Nowadays, due to increasingly rapid trends of integration of businesses and facilitation of
international trade, an old and very well known tool used for financing of the trade, the bill of exchange has been revitalized.
Since Armenian businesses are mainly concerned with renovation and import of goods, equipment, machinery and other tangible assets, they often act as drawers of the bills of exchange for the favor of foreign drawee. This means that the obligation of the payment for the goods is being satisfied with the issuance of a bills of exchange, which being an abstracted instrument from the main obligation extends a possibility for the drawee to obtain financing before the maturity of the bill by discounting it.
And that is where the problems arise. What are the mandatory requirements as to the form of the bills of exchange? Is there an acceptance and protest procedure for bills of exchange? How is the presentation under the bills of exchange made? Is it possible to have a fast track procedure against the drawer of bills of exchange if he fails the payment thereof?
Armenian legislation, unfortunately, does not provide the answers to these questions. The main uncertainty stems from the Civil Code of Armenia, which prescribed for blank legal norms leaving it to the legislator to set certain rules with regard to bills of exchange.
The businesses therefore opt for other instruments such as letters of credit, escrows, bank guarantees and other tools for financing international trade since the legal uncertainty poses great risk for the return of their investments in debt security instrument such as the bill of exchange.
The research has shown that Armenian legislator has been reluctant to provide legal certainty to the persons wishing to use the instrument. After the abolition of the old law on State Notary on 2003 which prescribed for protest and acceptance procedure with the public notary, the new law on Public Notary repealing the old one has omitted the questions related with bills of exchange. There have been no further efforts to establish a charter for the bills of exchange which would regulate the outstanding questions above.
It is also odd, that Armenia has never joined any international instrument, which has harmonized the law on bills of exchange to a large extent throughout Europe and even Eurasia. Most widely known and successful international instrument is the Geneva Convention Providing Uniform Law on Bills of Exchange and Promissory Notes (1930). Although the Convention is very plane, it does provide the answers and default provisions to all the questions raised above.
As lawyers specialized in international trade, we usually advise to subject the bills of exchange to a foreign law which has the legal system complicated enough to back up the certain operation and enforcement on the bill of exchange. Even this appears to be a non-easy task since the conflict of law rules usually subjects the law of the bills of exchange to the law of the place of the issuer. Using the gap provided for in the Geneva Convention we usually would suggest mentioning the place of issuance as a country the legislation of which you wish to be applicable.
Recent initiatives of the Ministry of Justice have seen the declaration of consultations on changes of the Civil Code of Armenia. We are sure to push this forward, amongst other things, with concrete proposals for amendments to the law addressing the concerns of the business community.