The documentary letter of credit (“LC”) is a key payment method in international trade – not only does it satisfy both the seller’s and the buyer’s conflicting needs, but it also is considered to be relatively risk free. However, the recent surge in financial sanctions and embargoes, and the resulting “sanctions clauses” in LCs trying to meet the issue, is challenging the fundamental nature of an LC.

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Download here: UCP 600

These Standard Clauses are typical provisions setting out the terms of a letter of credit facility made available to the borrower under a revolving credit loan. These Standard Clauses govern the process for requesting letters of credit and specify the borrower’s obligations to reimburse the letter of credit issuing bank for amounts drawn under the letters of credit.  They also set out the obligations of the revolving lenders to participate in outstanding letter of credit obligations if not reimbursed by the borrower. Also included are provisions requiring the borrower to post cash collateral to secure letter of credit obligations under certain circumstances, and provisions regarding letter of credit fees. These Standard Clauses have integrated notes with important explanations and drafting and negotiating tips.

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Loan Agreement – Letter of Credit Clauses

LETTERS OF CREDIT – SANCTIONS CLAUSE VS PAYMENT UNDER UCP

The documentary letter of credit (“LC”) is a key payment method in international trade – not only does it satisfy both the seller’s and the buyer’s conflicting needs, but it also is considered to be relatively risk free. However, the recent surge in financial sanctions and embargoes, and the resulting “sanctions clauses” in LCs trying to meet the issue, is challenging the fundamental nature of an LC.

Continue reading “LETTERS OF CREDIT – SANCTIONS CLAUSE VS PAYMENT UNDER UCP” →