When invoking the fraud exception to resist payment on a letter of credit (“LC”), banks typically argue that the beneficiary had made false representations in the documents presented to the bank. In the context of commodities trading, banks often rely on representations made by the beneficiary in the letter of indemnity (“LOI”), which is a document issued from a seller of cargo to a buyer (or the buyer’s bank) when the seller is unable to immediately obtain the original shipping documents.
However, to what extent can an issuing bank rely on the representations in a LOI when the LOI is addressed solely to the buyer (i.e. the LC applicant) and not to the bank? This question was recently addressed by the Singapore Court of Appeal in UniCredit Bank AG v Glencore Singapore Pte Ltd [2023] SGCA 41 (“Unicredit v Glencore”). The SGCA dismissed UniCredit’s claim on the basis that the representations which UniCredit sought to rely on were not made to UniCredit, but to the buyer of the cargo.
This article follows from our earlier article on the Singapore High Court’s decision in Unicredit v Glencore [2022] SGHC 263, which can be accessed here: Further Developments in the Law on Letters of Credit
Click here to view the article.
For further information, please contact:
Probin Dass, Partner, Shook Lin & Bok
probin.dass@shooklin.com
