Technological advancement in recent years has developed the concept of trade in general, as it has facilitated the exchange of goods and avoided delays in receiving shipping documents. Replacing paper documents with electronic documents is among the most prominent changes that have accelerated procedures, reduced costs, and introduced the advantage of electronic data interchange, which in turn contributes to resolving problems arising from the arrival of goods before the arrival of documents. The electronic documentary credit is considered one of the banking operations that significantly affects the growth of commercial and economic activity, in addition to being an effective means of settling international payments (1).
The idea of the electronic documentary credit began more than 30 years ago when a French committee adopted a number of studies addressing the legal problems related to the use of computers in international commercial relations. This committee was concerned with simplifying international trade procedures in relation to maritime shipping documents, and that signing them could be carried out through the use of a digital signature—an approach that requires amendments to domestic laws and international conventions (2).
In the Kingdom of Saudi Arabia, the application of the electronic documentary credit finds its legal basis in the Uniform Customs and Practice for Documentary Credits issued by the International Chamber of Commerce under Publication No. 600 of 2007, as well as the principles established by the Banking Disputes Committee.
By considering the Saudi E-Commerce Law issued in 1440H, recognition appears of banks providing their services electronically. The “commercial outlet” was defined as the electronic platform that enables the service provider to display a product, sell it, provide a service, advertise it, or exchange data related thereto. The laws in the Kingdom also recognized electronic records through the Electronic Transactions Law of 1428H, which conferred legal effect upon electronic records and defined an “electronic record” as data that is created, sent, received, transmitted, stored, or preserved by an electronic means capable of being retrieved or obtained in a form that can be understood (3).
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Meaning of the Electronic Documentary Credit:
The Saudi regulator did not address a definition of the electronic documentary credit in the commercial system (Commercial Court Law) (4). However, a definition of the documentary credit may be inferred from the definition of the electronic document set out in the Appendix to the Uniform International Customs and Practice, Publication No. 600 of 2007, where Article 3 (paragraph I B/) provides that it is “data created, extracted, sent, notified, received, or stored by electronic means, capable of being authenticated by the apparent identity of its sender and the apparent source of its contents, so long as it remains complete and unaltered and can be examined for compliance with the terms and conditions of the Appendix.” Article 2 of the UNCITRAL Model Law on Electronic Signatures of 2001 defined a “data message” as “information generated, sent, received, or stored by electronic, optical, or similar means, including, but not limited to, electronic data interchange, electronic mail, telex, or telecopy” (5). The electronic documentary credit was so named because it is founded upon a set of documents that must be presented for its execution, and the word “electronic” indicates that this credit is processed by electronic means (6).
Legal scholarship has addressed the definition of the electronic documentary credit. Some have defined it as “a credit that uses electronic means as a substitute for traditional methods, whether in communication between the parties, notification of the letter of credit, the issuance and circulation of instruments, their examination, and the settlement of their value” (7). Others have defined it as “a banking service of a special type involving an agreement between the bank and the applicant customer, pursuant to which the bank issues a binding offer addressed to the beneficiary, whereby the latter is obliged to submit the electronic documents” (8). Others have also defined it as: “the electronic documentary credit is an electronic banking service under which the bank and the applicant customer contract for the bank to be bound to effect electronic payment to the beneficiary, in consideration of the beneficiary’s submission of the required electronic documents; and the applicant customer is bound to pay the commission, expenses, and electronic rules” (9).
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Offer and Acceptance in the Electronic Documentary Credit:
Any distance communication that includes all elements necessary for contract formation constitutes an electronic offer pursuant to the European directive relating to consumer protection in distance contracting, such that the addressee can accept the contract directly (10). Accordingly, submitting an application to open a credit on the bank’s website does not constitute an offer; rather, upon the bank’s acceptance, the bank makes a detailed offer in the form of the terms of the documentary credit contract, and once the customer approves its terms, the documentary credit contract is concluded between the customer and the bank for the benefit of the beneficiary (11).
The Saudi regulator did not stipulate a specific method by which acceptance must be expressed. Acceptance in electronic contracting may therefore be expressed by any electronic means. This is made clear by Article 10 of the Electronic Transactions Law, which provides: “1- Offer and acceptance in contracts may be expressed through electronic transactions, and the contract shall be valid and enforceable whenever concluded in accordance with the provisions of this Law.”
Obligations Arising from the Electronic Documentary Credit:
- The Bank’s Obligations Toward the Applicant Customer (the Buyer):
- To carry out the transaction in accordance with the customer’s instructions by placing the agreed amount at the beneficiary’s disposal, by means of electronic transfer of the credit amount to the beneficiary.
- To examine and verify the documents specified by the customer.
- The bank’s obligation to transmit the documents to the applicant customer in accordance with Decision No. 409/1421H issued by the Committees for Banking and Financing Disputes and Violations (13)(14).
- The Applicant Customer’s Obligations Toward the Bank:
- The applicant customer’s obligation to pay the bank the amount of the credit and the expenses on the date specified in the credit-opening contract and in accordance with the agreed terms.
- The applicant customer’s obligation to receive the documents representing the goods.
- The applicant customer’s obligation to pay the commission immediately upon the conclusion of the documentary credit contract.
- The Bank’s Obligation Toward the Beneficiary:
- The obligation to send the letter of credit.
- The obligation to pay the value of the documents after receiving them.
- The Beneficiary’s Obligation Toward the Bank:
- To comply with the terms of the documentary credit.
- To submit the documents.
How is the term “electronic documentary credit” defined by legal scholars in terms of communication and settlement?
In legal scholarship the electronic documentary credit is defined by its use of electronic means as a substitute for traditional paper-based methods across the entire transaction lifecycle.
