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ARTICLE · 10 MARCH 2014

Letters Of Credit

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Letters of credit and documentary credits continue to be a mainstay of international trade transactions.

United KingdomFinance and Banking
Oliver Abel Smith
Oliver Abel Smith

Letters of credit and documentary credits continue to be a mainstay of international trade transactions.  Letters of credit are also often used in financing transactions, either as a form of collateral or issued by a bank in connection with an acquisition or another transaction being financed.  A recent case, Taurus Petroleum Limited v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq [2013] EWHC 3494 (Comm) relates to letters of credit in a trade transaction and serves as a useful reminder of some of the key issues to be borne in mind.

It should be noted that the case is subject to an appeal to the Court of Appeal.

Background

Taurus had been awarded $8 million under an arbitral award against the State Oil Marketing Company of the Ministry of Oil ("SOMO"), the Iraqi state entity with sole authority for the export and import of oil and gas products from and to Iraq.  The case related to two letters of credit issued by Crédit Agricole in respect

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