dissenting:
We must decide whether a bank’s obligation under a letter of credit will be enforced when the performance is legal at the place designated for payment but illegal at the place where the credit was issued. Here, the letter of credit explicitly stated that Chuidian was to present his sight drafts “for payment at the counters of the Philippine National Bank, Los Angeles, 700 South Flower Street Suite 2516 Los Ange-les, CA 90017.” No other place of payment was designated. Moreover, Los Angeles is the place where prior payments had been made.
The majority presents one possible solution. The two cases which form the basis of the majority’s analysis, Sabolyk v. Morgan Guaranty Trust Co., No. 84 Civ. 3179, 1984 WL 1275 (S.D.N.Y. Nov. 27, 1984), and RSB Mfg. Corp. v. Bank of Baroda, 15 B.R. 650 (S.D.N.Y.1981), hinge their own analysis on one factor, the role of the intermediary bank. If that bank is not a confirming bank, then, as a practical matter, the place of performance under the letter of credit remains the place where the letter of credit was issued.
In my opinion the correct rule is that proposed by Damir — the place of performance of a letter of credit is the place (or places) where it is to be paid. In J. Zeevi & Sons, Ltd. v. Grindlays Bank (Uganda) Ltd., 37 N.Y.2d 220, 371 N.Y.S.2d 892, 333 *566N.E.2d 168, cert. denied, 423 U.S. 866, 96 S.Ct. 126, 46 L.Ed.2d 95 (1975), the plaintiff, J. Zeevi and Sons, an Israeli partnership, was the beneficiary of an irrevocable letter of credit issued by Grindlays Bank in Uganda. Apparently, Grindlays Bank had an account at Citibank which it authorized Citibank to debit if J. Zeevi’s sight drafts complied with the terms of the letter of credit. However, the drafts had to be sent to Grindlays Bank in Uganda by the negotiating bank. J. Zeevi presented its drafts to Chemical Bank in New York, which honored them and thereupon became the negotiating bank. Chemical then sought reimbursement from Citibank. Id. 371 N.Y.S.2d at 895-96, 333 N.E.2d at 170-71.
Citibank refused to honor Chemical’s sight drafts. The Ugandan government had ordered that “all foreign exchange allocations in favor of Israeli companies and nationals ... be canceled” and that no payments be made under J. Zeevi’s letter of credit. Id. 371 N.Y.S.2d at 896, 333 N.E.2d at 171. Grindlays Bank cancelled the letter of credit, and J. Zeevi sued in New York state court. Id.
Grindlays Bank argued that Ugandan law applied and under that law its performance was excused. The J. Zeevi court was not persuaded. It found that the law of New York, not the law of Uganda, applied because New York had “an overriding and paramount interest” in the litigation:
A vast amount of international letter of credit business is customarily handled by certain New York banks whose facilities and foreign connections are particularly adaptable to this field of operation. The parties, by listing United States dollars as the form of payment, impliedly accepted these facts and set up procedures to implement their trust in our policies. In order to maintain its pre-eminent financial position, it is important that the justified expectations of the parties to the contract be protected. Since New York has the greatest interest and is most intimately concerned with the outcome of this litigation, its laws should be accorded paramount control over the legal issues presented.
Id. 371 N.Y.S.2d at 898-99, 333 N.E.2d at 172-73 (citations omitted). In other words, the mere fact that payment was to be made in New York gave New York the greatest interest in the litigation, and thus the law of New York, not Uganda, applied. See also 9 P.S. Pilecki, L.G. Weeramantry, R. Natter, Banking Law § 239.07 at 239-35 (1992) (when dispute between beneficiary and bank concerns the bank’s performance of its obligations under the letter of credit, the law of the place of performance should apply because that place has the greatest interest and “closest connection” to the transaction). Other courts have reached a similar conclusion. See Consolidated Aluminum Corp. v. Bank of Virginia, 704 F.2d 136, 137 n. 3 (4th Cir.1983), where the court when presented with a letter of credit with a provision strikingly similar to the payment provision in this case determined that since “[t]he letter of credit ... required that the draft and documents be presented [for payment] ‘at the counters’ of the Bank of Virginia in Richmond, Virginia ... [t]he place of performance is Virginia, and therefore the law of Virginia governs resolution of the issue here presented.” In fairness it should be noted, however, that the Bank of Virginia was also the issuing bank. See also Banco de Vizcaya v. First Nat’l Bank of Chicago, 514 F.Supp. 1280 (N.D.Ill.1981) (applying law of the place of payment to determine that performance under letter of credit was not illegal despite injunction by a court at the place of issuance), vacated by unpublished order (July 23, 1981).
Moreover, the place of payment is usually considered the place of performance in analogous situations. See Republic of Argentina v. Weltover, Inc., — U.S. -, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). In Weltover the Court concluded that the place of performance was the place of payment for bonds issued by the Argentine government, held by international purchasers, and payable in New York if the holder so desired:
Respondents had designated their accounts in New York as the place of payment, and Argentina made some interest payments into those accounts before an*567nouncing that it was rescheduling the payments. Because New York was thus the place of performance for Argentina’s ultimate contractual obligations, the rescheduling of those obligations necessarily had a “direct effect” in the United States....
