'Joker' clauses


On occasion, we are made aware of documentary credits that include terms and conditions that allow the applicant to ‘more or less' control the settlement process, commonly referred to as ‘joker' clauses.


When a bank seeks to incorporate such clauses, it should remember that a documentary credit is independent of any sale or other contract to which it may relate. Considering that UCP does not provide full coverage of all the documents that may be required for presentation, an applicant and beneficiary should determine, and agree upon, the documents that are to be presented, the issuer, their data content and time frame for their presentation.


Any ambiguity inherent in the instruction phase is at the responsibility and risk of the applicant. An issuing bank may be required to provide an element of assistance to its client, at the time of completion of the application form, and this should include guidance as to the possible implications of UCP 600 articles 3, 14, 19-21, 23, 24, 28 (i) and 31.


Furthermore, an issuing bank may enhance the instructions of an applicant in order that a documentary credit is issued in a form that is deemed workable for each bank and the beneficiary. However, any changes it makes or suggests should be with the full knowledge and agreement of the applicant. The issuing bank should not, however, encourage inclusion of applicant-issued documents.


A document to be issued and/or signed by an applicant is often seen as being counter-productive in a documentary credit. Such a condition should only be required with the full agreement and understanding of the beneficiary, i.e., of the possible outcome should a document not be issued or signed as may be expected, or that it is issued at a time that is too late for its presentation under a documentary credit.


As stated in ISBP 745 Preliminary Considerations (vii), "A credit or any amendment thereto should not require presentation of a document that is to be issued, signed or countersigned by the applicant. If, nevertheless, a credit or amendment is issued including such a requirement, the beneficiary should consider the appropriateness of such a requirement and determine its ability to comply with it, or seek a suitable amendment."


Examples that have been used in documentary credits include certificates to be issued by a representative or agent of the applicant, certificates to be issued and/or signed by the applicant, documents evidencing that goods have cleared customs at the port of destination, a confirmation from the buyer that goods are in good order.

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