Sanctions clauses in contracts or Trade Finance Instruments

Sanctions are imposed by the United Nations, the EU Council or individual countries to achieve political and economic ends. They may prohibit dealings with specific countries, persons or property. Therefore, it is necessary to examine all contractual documents before signing the contract with regards to their compliance with the current sanctions in place.

Many sanctions in place either prohibit the export of listed goods entirely or require at least prior official permits, the same applies, of course, to the related financial transactions. To foresee all relevant consequences regarding sanctions during contract negotiations remains an on-going challenge for Austrian exporters.

In order to avoid civil law liabilities and more importantly criminal law consequences that arise from violating sanctions, ICC Austria offers guidance for its members on how to draft an adequate sanction clause that not only postpones the contract coming into force until the official permits are granted but also provides for a termination of the contractual relation in case new sanctions will arise.

Sanctions may restrict a bank’s ability to perform its role under ICC rules. International banks may be confronted with different sanctions regimes imposed in the multiple jurisdictions in which they operate. As a result, those banks may be subject to conflicting regulatory requirements, and consequently be amenable to formulating internal policies to mitigate the resulting legal risks. Some banks have chosen to control these legal risks by use of sanctions clauses.

Furthermore, Sanctions may restrict a bank’s ability to perform its role under ICC Banking Commission Rules, such as UCP 600 or URDG 758). International banks may be confronted with different sanctions regimes imposed in the multiple jurisdictions in which they operate. As a result, those banks may be subject to conflicting regulatory requirements, and consequently be amenable to formulating internal policies to mitigate the resulting legal risks. Some banks have chosen to control these legal risks by use of sanctions clauses.

Therefore the ICC Banking Commission published a Guidance Paper On The Use Of Sanctions Clauses In Trade Finance-Related Instruments Subject To ICC Rules: download pdf

In case you have further questions please contact us:

ICC Austria - International Chamber of Commerce

Wiedner Hauptstrasse 57, 1040 Wien
Tel: +43-1-504 83 00
E-Mail: icc(at)icc-austria.org