Key Insights on Letters of Credit and Practical Steps for Financing Banks in Singapore

Letters of credit are common financing instruments that are routinely issued in asset sale transactions and trade finance transactions. They are useful tools that can be deployed throughout the life of a transaction to achieve various purposes, including to provide both interim comfort and leverage in pre-dispute situations. In the wake of Crédit Agricole Corporate and Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd [2023] SGCA(I) 7, both issuers and beneficiaries alike should take time to understand when the payment obligation arises and whether there are any conditions to the contract's effectiveness.

Our partner Pierre Dzakpasu and associate Anne Jesudason discuss the recent decision in this Chambers Expert Focus piece, which teases out the important principles relevant to lenders providing asset or trade financing through letters of credit and sets out how issuing banks seeking to rely on letters of indemnity should protect their credit positions. This article was first published on Chambers Expert Focus on 15 October 2024; for further in-depth analysis please visit their website.