A practical examination of how an upstream LNG supplier can protect collection of sale proceeds where payment moves through an intermediary, a collection account and a standby letter of credit.
Summary
This edition examines the position of an upstream supplier in a back-to-back liquefied natural gas sale financed by a standby letter of credit. It focuses on the supplier’s central commercial exposure: whether the proceeds, once paid by the end-buyer or a bank, will reach the party that parted with the cargo.
The analysis treats the transaction as an integrated architecture rather than a single sale contract. It considers the relationship between the sale documents, payment instructions, collection account, assignment and trust arrangements, bank acknowledgements, security, dispute-resolution provisions and compliance controls needed to produce one coherent and enforceable position.
Key themes
- Securing sale and credit proceeds where the upstream supplier is not the beneficiary of the standby letter of credit.
- Locking the collection account and controlling amendments, payment directions and misdirected proceeds.
- Perfecting assignments, trusts, notices, acknowledgements, priority and registration before shipment or insolvency risk materialises.
- Aligning governing law, arbitral seat, forum and enforcement strategy across the transaction suite.
- Addressing sovereign immunity, sanctions, bribery, procurement and the legality of the payment route.
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