Conflict and Coordination between Sanction Clause and Letter of Credit Rules:An Analysis Based on the JP Morgan Case
The increasing prevalence of unilateral sanctions regimes in international trade has led to a growing trend of parties incorporating sanction compliance provisions into their cross-border commercial contracts.However,the unique commercial underpinnings and legal logic of letter of credit(LC)transactions introduce a complex interplay between sanction clauses and the fundamental principles of LC rules.This tension was recently brought to the forefront in a landmark Singapore Court of Appeal case,which highlighted the inherent contradictions and practical dilemmas arising from the incorporation of sanction clauses into LCs.The court recognized that sanction clauses,by granting banks excessive discretion to halt payments under LCs based on their own assessment of potential sanctions violations,pose a significant threat to the core principles of LC—their irrevocability,independence,and strict conformity to presented documents.Although the Court balanced the rights and obligations of both parties through a"strict interpretation",this approach,however,falls short of addressing the systemic risks posed by"overly compliant"sanction clauses to the integrity of LC.By a more comprehensive solution lies in a multi-pronged approach that involves the negotiation,formulation,notification,and post payment compensation of sanctions through multilateral channels,the international trade community can achieve a more harmonious coexistence between sanctions compliance and the predictability of LC transactions.
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维普
