Forfaiting, trade finance and the International Chamber of Commerce (ICC)

Abstract

Some generalities
In his research Nis Clausen has been oriented mainly towards law & economics and law and finance.The law related to trade finance may not per se be one of his particular areas of interest, but it is an area of law which is closely related to i.a. finance and credit. I have here chosen a topic which is part of trade finance, although it is hardly the best known and most used arrangement, namely forfaiting. One reason, and maybe the best one, for discussing forfaiting is that The International Chamber of Commerce (ICC) is preparing a set of rules covering forfaiting transactions, which are due to be in force in 2013. ICC has for several years cooperated with the International Forfaiting Association concerning such rules. ICC and its trade financing groups have regarded forfaiting as a practical financing tool beside other related arrangements which it has regulated. 
Forfaiting is basically related to the sale of a payment claim on a without recourse basis. Traditionally it has been used mainly together with bills of exchange (or promissory notes); at least this seems to be the situation in English and commonwealth countries. Forfaiting seems to have had rather limited use in Scandinavia. There may be an increased use of forfaiting in present international business as a tool of finance. This may to some extent be a consequence of new rules on capital requirements for banks which seems to lead to a growing use of alternative financing methods.