Id. — U.S. at -, 112 S.Ct. at 2168 (emphasis added); see also Cal.Com.Code § 4102(2) (law of the place where check or other negotiable instrument is presented, paid or collected governs bank’s liability). PNB’s obligations under the letter of credit closely resemble Argentina’s under its bonds. In both instances, liability for payment remained with the entity in the foreign jurisdiction and no domestic payor assumed any contractual obligations. Moreover, in both cases the “beneficiaries” of the obligations were foreign nationals, although here, Chuidian was a resident of the State of California. Finally, in Republic of Argentina the parties had even fewer contacts with the forum. Both the issuer of the bonds and the purchasers were foreign entities. Unlike this case, the only contact with the local forum was that the bonds were payable there.
The majority indicates that the Restatement (Second) of Conflicts of Laws (1969) supports the conclusion that Manila was the place of performance. But the Restatement sheds no light on that issue. We have been asked to determine the place of performance of a letter of credit issued in one jurisdiction but payable in another. The Restatement’s choice of law analysis merely addresses what effect one should give to an illegality once it has been determined that performance is illegal at the place of performance. See Restatement (Second) Conflicts of Law § 202 comment c. It does not help with the determination of whether Manila or California was the place of performance.
The majority indicates that a rule which designates the place of performance as the place of issuance when no intermediary bank has undertaken to confirm the letter of credit is more flexible than a rule which designates the place of payment as the place of performance. I do not agree. The rules are equally uniform. Under the rule adopted by the majority, the district court need make only one finding: it must determine whether the intermediary is or is not a confirming bank. If it is not, the place of issuance controls. This is not to say that the alternative rule designating the place of payment as the place of performance is more flexible. The fact-finder’s task is just as simple: it must locate the place (or places) where payment is to be made. The obligation to pay at that place will then devolve upon the issuing bank. If there is also a confirming bank, it will have the same obligation.
So if we are left with these two rather inflexible rules, we must choose between them on some principled basis. In my opinion, the majority chose the wrong one and, thus, failed to reach the right answer.
The great value of letters of credit as commercial devices is their reliability. Bank of Cochin Ltd. v. Manufacturers Hanover Trust, 612 F.Supp. 1533, 1537 (S.D.N.Y.1985), aff'd, 808 F.2d 209 (2d Cir.1986). The parties to a letter of credit effectively substitute the creditworthiness of an issuing or confirming bank for that of the account party. J.F. Dolan, The Law of Letters of Credit ¶ 3.07[2] (2d ed. 1991). By doing so, they shift the risk of nonperformance from the beneficiary, usually a seller of goods, to an issuing or confirming bank. The bank is paid a premium by the account party to bear this risk, and it has no recourse against a beneficiary if the drafts presented by the beneficiary conform to the terms of the letter of credit. Goods are shipped and other actions are taken on the strength of the bank’s promise that the money will be paid over.
Under the place of issuance rule, the issuing bank has the most protection against the vagaries of the legal climate and the risk of illegality is borne by the beneficiary. Under the place of payment rule, the beneficiary has the most protection. I say this because it seems to me that when a beneficiary negotiates to have payment made at a certain place, he expects to be able to obtain it there unless that violates the law of the place of payment. The beneficiary need not consider whether the entity handing over the money *568is an issuing, confirming, advising, paying, or negotiating bank. The beneficiary should only have to be sure that the terms of the letter of credit have been met — that being done, payment should follow, and the beneficiary should not have to worry about political or other events in far off places. The goods have been shipped or other obligations performed and payment should be made at the designated place. If it is not, the issuing bank should be liable. It, not the beneficiary, should bear the risk. The place of payment rule accomplishes just that. Thus, it more closely reflects the customary allocation of risk in letter of credit transactions and fosters the stability of those transactions.
This case is a good illustration. The parties bargained for an irrevocable obligation secured by PNB’s credit and payable in United States dollars in California. In reliance on that Chuidian gave up valuable assets. However, because of the legal and political climate in the Philippines, PNB refused to pay in accordance with the terms of its letter of credit. But guaranteed payment is exactly what Chuidian bargained for, nothing in the law of California precluded that payment, and the funds were actually available in California. The letter of credit should have been performed according to its terms. PNB’s failure to pay stripped Chuidian of the benefit of his bargain, even though the account party did receive what it bargained for. The majority countenances this result in the name of protecting the usefulness of letters of credit. Unfortunately, the opposite has occurred, as reflection upon what has happened to Chuidian demonstrates.
An irrevocable letter of credit is by its nature meant to be irrevocable in all but a few limited circumstances (usually where there is fraud in the procurement or payment of the letter of credit). Recognizing the place of payment as the place of performance in this case would effectuate the parties’ agreement and thus enhance the “reliability and fluidity” of letters of credit. Bank of Cochin Ltd., 612 F.Supp. at 1537.
Because the purpose of letters of credit is to facilitate commerce and to induce the beneficiaries to part with goods or expend services on the basis of those letters, the place of payment approach is the correct rule. Under the place of payment rule, California was the place of performance, and Damir is entitled to payment.1 I fear that the majority’s selection of the opposite rule will undermine the certainty and reliability of commercial transactions which depend upon letters of credit. Thus, I dissent.
. Given the majority's opinion, I need say little about the international comity and act of state doctrines also relied upon by the district court. Suffice it to say, however, that I would "reject the notion that a federal court owes greater deference to foreign courts than to our own state courts." Neuchatel Swiss General Ins. Co. v. Lufthansa Airlines, 925 F.2d 1193, 1195 (9th Cir.1991). Since California is the place of payment and the PCGG orders are based upon an allegation of fraud twice disproven in courts within the United States, I would decline to protect PNB by relying on comity or the act of state doctrine.