Sanctions clauses that are wisely or imprudently constructed continue to be inserted into trade finance instruments and may heavily impact the legal rights and transactional obligations of involved parties.
Various articles from the June 2024 edition of DCW caught the attention of ICC Banking Commission Senior Technical Advisor Dave Meynell who offers the following comments.
In a high profile case involving standby letters of credit issued in connection with aircraft leases to Russian airlines and
Singapore's TradeTrust, developed by IMDA, integrates global standards, UNCITRAL's MLETR, and blockchain, allowing verification of electronically issued documents for global trade.
Developed by Singapore’s Infocomm Media Development Authority (IMDA), TradeTrust comprises a set of globally accepted standards and frameworks that connects governments and businesses to a public blockchain to ensure that documents issued electronically are able to be verified in terms of their source and authenticity. It also offers trusted interoperability of electronic trade documents (including those of a negotiable nature) across different digital platforms. The framework is aligned with a global standard: UNCITRAL’s Model Law of Electronic Transferable Records (MLETR) which Singapore has adopted into legislation. To facilitate broader acceptance and use of TradeTrust, a freely available digital utility has been provided alongside a reference implementation that is designed to comply with the MLETR requirements.
The TradeTrust digital utility is open-source software available for download. The software leverages blockchain technology and has functions that enable the verification of authenticity and provenance of electronic trade documents such as a certificate of origin. In addition, the software is designed to enable implementers to handle electronic transferable records such as an electronic bill of lading in a way that fulfils three key criteria stipulated in the MLETR: singularity; exclusive control; and integrity.
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Exploring the steps and considerations for banks to effectively navigate the complexities of true sale unfunded risk participation, identifying product and regulatory nuances, and understanding practical applications through use case scenarios.
Fraud prevention is a crucial pursuit, but is an interim/hybrid solution requiring a beneficiary’s bank to vouch for the beneficiary the answer? Or does it introduce added risks?
ICC TAB 9 points out that there is a risk of documents being presented to more than one bank at the same time, especially under an LC that is freely negotiable, but it stops short of making any recommendations for avoiding this risk. Here’s my suggestion.
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