Kuvera Resources v JPMorgan Chase: Sanctions Clause & Letters of Credit Dispute

In Kuvera Resources Pte Ltd v JPMorgan Chase Bank, N.A., the Singapore Court of Appeal addressed a dispute over a sanctions clause in letters of credit. Kuvera Resources, the appellant, sued JPMorgan Chase for refusing to pay under two confirmed letters of credit, citing a sanctions clause due to concerns about the vessel involved. The Court of Appeal allowed Kuvera's appeal, finding that JPMorgan had not sufficiently proved the vessel was subject to applicable restrictions under the sanctions clause and awarded damages to Kuvera.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal Allowed

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal case involving Kuvera Resources and JPMorgan Chase concerning a sanctions clause in letters of credit and its impact on payment obligations.

1.7 Decision Date

27 September 2023

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Kuvera Resources Pte Ltd	Appellant, Plaintiff	Corporation	Appeal Allowed in Part	Partial	Mahmood Gaznavi s/o Bashir Muhammad of Mahmood Gaznavi Chambers LLC Rezza Gaznavi of Mahmood Gaznavi Chambers LLC
JPMorgan Chase Bank, N.A.	Respondent, Defendant	Corporation	Appeal Dismissed	Lost	Chia Voon Jiet of Drew & Napier LLC Cavinder Bull SC of Drew & Napier LLC Charlene Wong Su-Yi of Drew & Napier LLC Grace Lim Rui Si of Drew & Napier LLC

3. Judges

Judge Name	Title	Delivered Judgment
Sundaresh Menon	Chief Justice	No
Judith Prakash	Justice of the Court of Appeal	No
Steven Chong	Justice of the Court of Appeal	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
Cavinder Bull SC	Drew & Napier LLC
Charlene Wong Su-Yi	Drew & Napier LLC
Grace Lim Rui Si	Drew & Napier LLC

4. Facts

Kuvera, a Singapore-incorporated company, traded coal sourced from Indonesia.
JPMorgan, a US-incorporated bank, confirmed two letters of credit (LCs) issued by Bank Alfalah Limited in Dubai.
The LCs were to facilitate the sale of coal from PT Borneo Guna Energi (Seller) to Oilboy DMCC (Buyer) in the UAE.
JPMorgan's confirmations contained a Sanctions Clause, allowing it to deny payment if the transaction involved a sanctioned entity or vessel.
Kuvera presented documents under the LCs, but JPMorgan refused payment, citing concerns that the vessel (Omnia) was linked to Syrian interests.
JPMorgan relied on its internal Master List, which included the Omnia, and consulted with OFAC.
Kuvera then secured partial payment from the Buyer through a Memorandum of Understanding (MOU).

5. Formal Citations

Kuvera Resources Pte Ltd v JPMorgan Chase Bank, N.A., Civil Appeal No 1 of 2023, [2023] SGCA 28

6. Timeline

Date	Event
2019-07-23	PT Borneo Guna Energi contracted to sell coal to Oilboy DMCC.
2019-08-08	First letter of credit (LC1) was dated.
2019-09-13	JPMorgan confirmed LC1.
2019-09-23	Second letter of credit (LC2) was dated.
2019-09-27	JPMorgan confirmed LC2.
2019-11-28	Kuvera made a presentation of documents to JPMorgan under the LCs.
2019-12-03	JPMorgan informed the Presenting Bank that it could not accommodate Kuvera’s presentation.
2019-12-15	LC1 expired.
2019-12-16	LC2 expired.
2020-01-17	Kuvera commenced Suit 57 against JPMorgan.
2020-01-23	Memorandum of Understanding (MOU) was agreed between Kuvera, the Issuing Bank and the Buyer.
2023-08-01	Judgment reserved.
2023-09-28	Judgment delivered.

7. Legal Issues

Interpretation of Sanctions Clause
- Outcome: The court held that the sanctions clause should be construed objectively and that JPMorgan had not discharged its burden of proof in order to rely on the Sanctions Clause.
- Category: Substantive
- Sub-Issues:
  - Objective interpretation of contractual terms
  - Burden of proof for invoking sanctions clause
Validity and Enforceability of Sanctions Clause
- Outcome: The court provisionally viewed that the Sanctions Clause would most likely be incompatible with the commercial purpose of the Confirmations due to the significant unpredictability such an interpretation would introduce into the Confirmations.
- Category: Substantive
- Sub-Issues:
  - Consistency with commercial purpose of confirmation
  - Discretion afforded by the clause
Beneficial Ownership of Vessel
- Outcome: The court found that JPMorgan had not displaced the prima facie inference of ownership arising from the registered (non-Syrian) owner of the Omnia in 2019.
- Category: Substantive
- Sub-Issues:
  - Evidential burden to prove Syrian ownership
  - Relevance of red flags

