By trainee Humzah Irfan at Sullivan in London
At Sullivan's monthly seminar in December, Mark Norris, partner at Sullivan’s London office, reflected on a roller-coaster year in 2020, breaking down key trade finance related events and picking up on common themes with a view on how issues from 2020 might feed into 2021.
Key points from Mark’s presentation included:
- Sanctions – President Trump’s use of the US sanctions regime has been keen to say the least, with US secondary sanctions having a wide, extrajudicial impact on financial markets. This extrajudicial reach was explored by the Court of Appeal in Lamesa Investment Ltd v Cynergy Bank Ltd, which considered whether the failure to tender payment under an English law facility agreement was excusable by virtue of US secondary sanctions. The UK’s Global Human Rights Sanctions Regulations 2020 will likely result in more onerous due diligence processes in the future. Watch this space.
- Financial crime – Following the acquittal of three former Barclays executives of criminal fraud charges brought by the Serious Fraud Office (SFO) in February 2020, there will likely be a push towards the “failure to prevent” bribery offence under section 7 of the Bribery Act 2010, which could be extended to cover human rights abuses. Adequate policies and procedures for the prevention of bribery will be a must-have for commercial organisations.
- Sustainable trade and export finance – As trade is a priority of the newly formed Foreign, Commonwealth and Development Office (FCDO), we expect to see more innovative financing solutions coming from it. This includes the Developing Markets Infrastructure Programme, announced at the beginning of 2020 to provide viability gap funding for programmes that are economically and socially justified but not financially viable. In addition, UK Export Finance has allocated £2 billion from its direct lending facility to clean growth projects for renewable energy and conservation efforts.
- Restructuring loans in the light of COVID – In April 2020, the IMF and World Bank launched the Debt Service Suspension Initiative, designed to assist countries in need of financial support following the pandemic. Countries that have signed up now enjoy a better credit profile and can borrow more cheaply. The initiative has been extended through to June 2021.
Please click here for a link to a video of the seminar to find out more about challenges in the trade finance.
For further information on the challenges to trade and commodity finance please don’t hesitate to get in touch with Mark Norris or your usual contact at the firm.