Lim Wei

Sanctions clauses in documentary credit transactions: a cautionary tale

In the current geopolitical climate, sanctions are increasingly used as a foreign policy tool and can have significant implications for contractual obligations in international trade. In Kuvera Resources Pte Ltd v JPMorgan Chase Bank, N.A. [2023] SGCA 28, the Singapore Court of Appeal held that a confirming bank could not deny payment to the beneficiary of two letters of credit (LCs) on the ground that its confirmations of the LCs included a contractual clause (Sanctions Clause) extinguishing the confirming bank’s liability as the underlying commercial transaction was allegedly caught by the sanctions laws of the US.