Ruling casts shadow on Chinese letters of credit

Author: | Published: 1 Feb 2005

China's banking and legal systems have been the subject of much reform in the past few years. The changes have been many and they have been made rapidly. Generally the reforms have been welcomed.

The developing Chinese legal system faces big challenges at this time of rapid change in finance law and practice. The Chinese judicial system has to deal with a wide range of new problems covering a large area and a vast population. It would be surprising if Chinese courts generally had developed a sophisticated understanding of international documentary credits and other similarly complicated technical issues within such a short period of time. However, it is essential to the development of the Chinese banking system that international banks are confident in the ability of the Chinese judiciary to deal with these issues.

A recent case in Hong Kong has shown some of the dangers to international banks of relying...