Another topic previously covered by one of our blogs back in November 2015.
Recently, the question has been raised in certain quarters as to whether or not sanctions-related wording should be prohibited by UCP and within documentary credits.
In this instance, it is worthwhile referring to the ICC Guidance Paper on the use of Sanction Clauses released in 2014 (ICC Banking Commission Document No. 470/1238).
Section 1.2 states that the need for sanctions is a political matter outside the realm of the ICC and that the enforceability of sanctions is a question to be decided by courts, national regulators or administrative agencies; it is not an issue that can be addressed by rules of banking practice such as ICC rules. Accordingly, ICC rules do not address how sanctions should be interpreted or their impact on the trade finance-related instrument in which they are incorporated.
As further stated in this Guidance Paper, it is recommended that banks should refrain from issuing trade finance-related instruments that include sanctions clauses that purport to impose restrictions beyond, or conflict with, the applicable statutory or regulatory requirements.
Another issue that has been raised is the possibility for sanctions to be included within the force majeure article of UCP (currently UCP 600 article 36). However, it is worth bearing in mind that, regardless of inclusion or not, applicable law will always have predominance over UCP.
The fact is that sanctions have no relationship with force majeure events. They are not acts of god but regulatory imposed conditions (similar to injunctions) and would have to be dealt with separately from force majeure.