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Do you have any information on silent confirmations in the context of letters of credit?
Resource type: Ask
Published on 02-Mar-2017
I am seeking feedback on a trade finance subject: "silent confirmations".
In particular, the legal issues for banks which issue silent confirmations to be aware of.
This is in the context of letters of credit governed by UCP 600 issued by foreign banks.
A silent confirmation, is a confirmation, issued to the beneficiary of a letter of credit, by which the silent confirmation bank undertakes to pay the beneficiary (thereby the beneficiary gains assurance of payment if for some reason the issuing bank refuses or cannot pay under the letter of credit (e.g. due to court injunction, insolvency, exchange controls).
The issuing bank may may not be aware of the silent confirmation, hence the silent confirmation would not, I understand, be covered by UCP 600 and is just a (separate) contractual arrangement between the beneficiary and silent confirmation issuing bank (that could also be an advising/negotiating/nominated bank under UCP).
Any general comments on legal considerations and research sources would be much appreciated.
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