Following the escalation of sanctions on Russian businesses, individuals and financial institutions over the past few days, we have taken the decision to reissue the previous ICC guidance on the use of sanctions clauses in documentary credits in consolidated form.
To reiterate our core guidance:
Sanctions law and regulations are generally mandatory, and thus may override the ICC rules applicable to that instrument. As such, the addition of a clause, stating the bank’s commitment to respect such sanctions law or regulation applicable to it by law may be unnecessary and lead to confusion.
Nevertheless, in circumstances where a bank determines it wants to include a sanctions clause in a documentary instrument, it is recommended that the clause should be drafted in clear terms, restrictively, to limit the reference only to mandatory law applicable to the bank, and not be extended beyond that. Banks may refer to the addendum in the consolidated guidance for the drafting guidance which is combined with the guidance paper and available in the above page.
It is further reiterated that banks should refrain from issuing trade finance-related instruments that include sanctions clauses that purport to impose restrictions beyond, or conflict with, the applicable statutory or regulatory requirements. It is also advisable for practitioners to be aware of the risks posed by such clauses if included by other banks involved in their transactions, and be prepared to reject such clauses where it brings to question, the irrevocable, independent nature of the credit, demand guarantee or counter-guarantee, the certainty of payment or the intent to hour obligations.
Further guidance/capacity building
We are committed to supporting the market in navigating the challenges posed to legitimate trade by the recent sanctions escalation, and will consider further interventions, as appropriate, to ensure that any and all new instruments are implemented in the most efficient manner possible.
To further support the market, we will be making the ICC Academy’s introductory course on compliance available free of charge to members throughout March. Further details on how to access this complementary e-training module will be circulated later this week.