Court clarifies enforceability of sanctions clauses in trade contracts.
In a significant ruling, the Court of Appeal of Singapore sided with coal trader Kuvera Resources in its lawsuit against JPMorgan over trade sanctions. This case is the first time the Singapore court has had to address the validity and enforceability of a sanctions clause in a contract. The dispute arose when JPMorgan, the confirming bank, refused to process a payment under two letters of credit (LCs) related to a coal sale to Dubai, citing concerns that the vessel transporting the coal might be owned by a Syrian entity, violating U.S. sanctions.
Kuvera Resources appealed the High Court’s 2022 ruling, which had sided with JPMorgan, validating the sanctions clause that allowed the bank to deny payment if it conflicted with U.S. sanctions laws. The Court of Appeal upheld the validity of the sanctions clause but criticized JPMorgan for not providing sufficient evidence to prove the vessel’s Syrian ownership. The court ruled that JPMorgan could not invoke the clause without more concrete evidence of a breach of sanctions.
In light of this ruling, the Court partially allowed Kuvera Resources’ appeal, awarding them damages of US$98,786.87 for confirmation charges and outstanding balances, as well as S$11,429.32 in travel expenses. This case highlights the growing complexity of global trade and financial regulations, especially in regard to sanctions compliance.
