FACTA UNIVERSITATIS Series: Law and Politics Vol. 20, N o 2, 2022, pp. 125-133 https://doi.org/10.22190/FULP2202125A © 2022 by University of Niš, Serbia | Creative Commons License: CC BY-NC-ND Review Paper THE INTERPRETATION OF THE PRINCIPLE OF STRICT COMPLIANCE IN LETTERS OF CREDIT IN INTERNATIONAL COMMERCIAL LAW UDC 347.74:339.72 339.542 Yunus Emre Ay Antalya Bar Association, Turkey Abstract. Letter of Credit (L/C) is a very popular payment method in international trade. The issuing bank has the obligation to make payment if the document stipulated in a Letter of Credit are presented. Under the strict compliance principle, any discrepancy in the documents may be the reason for refusing payment. There are two different approaches to the interpretation of the principle of strict compliance: literal compliance and substantial compliance. In literal compliance, a slightest inaccuracy may be the reason for refusing payment, which is not the case in substantive interpretation. The author provides an overview of these two approaches, with specific reference to relevant case law and relevant provisions of the UCP Rules and ISBP Rules governing this international trade matter. These international rules and diverse case law offer opportunities for a more flexible and balanced approach to the interpretation of strict compliance. Key words: Letter of Credit, principle of strict compliance, literal compliance, substantial compliance 1. INTRODUCTION In international trade, the buyer and the seller are located in different countries and the goods are transferred from the country of the seller to the country of the buyer. The seller is reluctant to deliver goods without an assurance of payment. The buyer is reluctant to make payment before the delivery of goods without the assurance that he shall get commodities. Contracting parties are part of different legal systems. Moreover, various factors, such as physical distance, between the parties, cultural differences, political risks, and currency exchange restrictions, increase the lack of trust and uncertainty. Thanks to Received March 18 th , 2022 / Accepted May 4 th , 2022 Corresponding author: Yunus Emre Ay, LLB, LLM (Prague), Attorney-at- law, Antalya Bar Association, Turkey. E-mail: yunusemreay0@gmail.com