contract and L/C is adequate and legally During the process of negotiation to sign the contract, the enterprises in any position shall supplement the knowledge of international law and domestic law Moreover, they should use the international payment service of a huge bank with high – prestige and a wide system of agents over the world The parties should agree on the method of resolving disputes and applicable law in case of disputes Besides, each party should pay attention to different specific measures to avoid risks subject to their functions and obligations Finally, it is valuable to choose the applicable law by putting an article in the contract in order to protect their rights and benefits The other relating party can also exempt all or some stipulations of UCP which they seem it unbenefitable for their relationship - Firstly, toward the buyers: Negotiate to sign the contract thoroughly before opening L/C 48 - The application for L/C must accord with contract - Use contract to bind the seller to deliver goods Examine their right of refusal in case issuing bank does not complete their duties time - Secondly, toward the sellers: Use contract to bind the buyers in case they not open or open L/C after due Check the condition of documents in L/C Form documents conformed to the regulation of UCP, avoid of the error and present them in due time - Thirdly, toward issuing bank: Make importer realize the obligation of reimburse for the issuing bank and the independence of L/C with contract Open L/C as in application L/C Control the full documents to request buyer to reimburse if necessary Co - operate with buyers in examining documents Enhance the ability of discovering false documents As we know, false documents often come from the lack of business morals from sellers Therefore, searching seller‘s creditworthiness is a way of realizing the false documents Although issuing bank does not take responsibility of validity of document according to UCP, they should raise the capability of detect the false documents for the benefit of their customer Doing this job well, issuing bank will contribute to restrain the dispute and protect the benefit of their nation Ensure source of foreign currency to settle payment Despite the right of document refusal, they should consider if the errors are not important Fourthly, toward advising bank: Confirm L/C before advising to sellers - Consult with exporter to form documents in accordance with L/C Examine thoroughly documents before accepting to negotiate without recourse 49 CONCLUSION In current market economy and the situation when Vietnam have participated in the economy of universe, economic disputes are seen unavoidable The difficult economic situation of the world in recent year have brought some unfavorable turn for the import and export activities of Vietnam leading to the increase of conflicts due to the violation of party as stipulated in contract Disputes concerning the payment method by L/C requires the deep knowledge and research of internationational customs, practices and national law Parties should apply the mechanism to resolve a dispute in a flexible way which not only ensure their prestige in market but also ensure the conformity to international practices without violating national law From reality of Vietnamese stipulation relating to L/C in Vietnam as well as experiences from foreign countries, it can be realized the urgent requirement to build the specific legal norms regulating the relationship arising in L/C As seen, to some extent, insufficiency in the law may become a boundary for the parties entering into the contract Thus, it is suggested that Vietnamese law should take the matter of resolving disputes of L/C into consideration Specifically, the notion of fraudulence, remedy and the conflict of law must be reconsidered and improved They must ensure the compatibility with the system of norms which are unified to apply all over the world (for instance UCP) and meets the requirement of protecting the legitimate right of involved party Such stipulations will guide party in the process of participating in the transaction by L/C, as well as, the basis to resolve disputes absolutely and fairly if arising Beside, paying more attention to personal factor in resolving disputes is one way to improve the efficiency of each resolution method In the process of operating L/C transaction, in order to avoid disputes, it must be required the ―consciousness‖ of the participating party themselves when apply the legal stipulations to protect their rights intelligently As shown, in spite of any critical comment on the performamce of L/C, it can be denied the fact that L/C will play an important role in external economic activity of Vietnam more and more With this research, the author would like to contribute to the development of resolving disputes L/C in Vietnam However, in short time and with a limit of reference materials, it hardly avoids mistakes Therefore, the author sincerely thanks any advices or suggestion for my paper BIBLIOGRAPHY I NATIONAL LAWS AND OTHER DOCUMENTS Vietnamese Law No 49/2005 dated November 29, 2005 of National Assembly negotiable instruments on Law No 46/2010 dated June 16, 2010 of National Assembly on the State Bank of Vietnam Law No 47/2010 of National Assembly on Credit institutions Decree No 64/2001 dated September 20th 2001 on the payment activities through the credit institution Decision No 226/2002 dated June 23rd 2002 of State bank on the regulation of payment activity through payment- service supplying organization Decision No 1092/2002 