When focusing on communication and settlement scholars have provided the following specific definitions:
Substitution of Traditional Methods: It is defined as a credit that utilizes electronic means for communication between parties, the notification of the letter of credit and the settlement of its value.
Electronic Payment Obligations: Another definition characterizes it as an electronic banking service where the bank is contractually bound to effect electronic payment to the beneficiary in consideration for the submission of required electronic documents.
Comprehensive Electronic Processing: Scholars also emphasize that electronic means are used not only for communication and settlement but also for the issuance, circulation, and examination of instruments.
Essentially, the term “electronic” signifies that the entire credit process, from the initial agreement to the final financial settlement, is conducted via electronic data interchange
What are the bank’s specific obligations toward the applicant customer regarding document examination and electronic transfers?
Regarding the electronic documentary credit, the bank holds several specific obligations toward the applicant customer (the buyer) concerning both the handling of documents and the execution of financial transfers:
Execution of Electronic Transfers: The bank is obligated to carry out the transaction strictly according to the customer’s instructions. This involves placing the agreed-upon credit amount at the beneficiary’s disposal through an electronic transfer. This electronic payment is essentially the bank’s primary commitment in exchange for the beneficiary submitting the required electronic documents.
Examination and Verification of Documents: A core duty of the bank is to examine and verify the specific documents that were identified by the customer in the credit agreement. These documents must be checked for compliance with the terms and conditions of the credit.
Transmission of Documents: Following the examination, the bank has a legal obligation to transmit these documents to the applicant customer. In Saudi Arabia, this specific duty is supported by Decision No. 409/1421H issued by the Committees for Banking and Financing Disputes and Violations
What is the definition of a “data message” according to the 2001 UNCITRAL Model Law?
According to the UNCITRAL Model Law on Electronic Signatures of 2001, specifically Article 2, a “data message” is defined as information that is generated, sent, received, or stored by electronic, optical, or similar means.
The law clarifies that this definition includes, but is not limited to, the following methods:
- Electronic data interchange.
- Electronic mail.
- Telex or telecopy
Overview of Electronic Documentary Credit
The provided text explores the legal and operational framework of electronic documentary credits focusing on their role in modernizing global commerce. These digital financial tools streamline trade by replacing paper-based processes with electronic data interchange which reduces delays and operational costs. In the context of Saudi Arabian law the documents detail how local regulations and international standards, such as UCP 600, govern the validity of digital signatures and electronic records. The material defines the contractual relationship between banks, buyers, and sellers, emphasizing the specific obligations and rights of each party during the transaction. Furthermore the sources clarify the process of offer and acceptance within digital platforms, ensuring that electronic banking services maintain legal enforceability. Ultimately the text highlights how this technological shift supports economic growth by providing a secure and efficient method for settling international payments.
Sources:
1- Dr. Basim Alwan Tu‘mah Al-‘Aqabi, Nibal Ruways Hamzah, Risks of the Electronic Documentary Credit, p. 29, published on the website “Preview: Risks of the Electronic Documentary Credit”, access date 23/12/2025 at 5:48 p.m.
2- Dr. ‘Issam Fayid Muhammad, Bank Liability for Documents in Documentary Credit, Dar Al-Nahda Edition, 2015, p. 457.
3- Dr. ‘Izzah ‘Ali Muhammad Al-Hasan – The Legal Regime of the Electronic Documentary Credit in the Kingdom of Saudi Arabia, p. 1634, research published in Microsoft Word – 36.doc, access date 27/12/2025 at 11:15 p.m.
4- The Commercial System (Commercial Court Law) issued pursuant to Royal Decree No. (M/2) dated 15/1/1390H.
5- UNCITRAL Model Law on Electronic Signatures 2001, published on the website ml-elecsig-a.pdf, access date 28/12/2025 at 5:53 p.m.
6- Dr. Linda ‘Abdullah, The Crime of Money Laundering through the Electronic Documentary Credit, Jil Al-Bahth Al-‘Ilmi, Tlemcen, Tripoli, 2007, p. 176.
7- Dr. ‘Issam Fayid Muhammad, Bank Liability for Documents in Documentary Credit, p. 461.
8- Dr. Hasan Al-Khattab, The Electronic Documentary Credit: An Attempt at Grounding, Journal of Commercial Judiciary, 2014, p. 92.
9- Dr. Basim Alwan Tu‘mah Al-‘Aqabi, Nibal Ruways Hamzah, Risks of the Electronic Documentary Credit, p. 32, published on the website “Preview: Risks of the Electronic Documentary Credit”, access date 28/12/2025 at 6:32 p.m.
10- Article 8 of European Directive No. EC/97/7 relating to consumer protection in contracting, on the website: Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (Text with EEA relevance), access date today 29/12/2025 at 3:30 p.m.
11- Dr. ‘Izzah ‘Ali Muhammad Al-Hasan – The Legal Regime of the Electronic Documentary Credit in the Kingdom of Saudi Arabia, the aforementioned reference, p. 1650.
12- Dr. ‘Izzah ‘Ali Muhammad Al-Hasan – The Legal Regime of the Electronic Documentary Credit in the Kingdom of Saudi Arabia, the aforementioned reference, p. 1651.
13- Decision No. 409/1421H issued by the Committees for Banking and Financing Disputes and Violations, published on the website
14- Pursuant to High Order No. (729/8) dated 10/07/1407H, which provided for the formation of a Banking Disputes Settlement Committee composed of specialists to examine cases between banks and their customers in order to settle disputes and find appropriate solutions between the parties in accordance with the agreements concluded between them. This was followed by the issuance of Royal Order No. (37441) dated 11/08/1433H, which provided in clause (First) for amending the name “Banking Disputes Settlement Committee” to become “Banking Disputes Committee.”
