Analysis of Lessons Learnt From Natixis v. BNP From a Different Perspective

Having worked for 45 years as a trade finance practitioner until November 2020, I have taken a very active interest in a number of court cases in my career for which I would always ask myself: What do I need to know about this decision? Now working independently in various advisory capacities in the industry, I continue to do this and offer public comment where I think it may be useful and relevant.

In commenting on a legal case, I believe in analysing what went wrong and what lessons may be learnt. Otherwise, it is no different than reading the judgment yourself. I hope this might be helpful for readers to contemplate possible necessary changes in order to avoid making mistakes similar to those emerging from a given case. With this in mind, I wanted to offer some thoughts on the US case, Natixis, New York Branch v. BNP Paribas.¹ I will first provide brief background about the case and quote relevant portions from it. I will then aim to discuss practical lessons and possible implications of the case.

Background

On 21 October, 2019, Hontop Energy (Singapore) Pte Ltd. (Hontop) agreed to purchase one million barrels of crude oil from Shell International Eastern Trading Company (SIETCO).

On 5 December 2019, Hontop agreed to resell the crude oil to Petrobras Global Trading B.V. (Petrobras) and the agreement was amended on 10 January 2020 whereby the quantity was reduced and the payment due date extended to 10 February 2020.

On 10 December 2019, Natixis, New York branch, issued a standby letter of credit subject to ISP98 (Natixis SBLC) for USD 75 million in favour of Hontop with an original expiry date of 31 January 2020 which was later extended to 28 February 2020. The SBLC was advised through BNP Paribas, Singapore branch (BNP Singapore), and available with BNP Singapore by negotiation.