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All Journal Jurnal Ilmiah Kutei
Muhammad Fikri Aufa
Sultan Adam School of Law
Law, Crime, Criminology & Criminal Justice

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Legal Study of the Advising Bank's Recourse Rights and the Application of Letters of Indemnity in Letter of Credit Deals Muhammad Fikri Aufa
Jurnal Ilmiah Kutei Vol 25 No 1 (2026)
Publisher : UNIB Press

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.33369/jik.v25i1.48745

Abstract

In international commercial transactions, the Issuing Bank issues Letters of Credit through banking services. The bank is required to make payments to exporters. Documentary credit is a common and secure payment technique used by parties interested in international trade. However, the Issuing Bank failed to pay the L/C, thus the advising bank exercised its recourse rights by issuing a letter of indemnity. The difficulty in this article is to determine when the advising bank's recourse rights are exercised and the method for sending a letter of indemnity. The normative legal research method was applied in this study. According to the discussion, recourse rights can be used by including them in the L/C contract or trade contract and sending a letter of indemnity to the exporter as a form of payment guarantee, and recourse rights are made with a notification letter to the issuing bank stating the grace period for orderly payment.
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