Abstract
LL.M. (Banking Law)
The increased use of settling transactions on an open account1 in international trade, the pressures to reduce costs, improve efficiencies and the inevitable move to utilise electronic processes has resulted in a need for a new solution for the payment of transactions between importers/buyers and exporters/sellers.2 Bank payment obligations (BPOs), the solution developed by the Society for Worldwide Interbank Financial Telecommunication (SWIFT)3 and the Banking Commission of the International Chamber of Commerce (ICC), are irrevocable undertakings given by an obligor bank to a recipient bank to pay a specified amount on the condition of a successful electronic matching of data or acceptance of mismatches.4 BPOs are distinct from the traditional methods relied on by importers and exporters as the terms of engagement are based on an agreed event referred to as a baseline and the technical matching of data generated by SWIFT’s transaction-matching application referred to as Trade Services Utility.
This dissertation focuses on the manner in which a BPO is established and structured, the legal obligations of the parties, specifically the banks, and establishing liability between the parties outside of the BPO.
The BPO was implemented to cater for the needs of the importers and exporters and to provide an efficient means of settling transactions. However, this payment method has not gained the desired traction within local trade sectors or the banking sectors. This dissertation explores the reasons why this payment method has not gained the expected acceptance from financial institutions or the main parties to import or export transactions.
The information gathered and reviewed pertains mainly to literature in the form of published works, rules developed specifically for trade instruments, articles, case studies and guidelines published or made available by the ICC.