On The Application Of Non-recourse Rule For Negotiable Instruments In Forfaiting Business

As one of the most important rules in negotiable instruments law, the non-recourserule is identified with the rules about right-of-recourse and the rules about discharge ofliabilities on negotiable instruments. Non-recourse endorsement is the main form of thenon-recourse rule. By writing a non-recourse endorsement the endorser shall discharge hisor her guarantee for the acceptance or payment of the bill. Accordingly, the endorsee shallabandon his or her right of recourse to the endorser.In essence, forfaiting is a method of trade finance, thus the application of thenon-recourse rule under forfaiting is essentially a process of transference of an unmaturedpayment claim. In this process, the seller of the payment claim acts as an endorser and thebuyer acts as an endorsee meantime. By virtue of the forfaited debt instruments, therecomes a transaction of bills and a transference of payment claim between both parties.Therefore, it will be of great significance to make a deep study on the application thenon-recourse rule in forfaiting business, which will help us understanding the rule itself aswell as the forfaiting business.Centring on the topic of study, this article discusses four issues systematically andprogressively. Firstly, the article gives a basic presentation of the interpretation ofnon-recourse rule, its values and different related legislations. In this part, the article hasclarified the relations among the rules about right-of-recourse, the rules about discharge ofliabilities on negotiable instruments and the rules about non-guarantee endorsement. It alsohas compared the attitudes from different countries or genealogies of law and exposed aaffirmative attitudes towards the non-recourse rule. Then, in the second part, by pointingout that forfaiting is setted on and is characterized by a non-recourse basis, namely,forfaiting is a non-recourse trade finance from the view of economics and a non-recoursetransference of payment claim from the view of science of law, the article constructs abridge successfully to combine the non-recourse rule with forfaiting. After that, the articlemakes its focus on the ways of realization, the effects the and precedents of non-recourse under forfaiting, which is discussed in the wake of two main international rules in the areaof forfaiting-the IFA Guidelines and the ICC-IFA Uniform Rules for Forfaiting. That is, thenon-recourse endorsement on the bill and the non-recourse clauses in the forfaitingagreement are two important means thereinto and the latter has a stronger effect because itcan be specially regulated by negotiable instruments law. Moreover, a clean and validforfaited debt instrument, a valid warranty and a legitimate transaction without fraudshould be deemed as the general precedents for non-recourse rule. At last, the article givesan deep analysis of the absence of non-recourse rule in China’s negotiable instruments lawwhich leads to a conclusion that the non-recourse rule should be accepted and confirmed inChina’s negotiable instruments law, so the writer makes his proposals and designs aboutthe rule in view of that conclusion.