The Court of Appeal of Singapore has ruled in favor of Kuvera Resources in its lawsuit against JPMorgan, marking the first case in Singapore where the validity of a sanctions clause in a contract was examined. Kuvera Resources, a Singapore-based coal trader, had appealed a 2022 decision in which the High Court sided with JPMorgan after the bank refused to honor two letters of credit (LCs), citing potential violations of U.S. sanctions on Syria.

JPMorgan had refused to pay Kuvera, claiming the vessel used to transport the coal might have been Syrian-owned, which could breach U.S. sanctions regulations. The bank had included a sanctions clause in its LC confirmations, stating that it would not be liable for payment if doing so would violate U.S. sanctions. This clause was initially upheld as valid and enforceable by the High Court.

However, the Court of Appeal, while agreeing on the clause’s validity, ruled that JPMorgan had not provided sufficient evidence proving the vessel’s Syrian ownership. Justice Steven Chong emphasized that the bank relied on “red flags” during due diligence that pointed to possible Syrian ownership but lacked concrete proof to justify withholding payment under the sanctions clause.

The court partially overturned the High Court’s ruling and awarded Kuvera Resources damages of US$98,786.87, alongside additional compensation for travel expenses amounting to S$11,429.32. Although Kuvera had already received US$2.2 million from the buyer, the ruling addressed the remaining claims, marking a significant decision in the application of sanctions clauses in international trade.