Jurisdiction of the Courts in Disputes Involving Documentary Letters of Credit

Documentary letters of credit could be regarded as the primary payment mechanism in international trade. Hence, it is not unlikely that issues of conflict of laws and jurisdiction to be raised frequently before courts and international tribunals in cases involving letters of credit. The main task of the courts and arbitral tribunals in such situations is to determine the proper law to govern the case. Although there are fairly established rules regarding the governing law for contracts or properties convened or suited abroad, determining the proper law in cases involving payment instruments remains controversial. One of the key questions in this relation is the role of UCP in conflict of laws and jurisdiction of the courts. In this article it has been argued that the UCP, despite its importance and prominence in legal and practical aspects of the letters of credit, lacks some of the necessary conditions of a governing law and courts and arbitral tribunals should rely on national legal systems to decide on the questions related to conflict of laws and jurisdiction which may arise in cases involving letters of credit. This analysis is followed by a brief explanation of the civil procedure rules of the Islamic Republic of Iran which may be applied in such cases.