KUVERA RESOURCES PTE. LTD. v JPMORGAN CHASE BANK, N.A.

Facts

Kuvera Resources Pte Ltd, a Singapore coal trader, appealed in Civil Appeal No 1 of 2023 against the dismissal of its claim in Suit No 57 of 2020 against JPMorgan Chase Bank, N.A. Kuvera was the beneficiary of two letters of credit issued by a Dubai bank for a 2019 sale of Indonesian coal to a UAE buyer; JPMorgan advised and confirmed both. Every confirmation contained a sanctions clause stating that JPMorgan must comply with US sanctions laws and would not be liable for failing to pay where documents involved any country, entity, vessel or individual listed in or otherwise subject to any applicable restriction.

Kuvera made a complying presentation for US$2,422,111.07 in November 2019. JPMorgan's screening found the carrying vessel, the Omnia, on its internal, non-public Master List; it had been added in 2015 as the Lady Mona when linked to a Syrian group. JPMorgan refused payment and returned the documents. Kuvera sued, then negotiated a memorandum of understanding under which the buyer paid it AED 8,096,000 for the documents, and narrowed its claim to the balance of US$218,068.33 plus S$11,429.32 in travel expenses. During the suit, JPMorgan wrote to the US Office of Foreign Assets Control (OFAC), which replied that paying would have been an apparent violation. The trial judge held that JPMorgan could rely on the clause by showing OFAC would have found a breach of the Syrian sanctions regulations, and alternatively that red flags proved Syrian ownership.

Issues

1. Whether the sanctions clause was validly part of JPMorgan's confirmations
2. Whether the clause applied on a risk-based view of what OFAC would decide or only on objective proof
3. Whether JPMorgan proved that the Omnia was under Syrian beneficial ownership
4. What damages Kuvera could recover

Holding

The Court of Appeal (Sundaresh Menon CJ, Judith Prakash JCA and Steven Chong JCA) allowed the appeal in part, awarding Kuvera damages of US$98,786.87 and S$11,429.32, made up of US$8,893.96 in confirmation charges, the US$89,892.91 settlement discount and the S$11,429.32 in travel expenses. Parties were invited to make submissions on costs given Kuvera's partial success.

Reasoning

The court agreed that a documentary credit comprises autonomous contracts and that confirmations are irrevocable unilateral contracts, so a confirming bank could include the clause without separate offer or acceptance.

It held, however, that whether a vessel is otherwise subject to any applicable restriction must be determined objectively, on a balance of probabilities, without asking what a third party such as OFAC might decide. JPMorgan's approach reflected risk management: its witness accepted it preferred false positives, its internal list needed only some nexus, and it sought OFAC's support after the event on information it admitted was inconclusive. Neither OFAC's reply nor the expert evidence showed more than a risk.

The Syrian link in 2015 was established, but JPMorgan bore the burden of proving it continued after the 2019 renaming. Absent ownership information on a Barbados registry did not show concealment, the 2019 owner and manager were Barbados and UAE entities, and a 2017 report linking a Cypriot national to the manager did not prove his interest in 2019. JPMorgan therefore could not rely on the clause. Provisionally, the court said the clause as JPMorgan read it would likely be incompatible with the commercial purpose of a confirmation.

On damages, Kuvera could not recover US$73,000 for quality issues or US$50,344.20 for demurrage, which it would have owed the buyer anyway. It recovered the confirmation charges, the discount given from a position of vulnerability, and travel costs incurred only because of the non-payment.

From the judgment