Final and Pending ICC Opinions circulated by the ICC and the future of ISBP
Dear all,
The ICC have just circulated the final consolidated Opinions of the Banking Commission, April 2023:
First the “easy” one:
ICC Opinion TA930rev (No payment due to sanctions clause) was approved with changes to the Analysis and conclusion. The underlying issue in the opinion is that prior to maturity, the issuing bank advised that they could not pay due to trade sanctions.
A number of questions were raised including:
* Whether or not a sanctions clause is a non-documentary condition
* Whether the obligation of the issuing bank under an LC is separate from the underlying agreement
* Whether the bank must provide evidence that there are economic sanctions
* Whether the payment obligation remains in force until the sanctions issue is approved
* Whether an offer to pay in a different currency is valid.
For most of the questions the answer is that the issue is a matter outside the scope of the UCP 600.
However, for the issue of non-documentary conditions, reference is made to the Addendum to the Sanctions Guidance Paper, which states that sanctions clauses are non-documentary conditions for the purposes of the UCP (and the URDG) and recommends that banks should refrain from including sanctions clauses that impose restrictions beyond, or conflict with applicable regulatory requirements. It is added that non-documentary conditions are addressed in UCP 600 article 14 (h) wherein it is stated that if an LC contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it. The scope of UCP 600 article 14(h) is in respect of determining if the presented documents constitute a complying presentation. The legality or enforceability of sanctions clauses may also involve considerations of mandatory law/regulations which may override the credit and the UCP.
On whether evidence is required to prove that there are economic sanctions, the answer is that it is expected that a bank should provide a reference to the applicable law or sanction regulation, and the document(s) and /or data in the presentation to which it relates.
A review of TA930rev has been added to lcviews premium duly linked to relevant rules and practice.
Then the “not so easy”:
For TA927, as mentioned in the previous blog post, it was not possible to reach a unanimous conclusion. For that reason, an updated version has been circulated to the ICC National Committees who have been given the three following choices:
* Accepted
* Accepted with reserve
* Inviting initiator for withdrawal for ISBP revision on the topic to occur
The ICC National Committees will have until 27 June 2023 to express their preference. Decision will be final by 11 July 2023 during the next official opinion session.
The future of ISBP:
Following the updates to ISBP (as explained in a previous blog post), the ICC are asking the National Committees on their view in respect of the future of ISBP. I.e., they are asked to answer the following questions:
* No further work;
* Full review of the newly aligned ISBP text retaining the scope as “examination of documents” only;
* Scope of ISBP to be extended beyond examination;
* Drafting of separate independent guidance publications covering issuance, advising, confirmation, amendment.
The ICC National Committees will have until 30 June 2023 to express their preference.
This will be interesting to follow.
Thanks again to the ICC for taking good care of the LC.
Kind regards
Kim