In one of our earliest blogs, we made reference to the ICC Guidance Paper on the use of Sanctions Clauses, published in an updated version in 2014. The paper deals with the use of clauses in relation to trade, economic or financial sanctions or embargos in trade finance instruments (documentary and standby letters of credit, demand guarantees and counter-guarantees) that are subject to the rules drafted by the ICC Banking Commission.
The issue of sanctions being applied upon a documentary credit transaction has surfaced on a number of occasions over the years. As stated in the paper, the use of sanction clauses had become a problematic issue in that they lead to uncertainty as to their application and could potentially defeat the independent nature of such instruments. The purpose of the Guidance Paper was to highlight this issue and recommend best practices in that respect.
Due to recent resurgence in the use of sanctions clauses in documentary credits, we understand that the ICC will again address this issue - we will update you once more information is made publicly available.
More detailed information on this topic can be found in our ‘Sanctions' training module.