A comparative study of Arbitration in Disputes Arising fromLetters of Credits (L/C)

Letters of credits are considered as a common method in commercial transactions for payment, disputes may arise from obtaining letters of credits and payment, and parties have tendency to resolve disputes through arbitration. Also letters of credits has been made up of several related contracts that have been concluded for common aim in spite of having legal autonomy. The purpose of this article is to provide a definition and overview of the function of letters of credits in the field of international trade and study of arbitrability of disputes arising from documents and letters of credits and extend the material scope of arbitration clause to other related contracts. In relation to the arbitrability of disputes arising out of letters of credit, the principle is based on the arbitrability of all disputes. International Center for Letter of Credit Arbitration has proposed specialized arbitration in this area. The Center's regulations indicate that arbitration in this area is carried out by experts involved in international banking operations.Regarding with the arbitration clause in the contract between principal and beneficiary, personal scope of arbitral tribunal is not extended due to the principle of independence of letters of credits and Doctrine of  Privity of contract to the relations of other contracts, but issues related to letters of credits can be within the jurisdiction of the arbitral tribunal, although the tribunal cannot issue a binding award on third party.