Sanctions Clauses in Trade Finance Instruments

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. When utilized by banks, sanctions clauses run the gamut from informational and obvious – “we will comply with sanctions laws and regulations applicable to us” – to opaque and nebulous – “we shall not handle or deal with any documents, shipments, goods, payments and/or transactions that may relate, directly or indirectly, to any sanctioned countries/regions, persons or parties”.

Except in use of the former and similar where the wording essentially declares that a bank will abide by applicable law, more broadly worded sanctions clauses have brought into question the independence of trade finance undertakings and in many instances have forced courts to determine whether a particular sanctions clause is valid and enforceable. As demonstrated in recent court cases and reversals – Kuvera Resources v. JPMorgan Chase Bank and now Celestial Aviation Services Ltd v. UniCredit Bank – outcomes can be uncertain and unpredictable.                  

Against this backdrop, trade finance specialist and DCW Editorial Advisory Board member Khalil Matar has designed a dynamic self-guided presentation for trade finance professionals grappling with the increased prominence of sanctions clauses in trade finance instruments to reflect on the topic and hopefully achieve a more informed position.