Since a draft was included in the presentation at issue in ICC Opinion TA.948, it prompts important questions about examination not only under UCP but also under bills of exchange law.
Stemming from Kuvera Resources Pte Ltd. v. JPMorgan Chase Bank, N.A. where the High Court of Singapore determined that the sanctions clause in question “does not come within the scope of the (UCP) rule prohibiting non-documentary conditions”, the ICC Banking Commission decided to revisit and revise one aspect of its guidance on how sanctions clauses are to be categorized and considered.
In 2014, ICC issued “Guidance Paper on the Use of Sanctions Clauses in Trade Finance-related Instruments Subject to ICC Rules” and six years later released an “Addendum to The Use Of Sanctions Clauses In Trade Finance-Related Instruments Subject To ICC Rules, Including Documentary And Standby Letters Of Credit, Documentary Collections And Demand Guarantees” in order to emphasize its position.
Acknowledging the initial paper’s recognition of the problematic nature of sanctions clauses, the 2020 Addendum stated: “They are non-documentary conditions for the purpose of the UCP and the URDG.”
In November 2024, the ICC removed this sentence from its guidance document on the subject and inserted the following footnote:
A previous edition of this Addendum contained a statement that sanctions clauses are non-documentary conditions for the purposes of the UCP and the URDG. This statement has been deleted, to avoid any implication that sanctions clauses are to be analysed differently from other clauses in trade finance instruments. Whether or not a sanctions clause is a non-documentary condition for the purpose of the UCP and the URDG will depend on the drafting of the clause: if it is drafted as a condition for a complying presentation under the letter of credit, the confirmation, the guarantee or the counter-guarantee without stipulating the document to indicate compliance with the clause, it could be considered as a non documentary condition for the purpose of article 14(h) of the UCP and of article 7 of the URDG. Conversely, if the sanctions clause is drafted as a term of payment, thus operating in certain circumstances to override the payment obligation and permit the obligor in the letter of credit, guarantee or counter-guarantee not to pay the beneficiary against a complying presentation, it could be permissible under the UCP/URDG. Validity and enforceability are to be determined under the applicable law.
The updated “Consolidated ICC Guidance on the Use of Sanctions Clauses in Trade Finance-Related Instruments Subject to ICC Rules” is available for download here.
Since a draft was included in the presentation at issue in ICC Opinion TA.948, it prompts important questions about examination not only under UCP but also under bills of exchange law.
