It is noticeable that this subject appears to be re-surfacing in various parts of the world over recent times.
We have covered this subject on numerous occasions in the past, but it would appear to be opportune to focus again on the prime issues.
As noted in the paper issued by the ICC on 24 May 2016, "Notes on the Principles of Strict Compliance," the issue of strict compliance has continually surfaced with respect to the examination of documents presented under documentary credits (https://iccwbo.org/publication/icc-banking-commission-executive-committee-issues-paper_notes-on-the-principle-of-strict-compliance/).
A significant number of ICC Opinions and DOCDEX decisions have dealt with this issue and the abovementioned paper details the most relevant ICC rules and practices, backed-up by a summary of a number of DOCDEX decision and ICC Opinions. A summary of the legal perspective highlights the interpretation given in a number of court cases, and reference is also made to a number of expert opinions.
The conclusion emphasises that developments in the past have proved that, as time goes by, it is customs and practice that will provide the required clarity in respect of ‘strict compliance'. And once such customs and practice have become commonplace, they will form part of a future revision of ISBP.
For more details, we refer you to our detailed reviews at:
- strict compliance: ICC paper & ICC rules & opinions - https://www.tradefinance.training/blog/articles/strict-compliance-icc-issues-paper-icc-rules-opinions-13/
- strict compliance: ICC paper & legal perspective - https://www.tradefinance.training/blog/articles/strict-compliance-icc-issues-paper-legal-perspective-23/
- strict compliance: ICC paper & expert perspective - https://www.tradefinance.training/blog/articles/strict-compliance-icc-issues-paper-expert-perspective-33/
As a side issue, we also examined in a previous blog as to whether or not strict compliance also applied to demand guarantees. This was considered in a UK court decision in December 2016, ‘MUR Joint Ventures BV v Compagnie Monegasque de Banque'. The court looked at whether the principle of strict compliance as it applies to documentary credits would also apply to demand guarantees. The final decision stated that "the principle of strict compliance does not necessarily extend to demand guarantees". In this respect the court referred to an earlier decision which stated that ‘the degree of compliance required by a performance bond may be strict, or not so strict.' (IE Contractors Ltd v Lloyds Bank Plc).