**5. Conclusion**

There is no doubt that the autonomy principle is the cornerstone of the letters of credit mechanism. This principle aims to provide banks with immunity and affirm the unique character of letters of credit. Nonetheless, it could be considered as a double-edged sword, meaning, such a principle might be seen as a device for the fraudster to manipulate the system.

This chapter concludes that to trigger the fraud exception rule in England, two conditions must be met. That is to say, if a clear evidence is provided besides with the bank's knowledge, the fraud exception rule, will be applied; a part from the fact that it must appear in the presented documents. In this regard, the bank should be aware of the fraud before the payment in order to fulfil the bank's knowledge condition; as explained in most of the English cases. However, if the bank is not aware of the fraud and the presented documents are in compliance, the bank will be under a duty of honor the credit. Meaning that 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. Most importantly, the UCP rules always assured that it is not a bank's responsibility to investigate allegations of fraud. Nonetheless, this chapter showed that there are some reservations regarding the bank's knowledge and the clear evidence conditions. In short, such an approach does not lead to justice and fairness for the applicant.

With regard to third party fraud, England, restricted application of the rule to cases of fraud either initiated by the seller, or where the beneficiary has knowledge of the third party's fraud. This approach is important to secure each party's interests. From the applicant's perspective, if the beneficiary committed the fraud, the beneficiary will lose their right of payment. In contrast, from the beneficiary's perspective, it is not logical to include third parties' actions in the fraud exception rule where the beneficiary is a victim, especially when the act of fraud is committed without the knowledge of the beneficiary. From the banks' standpoint, they will suffer hardship when it comes to dealing with third party fraud as they are unable to determine if the fraud was committed by the beneficiary or someone else. In addition, if that is the case, the bank is unable to determine whether the beneficiary is aware of that bad conduct or not. Again, banks are not required to go beyond the

<sup>69</sup> [72], [74], 172.

documents in this mechanism. It is true that the applicant will not be pleased with this approach, yet this is how the autonomy principle works.
