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	NOTICE OF THE SUPREME PEOPLE'S COURT ON PROHIBITING RANDOM LEGAL ORDER STOPPING PAYMENT FOR LETTERS OF CREDIT

	(Fa [2003] No.103 promulgated on July 16, 2003)


SUBJECT : LETTERS OF CREDIT; RANDOM LEGAL ORDER STOPPING PAYMENT
ISSUING DEPARTMENT : THE SUPREME PEOPLE'S COURT OF THE PEOPLE'S REPUBLIC OF CHINA
ISSUE DATE : 07/16/2003
IMPLEMENT DATE : 07/16/2003
LENGTH : 358 words
TEXT :

Since this year, the global steel price has plummeted. Consequently, the price of some of domestic steel products tends to decrease. The shrink of the margin between the price in domestic market and the import cost has directly affected the interests of the steel importers. Therefore, some importers have requested the banks to refuse payment on account of inconsistency between bills of documents, or applied to the court for order of stop payment under the pretext of fraud. Some courts randomly ordered stop payment for letters of credit, which has brought about adverse influence abroad. In order to maintain the international status of the courts and the banks, the relevant regulations are notified hereby as follows:

1. The principle of independence of letter of credit shall be rigidly adhered to. The letter of credit is independent from the business transaction it is based upon. As long as the documents provided by the beneficiary are consistent with the requirement of the letter of credit, the issuing bank is obliged to pay in the specified period. Since the letter of credit and the underlying transaction belong to different legal relations, the court is not allowed in most circumstances to order stop payment for the letter of credit issued by the issuing bank simply because of disputes arising from the underlying transaction.

2. The conditions of application of the principle of exception of fraud on letter of credit shall be rigidly adhered to. Only if there are sufficient evidences to prove fraud through letter of credit and the bank has not yet paid in a reasonable period, the people's court may order stop payment according to the request of the applicants and on condition that they provide guarantee or security. However, if the letter of credit has been accepted and transferred, or the payment has been negotiated, the court shall not order stop payment.

The people's court of all levels shall attach great importance to the order of stop payment for letter of credit. Random order of stop payment on unqualified conditions is prohibited. And the relevant people's court shall immediately correct the stop payment order that has been improperly adjudged.