Nowadays, in international trade cases with Italian parties, reference is made increasingly often to UCP 500.
As a matter of fact, at the beginning of 1994, the new uniform regulations drawn up by the International Chamber of Commerce relating to documentary credits came into force: these regulations are normally known as the UCP (Uniform Customs and Practice for Documentary Credits), today in the UCP 500 version which replaces the now out-of-date UCP 400, in force since 1984.
These regulations are aimed at simplifying international trade by setting up uniform rules over contracts of sale against documents, and are of undeniable importance, even if their effectiveness is not of a statutory nature, having been laid down by a private body without any legislative authority, less still of international effect.
In fact, the importance of customary rules in this field finds legal basis in Italy in the Civil Code, which at Art. 1527 provides that, in the event of a sale against documents, the vendor is released from the obligation to deliver by simply remitting the representative title to the goods to the purchaser as well as the other documents stipulated in the contract "or, if not so stipulated, according to custom". Therefore, the UCP regulations may be applied either as a result of the express provision of the contract of sale (probably the most likely reason), or, otherwise, in the absence of other provisions, as a result of international commercial customs embodied in the UCP 500.
The new uniform regulations dedicate ample space (all of six articles, as opposed to only one in the UCP 400) to the various forms of transport documents, describing their standard characteristics of form and content. Of particular interest is the innovation made in respect of the Bill of Lading which must now state in detail the business, name or company name of the carrier, thus limiting the possibility of it being made out with just a service mark, or in an anonymous form, and it must also be signed by that carrier or by his authorised representative.
Much space is also dedicated to the Letter of Credit, which, in the absence of contrary intention, is presumed to be irrevocable. The efficacy of this document has its basis in Italian law in the provisions of art. 1530 of the Civil Code, which, amongst other things, provides that if the issuing bank has confirmed the same, the only objections that the vendor can raise are those which result from the incompleteness or irregularity of the documents. The provisions of UCP 500 confirm the importance in this respect of determining the standard contents of documents representing goods, so as to limit the inconvenience related to the width of the banks' discretion in its valuation effected at the moment of payment, and thus to accelerate the time necessary to complete the operation. In this regard, the UCP 500 intervenes by defining with greater precision the notion of the "reasonable time" within which the bank must decide whether to reject the documents or to proceed with payment. It maintains, in particular, that such time would be two to three days for the most important financial marketplaces, whilst the maximum period established for all, in the absence of express agreement to the contrary, is seven days.
Further, the UCP 500 provides that the expenses of the banking operation are to be borne by the person who requested the issue of the Letter of Credit, if the Letter does not specify otherwise.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.