in some letter of credit disputes the issuing bank seeks subrogation to the applicant's right against the beneficiary of the beneficiary's right against the applicant. sometimes applicant seeks subrogation upon reimbursement of the issuing bank and even confirming bank claims subrogation to the issuing bank. until now there is a controversy whether subrogation should be permitted in the letter of credit trancations. many courts have argued that subrogation should not be permitted in the letter of credit transactions because application of subrogation is a violation of independence priciple and the isssuing bank's liability is not secondary but primary one. the 1995 revision of uniform commercial code apopts significant changes on subrogation in letter of credit context. section 5-117 provides expressly about subrogation of the issuing bank. applicant and nominated bank. but it is noted that this section grants only the right of subrogation would exist if the party seeking subrogation were a secondary obligor. it means that this section does not grant unconditional right of subrogation. it is expected, however, that in the near future courts might be permit subrogation in the letter of credit transactions more and more on the basis of this section. so where subrogation is more effective to claim than any other remedies, the party should use the right of subrogation on a positive attitude.
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