The problem with ‘negotiation’
In trade finance and documentary credit operations, the word
‘negotiation’ remains one of the most enduring enigmas of all times. No one describes
the situation better, perhaps, than Ole Malmqvist, a member of the UCP Drafting
Group for UCP 600 and one the most revered experts in the business. He said:
“.... there has been an extended discussion about the word negotiation, which nobody can define and
which only a few want to get rid of....
I'm still looking for someone who can explain to me the difference between
payment and negotiation .... so far
no one has been able to come up with a definition, not one I have seen, at any
rate, so I doubt that anyone will be able to come up with a definition now ....The word ‘negotiation’ is a problem.... I think we should get rid of the
word ‘negotiation’ because we cannot define it and because we don't need the
concept…. [1]
“…Every L/C expert knows
exactly what negotiation is/means. But ask any three of them for their
interpretation and be prepared to receive three different answers![2]”.
Reinhard Längerich says,[3] “I
am convinced that by removing the term 'negotiation' and 'the right of recourse
against the beneficiary' [from UCP], we would make the letter of credit a more
reliable instrument.”
The fact remains that in spite of such sever criticisms, ‘negotiation’ is
alive and well – ...... (continued...)
[2]
DCInsight Vol.
12 No.2 April - June 2006
[4] For a detailed comment on ‘negotiation’ by this writer,
refer to article ‘Re-defining Negotiation’, LC Monitor – Trade Services Update,
Volume
11, Issue 4, July–August 2009.
[5] ‘Suggested answer’ to question no. 2.15, Frequently
Asked Questions on UCP 600, Gary Colleyer.
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