The spread of sanctions clauses in letters of credit

Clause for concern


Commercial letters of credit (L/C) are most commonly used in international trade transactions as a trusted vehicle to pay for goods. With an increase in international sanctions, particularly as a result of the continuing unrest in the Middle East, banks issuing financing documents have responded by inserting sanctions clauses into their L/Cs.

The sanctions clauses are designed principally to warn counterparties that sanctions may prohibit the bank from dealing with specific countries, persons or