Kuvera Resources v JPMorgan Chase: Sanctions Clause in Confirmed Letter of Credit
In Suit No 57 of 2020, Kuvera Resources Pte Ltd sued JPMorgan Chase Bank, NA in the General Division of the High Court of Singapore, seeking US$2.42m for breach of contract related to a confirmed letter of credit. JPMorgan Chase refused payment due to a sanctions clause, citing potential violations of US sanctions laws. Justice Vinodh Coomaraswamy dismissed Kuvera Resources' claim, holding that the sanctions clause was a valid term of the confirmation, enforceable, and applicable in this case. The court ordered Kuvera Resources to pay costs to JPMorgan Chase.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Plaintiff's action dismissed with costs.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court dismisses Kuvera Resources' claim against JPMorgan Chase, ruling the sanctions clause in the confirmed letter of credit enforceable.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Kuvera Resources Pte Ltd | Plaintiff | Corporation | Claim Dismissed | Lost | Mahmood Gaznavi s/o Bashir Muhammad, Rezza Gaznavi |
| JPMorgan Chase Bank, NA | Defendant | Corporation | Judgment for Defendant | Won | Chia Voon Jiet, Charlene Wong Su-Yi, Grace Lim Rui Si |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Vinodh Coomaraswamy | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Mahmood Gaznavi s/o Bashir Muhammad | Mahmood Gaznavi Chambers LLC |
| Rezza Gaznavi | Mahmood Gaznavi Chambers LLC |
| Chia Voon Jiet | Drew & Napier LLC |
| Charlene Wong Su-Yi | Drew & Napier LLC |
| Grace Lim Rui Si | Drew & Napier LLC |
4. Facts
- Kuvera Resources contracted to receive payment via a confirmed letter of credit.
- JPMorgan Chase confirmed the letter of credit, including a Sanctions Clause.
- The Sanctions Clause allowed JPMorgan Chase to refuse payment if the transaction involved a sanctioned vessel.
- Kuvera Resources made a complying presentation of documents.
- JPMorgan Chase refused payment due to concerns about US sanctions related to the vessel 'Omnia'.
- The 'Omnia' matched the description of 'Lady Mona', a vessel previously linked to Syrian entities.
- Kuvera Resources received US$2.2m directly from the buyer after JPMorgan Chase's refusal.
5. Formal Citations
- Kuvera Resources Pte Ltd v JPMorgan Chase Bank, NA, Suit No 57 of 2020, [2022] SGHC 213
6. Timeline
| Date | Event |
|---|---|
| Contract signed for sale of coal from Indonesia to Dubai. | |
| First letter of credit issued for US$0.7m. | |
| Second letter of credit issued for US$1.65m. | |
| Defendant added confirmation to both letters of credit. | |
| Plaintiff made first presentation of documents to the defendant. | |
| Defendant rejected first presentation of documents. | |
| Plaintiff made second presentation of documents to the defendant. | |
| Defendant informed presenting bank of inability to accommodate presentation. | |
| Defendant returned plaintiff’s documents to the presenting bank. | |
| Letters of credit expired. | |
| Plaintiff entered into negotiations with issuing bank and buyer. | |
| Buyer paid US$2.2m to the plaintiff. | |
| Trial commenced. | |
| Decision made. | |
| Grounds of decision issued. |
7. Legal Issues
- Incorporation of Sanctions Clause
- Outcome: The court held that the Sanctions Clause was a term of the contract between the plaintiff and the defendant.
- Category: Substantive
- Validity and Enforceability of Sanctions Clause
- Outcome: The court held that the Sanctions Clause was valid and enforceable, not fundamentally inconsistent with the commercial purpose of a confirmed letter of credit, and not unworkable.
- Category: Substantive
- Application of Sanctions Clause
- Outcome: The court held that the Sanctions Clause entitled the defendant to refuse to pay the plaintiff against a complying presentation because paying the plaintiff would have exposed the defendant to a penalty for breaching US sanctions laws and regulations.
