Negative attention from US federal authorities can turn a banker's hair white overnight. For this, and other obvious reasons, sanctions clauses in letters of credit (LCs) have been increasingly common over the last 15 years – of late, particularly in confirmations added to LCs.

This note compares English and Singapore law on sanctions clauses in LCs by discussing the Singapore Court of Appeal's decision in the Kuvera Resources case [2023] SGCA 28. Among other things, that case looked at the validity of clauses LC banks may seek to invoke if they have:

• objective evidence of a sanctions breach (objective clauses);
• (with or without evidence that would trigger an objective clause) only formed the subjective opinion that a sanctions breach may have occurred or may likely occur (subjective clauses); and
• decided their internal risk-based/red-flag-based policy means they do not want to take the risk of a possible sanctions breach which may or may not have occurred or be in prospect (policy-based clauses).

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