8. Remedies Sought

Monetary Damages

9. Cause of Actions

Breach of Contract

10. Practice Areas

Commercial Litigation
Banking Litigation
Trade Finance
Letters of Credit

11. Industries

Banking
Shipping
Commodities Trading

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
United City Merchants (Investments) Ltd v Royal Bank of Canada	House of Lords	Yes	[1983] 1 AC 168	England and Wales	Cited to establish that a documentary credit transaction is made up of multiple transactions/relationships and the contracts operate independently of each other.
Hamzeh Malas & Sons v British Imex Industries Ltd	Queen's Bench Division	Yes	[1958] 2 QB 127	England and Wales	Cited for the principle of autonomy, under which the bank’s obligation to pay the beneficiary is independent of the underlying contract between the seller and the buyer.
Beam Technology (Mfg) Pte Ltd v Standard Chartered Bank	Singapore Court of Appeal	Yes	[2003] 1 SLR(R) 597	Singapore	Cited for the principle of autonomy, under which the bank’s obligation to pay the beneficiary is independent of the underlying contract between the seller and the buyer.
Brody, White and Co Inc v Chemet Handel Trading (S) Pte Ltd	Singapore Court of Appeal	Yes	[1992] 3 SLR(R) 146	Singapore	Cited to support the principle that an irrevocable credit constitutes an independent contract between the issuing banker and the beneficiary.
Crédit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another suit	Singapore Court of Appeal	Yes	[2022] 4 SLR 1	Singapore	Cited for the principle that absent a finding of fraud, there would be no basis for enjoining the issuing bank from paying under the letter of credit.
Chartered Electronics Industries Pte Ltd v Development Bank of Singapore	Singapore High Court	Yes	[1992] 2 SLR(R) 20	Singapore	Cited for the vital role letters of credit play in international commerce and commercial transactions.
Grains and Industrial Products Trading Pte Ltd v Bank of India and another	Singapore Court of Appeal	Yes	[2016] 3 SLR 1308	Singapore	Cited for the vital role letters of credit play in international commerce and commercial transactions.
Bank of Baroda v Vysya Bank	England and Wales High Court (Commercial Court)	Yes	[1994] 2 Lloyd’s Rep 87	England and Wales	Cited to support that it is only the confirming bank which becomes liable in contract to the seller/beneficiary under the confirmation specifically.
Dickson Trading (S) Pte Ltd v Transmarco Ltd	Singapore High Court	Yes	[1987] SLR(R) 674	Singapore	Cited to explain how JPMorgan’s obligations under the Confirmations were brought into existence upon the fulfilment of a specific condition (ie, Kuvera’s complying presentation).
CIFG Special Assets Capital I Ltd (formerly known as Diamond Kendall Ltd) v Ong Puay Koon and others and another appeal	Singapore Court of Appeal	Yes	[2018] 1 SLR 170	Singapore	Cited for the principles of contractual interpretation.
Lucky Realty Co Pte Ltd v HSBC Trustee (Singapore) Ltd	Singapore Court of Appeal	Yes	[2016] 1 SLR 1069	Singapore	Cited for the principles of contractual interpretation.
Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal	Singapore Court of Appeal	Yes	[2013] 4 SLR 193	Singapore	Cited for the principles of contractual interpretation.
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd	Singapore Court of Appeal	Yes	[2008] 3 SLR(R) 1029	Singapore	Cited for the principles of contractual interpretation.
Yap Son On v Ding Pei Zhen	Singapore High Court	Yes	[2017] 1 SLR 219	Singapore	Cited for the principles of contractual interpretation.
Mamancochet Mining Ltd v Aegis Managing Agency Ltd and others	England and Wales High Court (Commercial Court)	Yes	[2018] EWHC 2643 (Comm)	England and Wales	The English High Court considered a sanctions clause in a marine cargo insurance policy.
M/V Pacific Pearl Co Limited v Osios David Shipping Inc	England and Wales High Court (Commercial Court)	Yes	[2021] EWHC 2808 (Comm)	England and Wales	The issue before the English High Court was whether a letter of undertaking from an owner’s P&I Club which contained a sanctions clause constituted security in a reasonably satisfactory form.
Banco San Juan Internacional Inc v Petróleos de Venezuela SA	England and Wales High Court (Commercial Court)	Yes	[2020] EWHC 2937 (Comm)	England and Wales	The English High Court considered the proper construction of a sanctions clause, ie, whether the clause suspended the borrower’s repayment obligation.
The “Bolbina”	Singapore High Court	Yes	[1993] 3 SLR(R) 894	Singapore	Cited regarding challenging the validity of an in rem writ by raising a change of ownership prior to the issuance of the writ in order to defeat the in rem claim.
The “Ocean Winner” and other matters	Singapore High Court	Yes	[2021] 4 SLR 526	Singapore	Cited regarding challenging the validity of an in rem writ by raising a change of ownership prior to the issuance of the writ in order to defeat the in rem claim.
The “Min Rui”	Singapore High Court	Yes	[2016] 5 SLR 667	Singapore	The issue before the court was whether the defendant was the beneficial owner of a vessel, the Min Rui, at the time when the plaintiffs issued the in rem writ.
Kuvera Resources Pte Ltd v JPMorgan Chase Bank, NA	Singapore High Court	Yes	[2022] SGHC 213	Singapore	The decision below, which was appealed in this case.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Syrian Sanctions Regulations 31 CFR (US) § 542 (2014)	United States of America
High Court (Admiralty Jurisdiction) Act 1961 (2020 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Letters of Credit
Sanctions Clause
Confirming Bank
OFAC List
Master List
Complying Presentation
Beneficial Ownership
UCP600
Syrian Sanctions Regulations
Omnia (Vessel)

15.2 Keywords

letters of credit
sanctions clause
JPMorgan
Kuvera Resources
Singapore Court of Appeal
trade finance
banking law

17. Areas of Law

Area Name	Relevance Score
Letters of Credit	85
Letter of Credit Law	80
Banking Law	75
Contract Law	70
Sanctions Law	65
Breach of Contract	60
Damages	50
Trade Finance	40

16. Subjects

Banking
International Trade
Contract Law
Economic Sanctions