- Category: Substantive
8. Remedies Sought
- Monetary Damages (US$2.42m)
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Commercial Litigation
- Banking
- Trade Finance
11. Industries
- Banking
- Trade Finance
- Commodities Trading
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| United City Merchants (Investments) Ltd v Royal Bank of Canada | N/A | Yes | [1983] 1 AC 168 | N/A | Cited for the principle that each of the five contracts in a letter of credit transaction are separate and autonomous. |
| Kredietbank NV v Sinotani Pacific Pte Ltd (Agricultural Bank of China, third party) | N/A | Yes | [1991] 1 SLR(R) 274 | Singapore | Cited for the principle that each of the five contracts in a letter of credit transaction are separate and autonomous. |
| Brody, White and Co Inc v Chemet Handel Trading (S) Pte Ltd | N/A | Yes | [1992] 3 SLR(R) 146 | Singapore | Cited for the principle that each of the five contracts in a letter of credit transaction are separate and autonomous. |
| Kredietbank NV v Sinotani Pacific Pte Ltd (Agricultural Bank of China, third party) | N/A | Yes | [1999] 1 SLR(R) 274 | Singapore | Cited regarding incorporating terms into an offer by reference, e.g. by making its letter of credit or confirmation subject to the UCP600. |
| Henthorn v Fraser | N/A | Yes | [1892] 2 Ch 27 | N/A | Cited for the principle that an offer must be received by the offeree before it can be accepted so as to form a contract. |
| Robophone Facilities Ltd v Blank | N/A | Yes | [1966] 1 WLR 1428 | N/A | Cited for the principle that an offeror may revoke its offer at any time before the offeree accepts it. |
| Errington v Errington and Woods | N/A | Yes | [1952] 1 KB 290 | N/A | Cited for the principle that an offer of a unilateral contract is revocable at any time before the offeree commences performance in reliance on the offer. |
| Hamzeh Malas & Sons v British Imex Industries Ltd | N/A | Yes | [1958] 2 QB 127 | N/A | Cited for the principle that contract law declines to interfere with established mercantile usage and banking custom. |
| Raiffeisen Zentralbank Osterreich AG v China Marine Bunker (Petrochina) Co Ltd | N/A | Yes | [2006] EWHC 212 (Comm) | N/A | Cited as support for the unilateral contract explanation of letter of credit transactions. |
| Agritrade International Pte Ltd v Industrial and Commercial Bank of China | N/A | Yes | [1998] 1 SLR(R) 322 | Singapore | Cited for the principle that banks and beneficiaries do not have any obligations or rights outside the four corners of the terms of the credit. |
| MCH International Pte Ltd and others v YG Group Pte Ltd and others and other appeals | N/A | Yes | [2019] 2 SLR 837 | Singapore | Cited for the principle of interpreting a contract with its commercial purpose in mind. |
| Yap Son On v Ding Pei Zhen | N/A | Yes | [2017] 1 SLR 219 | Singapore | Cited for the principle that the purpose of contractual interpretation is to give effect to the objectively ascertained intention of the contracting parties. |
| Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd | N/A | Yes | [2015] 5 SLR 1187 | Singapore | Cited for the principles of contractual interpretation, including considering the context of the contract. |
| Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd | N/A | Yes | [2008] 3 SLR(R) 1029 | Singapore | Cited for the principle that a court will interpret a term differently from its plain language only when the plain language becomes absurd or ambiguous. |
| Malayan Banking Bhd v Bakri Navigation Co Ltd and another | N/A | Yes | [2020] 2 SLR 167 | Singapore | Cited for the principle that the content of foreign law is a question of fact which must be proved. |
| EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and another | N/A | Yes | [2014] 1 SLR 860 | Singapore | Cited for the principle that the court cannot simply take judicial notice of foreign law. |
| Star Cruise Services Ltd v Overseas Union Bank Ltd | N/A | Yes | [1999] 2 SLR(R) 183 | Singapore | Cited for the principle that the party asserting foreign law bears the burden of proving it as an issue of fact. |
| Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal | N/A | Yes | [2008] 2 SLR(R) 491 | Singapore | Cited for the principle that foreign law can be proved by adducing the opinion of an expert in the foreign law. |
| Re Gerald Martin Smith Serious Fraud Office and another v Litigation Capital Ltd (a company incorporated in the Marshall Islands) and others | N/A | Yes | [2021] EWHC 1272 (Comm) | N/A | Cited for the principle that a court will normally accept uncontradicted expert evidence unless it is obviously false, obscure, extravagant, lacking in obvious objectivity and impartiality or patently absurd. |
| TMT Co Ltd v The Royal Bank of Scotland plc (trading as RBS Greenwich Futures) and others | N/A | Yes | [2018] 3 SLR 70 | Singapore | Cited for the principle that a branch of a bank is not a legal entity separate from the foreign corporation itself. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act 1967 | Singapore |
| Banking Act 1970 | Singapore |
| Evidence Act 1893 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Letter of Credit
- Confirmation
- Sanctions Clause
- Complying Presentation
- US Sanctions
- UCP600
- Beneficiary
- Issuing Bank
- Confirming Bank
- Omnia
- OFAC
- Sanctions Screening
15.2 Keywords
- letter of credit
- sanctions
- JPMorgan Chase
- Kuvera Resources
- banking
- trade finance
- Singapore
- contract law
16. Subjects
- Letters of Credit
- International Trade
- Banking
- Sanctions Compliance
17. Areas of Law
- Banking Law
- Letters of Credit
- Sanctions Law
- Contract Law
- Civil Procedure