Should There Be a Negligence Exception to the Autonomy Principle for Letters of Credit?

Abstract

Fraud is the only widely accepted exception to the autonomy principle applicable to letters of credit. However, a recent decision of the Singapore High Court, Bank of China Ltd, Singapore Branch v BP Singapore Pte Ltd [2021] SGHC 120, [2021] 5 SLR 738, appears to support the possibility of a further exception: the negligence exception. Other lawsuits pending before the Singaporean courts also implicitly refer to (and plead) such a possibility. This paper argues that the negligence exception should be rejected.

Keywords: Trade finance law, letters of credit, documentary credits, autonomy principle, negligence, duty of care, foreseeability, proximity, public policy