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Arbitration is the best method to resolve a dispute, due to the flexibility in its mechanism and issuing of a final judgment, known as an ‘award’. The winning party usually seeks to apply that award in the state where the assets of the losing party exist. In this regard, the New York Convention 1958 guarantees that the award is enforceable in the state where the winning party sought to apply. Jordan is party to the Convention; it has regulated its own arbitration law and has adopted the UNCITRAL Model Law 1985. However, not all provisions were adopted where specific provisions in Jordanian law relating to certain matters differed from the Model Law provisions. These differences may positively or adversely affect the arbitration procedure in Jordan.

Purpose The purpose of this paper is to examine the application of the fraud exception rule and try to analyze the different approaches in regard to the implication of fraud rule in letters of credit. Further, this paper tries to explore if there is an obstacle when applying such exception rule in common law and whether there is an overlap with interpreting the said rule. The same fact appears in civil law courts as well. Design/methodology/approach This paper is a comparative study which uses analytical approach and critical legal thinking. Findings The scope of the fraud defence, the US legal systems demonstrate that the scope of the fraud rule is extended and covers both fraud in documents and fraud in the underlying contract, while in contrast, in UK the rule’s scope is restricted to fraud in documents only. Such an approach is reasonable, as it is justified by applying the Uniform Customs and Practice for Documentary Credits (UCP) rules strictly. That is to say, English courts apply the rules literally, even if it does not lead to fair judgements, while in contrast, American courts seek to enforce justice even if it goes beyond the rules. In any case, restricting the fraud exception to fraud in the documents is the proper approach. The reason for such restriction, on the one hand, is to maintain the integrity of letters of credit and, on the other hand, to affirm the autonomy principle. Originality/value Extending the scope of the fraud defence will require banks to go beyond the documents, which is not logical. Banks are neither expert in such transactions nor required to do so. Most importantly, banks are concerned with documents only; it is for the court to go beyond the documents. Although this approach could be criticized, it is important to ensure that the validity of the documentary credit instrument is not compromised. As established by academics, any argument need not engage the bank unless it is in respect of the presented documents. In short, “pay now, argue later” is paramount to distinguish parties’ litigations from banks vs parties’ litigations. In any case, it can be suggested that extending the fraud rule exception to include fraud in the underlying contract from Jordan perspective is not the proper one because it is necessary to maintain the integrity of letters of credit and to affirm the autonomy principle.

On 1 July 2007, changes to the Uniform Customs and Practice for Documentary Credits (UCP) 600 came into effect which emphasized that documents need not be absolutely consistent or mirror images of each other (the ‘strict approach’), merely that they must not be inconsistent (the ‘substantial approach’). In this article, the author considers how both the strict and substantial approaches have worked in practice and suggests a new basis for the proper compliance standard. Letters of Credit, UCP 600, Article 14, Article 15, Compliance Standard

Purpose This paper aims to analyse the status of the bank’s knowledge and the hardship related to the clear evidence requirement with regard to establish the fraud exception rule in English courts. Design/methodology/approach Traditional analysis method and critical legal thinking. Findings To trigger such an exception in England, two conditions, bank’s knowledge and clear evidence, must be met to establish the fraud rule, which will be applied only if it appears in documents. The bank’s knowledge condition, the awareness of the fraud that the bank should have before the payment, is material to determine whether if the fraud rule will trigger in most of the English cases. However, if the bank is not aware of the fraud, they must honour the credit if the documents are compliant, meaning the paying bank is protected if the documents against which it made payment are tainted with fraud, even if it is not aware of the fraud. Moreover, it is not a bank’s responsibility to investigate allegations of fraud. Nonetheless, there are some reservations regarding the bank’s knowledge and clear evidence conditions, as explained above. In short, such an approach does not lead to fairness and justice for the applicant. Originality/value English courts focus more on evidence of the fraud rather than making unnecessary distinctions pertinent to the fraud exception scope. The absence of such evidence will not trigger the exception rule. Conversely, injunctions are not easily granted in England where the requirement for heavy evidence and proof of the bank’s knowledge will be obstacles. That is to say, banks are more protected in England simply because the courts want to uphold the integrity of the banking system when affirming the autonomy principle. In a case where the applicant becomes aware of the fraud, there is no other option for the applicant except to ask for an injunction from the court, which is not easy to gain under English courts. In addition, it is unclear how the court will prove that the bank is aware if there is fraud in the presented documents. In addition, the question arises as to whether the same strict standard will be required by both the applicant and the party who notified the fraud.

According to many cases, it has been demonstrated that sellers with bad intentions have manipulated letters of credit system in many ways, including fraud. Thus, many legal jurisdictions have recognized the fraud exception rule. In order to apply such exception, some conditions must be met. Among these conditions, the bank’s knowledge and a requirement of a clear evidence. Notably, the bank’s knowledge is crucial, meaning that the establishment of the sole exception will depend upon the status of the bank’s knowledge. Meaning that if the bank is aware of existing fraud, it is under a duty to refuse presentation. Otherwise, it should not. In turn, the establishment of clear evidence by the English courts is somewhat hard to achieve, consequently, such condition criticized often. Further, if the beneficiary himself commits the fraud, or has knowledge of the fraud, then the fraud exception rule will apply.1 This raises the question of whether the fraud exception should also bite where the fraud is committed by a third party but without the beneficiary’s knowledge. From these facts, this chapter will try to analysis the status of the bank’s knowledge and the hardship related to the clear evidence requirement in conjunction with the third-party fraud.