dated October 8th 2002 of State Bank on the regulation on the procedures for payment through payment service-providing organizations English Uniform Law for Bill of Exchange – ULB 1930 Law on international Promissory Note and Bill of Exchange UNCITRAL Arbitration Rules 1967 adopted by UNCITRAL on 28 April 1976 10 UNCITRAL Model Law on International Commercial Arbitration 11 The Uniform Customs and Practice for L/Cs (UCP) 12 The International Standard Banking Practice for the Examination of Documents under L/Cs (ISBP) 13 The Uniform Customs and Practice for Documentary Credits for Electronic Presentation 14 Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (URR) II BOOKS Vietnamese 15 Ha Noi University of Law (2008), Giao trinh Luat Ngan hang Viet Nam 16 Ho Chi Minh city University of La (2010), Giao trinh Luat Ngan hang 17 Nguyen Dang Don – chief author, National University Publising House ( 2009), Thanh toan quoc te 18 International Court of Arbitration (2003), Trong tai va cac phuong thuc giai quyet tranh chap lua chon: Giai quyet cac tranh chap thuong mai nhu the nao 19 Nguyen Trong Thuy (2009), Statistic Publishing House, Toan tap UCP 600: Phan tich va binh luan toan dien tinh huong tin dung chung tu 20 Associate Professor.Doctor Nguyen Thi Quy (2010), Cam nang giai quyet tranh chap toan quoc te bang L/C 21 Associate Professor, Doctor Hoang Ngoc Thiet (2002), National Political Publishing House, Ha Noi, Tranh chap tu hop đong xuat nhap khau, An le tai va kinh nghiem 22 M.A Nguyen Ngoc Duy My, Giai quyet tranh chap thuong mai o Viet Nam English 23 ICC Publication, Commentary on UCP 600 (2007) III JOURNALS Vietnamese 24 Nguyen Huu Duc (2008), Chinese rules for L/C disputes 25 Pham Thi Thanh Nga (2012), Ban ve chung tu goc giao dich thu tin dung 26 Do Van Su (2011), Phap luật toán thu tin dung o Viet Nam va thuc tien ap dung 27 Nguyen Thi Thu (2012), Phap luat ve thu tin dung cua My, Trung Quoc va mot sôo khuyen nghi doi voi Viet Nam 28 Cao Xuan Quang (2008), Phap luat ve toan bang thu tin dung o Viet Nam dieu kien hoi nhap kinh te quoc te 29 Vu Thi Minh Huyen (2011), Giai quyet tranh chap ve giao dich tin dung chung tu toan quoc te 30 Hoang Yen (2012), Xu tranh chap thuong mai quoc te: coi chung lam oan 31 Bach Thi Le Thoa (2009), Giai quyet tranh chap bang tai va co che ho tro cua toa an 32 Ho Huong (2010), Luat tai thuong mai Viet nam 2010: ho tro toi da quyen cua tai 33 Anh Phuong (2013), “Nong” tinh trang Toa an tien huy hang loat phan quyet tai 34 Tran Minh Hai (2012), Trong tai thuong mai, su uu viet bi nghi ngo 35 Hoang Yen (2013), Xử tranh chấp, toa dang gay kho tai 36 Nguyen Cao Khoi (2008), Thanh toan quoc te thuc hien theo phan quyet cua toa hay thong le quoc te English 37 Anthony Connerty (1998), Fraud and documentary credits: the approach of the English courts 38 Gao Xiang and Ross P Buckley (1995), A comparative analysis of the standard of fraud required under the fraud rule in letter of credit law 39 Jaephil Hahn (2007), Governing laws on letters of credit under uniform commercial code 40 Ronald J Mann (2000), The role of letters of credit in payment transactions 41 Janet Koven Levit(2007), Bottom-up lawmaking through a pluralist lens: the icc banking commission and the transactional regulation of letters of credit 42 Katalin csekő gulyás (2008), China’s new statutory regulations on letters of credit 43 Frederick Brown (1997), The Role of Arbitration in Resolving Transnational Disputes: A Survey of Trends in the People' s Republic of China 44 Yanan Zhang (2011), Approaches to Resolving the International Documentary Letters of Credit Fraud Issue 45 Wen Qin (2006), China: New Rules for Resolving Letters of Credit Disputes in Chia 46 Roberto Bergami (2007), Will the UCP 600 Provide Solutions to Letter of Credit Transactions 47 Gao Xiang (2003), The Unique Jurisprudence of Letters of Credit: Its Origin and Sources 48 Uniform Rules versus Freedom of Contract: Japanese Practice in Letters of Credit Transactions 49 Souichirou Kozuka (2002), The development of the fraud rule in letter of credit law: the journey so the road ahead 50 George Amon (2007), Mediation – The Preferred Alternative for Conflict Resolutio IV WEBSITES 51 http://tinnhanhchungkhoan.vn/GL/N/DJAIJC/nhung-cam-bay-phap-ly.html, Nguyen Duy (2013), Nhung cam bay phap ly ((last visited July 2013) 52 http://www.misa.com.vn/tin-t%E1%BB%A9c/tabid/91/newsid/7443/Phuongphap-su-dung-hieu-qua-thu-tin-dung.aspx(last visited July 2013) 53 http://www.unidroit.org/dynasite.cfm?dsmid=103284 (last visited July 2013) 54 http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status html (last visited 03 July 2013) 55 http://thongtinphapluatdansu.wordpress.com (last visited July 2013) 56 http://www.ssrn.com/(last visited June 2013) 57 http://www.huanzhonglaw.com/dxaj-en3.htm, Arbitration Case on a Dispute concerning a Letter of Credit (last visited July 2013) www.vietnamlaws.com/ (last visited July 2013) 58 http://www.ucp.org/ (last visited July 2013) ... relevant international rules for the improvement of Vietnamese law in this matter is necessary and meaningful For the above-mentioned reasons, the topic ? ?THE RESOLUTION FOR L/C DISPUTES IN VIET NAM? ??... of business for the enterprises, banking and other business object conforming to other international undertakings of Vietnam, especially to the article of bank when Vietnam participates in WTO... defining the nature of the letter of credit to be effected‖ Contract between the issuing bank and the conforming bank for the making of payment: By issuing the letter of credit the bank enters into