Meeting the Challenges Covid-19 Poses for Trade Finance Transactions: Amendments and Waivers

Client Alert
June 17, 2020

This alert is the first in a series addressing the issues affecting trade finance documentation and transactions in the current climate.

Issues concerning documentation have been at the forefront of discussions in the trade, export and commodity finance industry during the Covid-19 pandemic. These discussions have underlined the importance of understanding the rights and obligations conferred on the parties to trade finance documents. Standard provisions that are often included without much consideration or negotiation, such as those relating to amendments and waivers, are suddenly in the spotlight.

The impact of the pandemic on the ability to meet contractual obligations might require agreements to be amended, or in counterparties seeking temporary waivers of obligations that would otherwise be breached. This alert looks at the issues that parties to trade documentation should be aware of when trying to find solutions to these commercial problems. We start by considering some general principles relating to amending English law documentation and the granting of waivers, before considering some typical trade finance documentation.

An overview of amendments and waivers

The starting point for understanding how to amend or waive a provision of an agreement should always be to check its terms. A well-drafted document will provide that amendments or waivers are effective only if made in writing and signed by, or consented to by, the relevant parties. In the case of a waiver, it is usually only necessary for the party that is being asked to waive its rights to consent to that waiver. Similarly, an amendments clause may provide that only certain parties to the document need to agree to a particular amendment. In all cases, it is important to ensure that any stated conditions are complied with precisely.


When an amendment is agreed other than in accordance with the stated conditions of the document, it is possible that it will not be effective. In Rock Advertising Limited v MWB Business Exchange Centres Limited[1], the Supreme Court considered whether to uphold the terms of a document providing that amendments could only take effect if made in writing (this type of provision is often referred to as a ‘no oral modification’ clause). In ruling that the contract in question had not been modified orally due to the express restriction on oral modifications, the Supreme Court placed significant weight on the terms of the contract and the need for commercial certainty. Although this limited autonomy of the parties to amend the contract, the Supreme Court reasoned that the restriction had been pre-agreed by the parties themselves and should be upheld.

While this ruling provides clear judicial support for upholding no oral modification clauses (and emphasises the importance of following any agreed formalities for amending a contract), the Supreme Court acknowledged that there may be circumstances in which a party may be prevented from relying on such a provision to claim later that an amendment is ineffective. As such, parties should remain alert to the fact that their communications and conduct could later be challenged as having amounted to an amendment of that contract, even where the requirements of the contract have not been strictly followed.


The term ‘waiver’ encompasses a number of different principles, including express and implied waivers and estoppel. The principles all involve a scenario in which a party gives up, or is precluded from relying on, rights or remedies that would otherwise be available to it under the contract.

For example, when faced with a repudiatory breach of contract by its counterparty, the innocent party should be alert to the risk that any delay in taking action could be construed as an affirmation of the contract, resulting in the loss of its right to terminate the contract as a result of the breach. A well drafted “no waivers” clause (i.e. a provision that any delay in exercising any right under the contract shall not be deemed to be a waiver of that right) may provide some protection, but these clauses are not effective in all circumstances. Parties must therefore proceed carefully when faced with a scenario in which a waiver may be relevant.

Amendments and waivers and trade finance documentation

There is no ‘one size fits all’ approach for trade finance documentation. We consider below some of the common issues that arise for certain types of trade finance documentation.

Facility agreements

A distinction must be drawn between bilateral and syndicated facility agreements. The process of amending the terms of a bilateral facility agreement is more straightforward, as there is only one lender who needs to be involved in the decision-making process. By contrast, a syndicated facility agreement will necessarily contain detailed provisions outlining how decision-making is to be conducted by the lenders. This will usually involve a distinction between those decisions requiring majority lender consent and those decisions requiring all lender consent. This can be complicated further if there is more than one facility granted under the facility agreement, meaning the consent of only certain lenders might be required for decisions relating solely to one facility.

The agent appointed by the lenders under the facility agreement will be the party responsible for determining the level of consent needed for a particular decision, and whether the required threshold has been reached. To facilitate the decision-making process, some agreements will contain a so-called ‘snooze you lose’ clause, providing that a lender who fails to respond to a consent request within the stated timeframe will be disregarded for the purposes of determining whether the relevant consent threshold has been met. One of the challenges for an agent will be setting appropriate timeframes for lender responses if this is not provided for in the facility agreement.

Where there are two or more obligors to a facility agreement, then for commercial reasons it is common to see one obligor acting as the agent for all the obligors. The relevant provisions of the appointment will need to be reviewed to determine whether this role is merely administrative, or whether the nominated obligor has the authority to agree amendments on behalf of the other obligors. Even where such an authority exists, it may still be necessary or advisable to get express agreement from all the relevant obligors to particular amendments or waivers. This will be considered further later in this series of alerts, in the context of security and guarantee arrangements.

Letters of credit

Letters of credit, whether documentary or standby, are usually subject to one of two sets of rules published by the International Chamber of Commerce: Uniform Customs and Practice for Documentary Credits (UCP 600) or International Standby Practices (ISP 98). It is important to understand the relationship between the express terms of a credit and the relevant rules that have been incorporated into it.

Both sets of rules adopt the default position that the agreement of the issuing bank, confirming bank (if any) and the beneficiary are needed for any amendment to a credit be effective. ISP 98 also envisages the possibility of automatic amendments being pre-agreed in the terms of the relevant credit (such as an automatic decrease in the amount of a standby letter of credit on the occurrence of a specified event).

Both UCP 600 and ISP 98 draw a distinction between the time at which an amendment will become binding on an issuing bank, a confirming bank and the beneficiary. For example, under UCP 600, a confirming bank is not required to extend its confirmation to the amended terms of a credit but will be treated as having done so as of the time it advises the amendment (unless it expressly advises the issuing bank and the beneficiary that it is advising the amendment without extending its confirmation). Similarly, under ISP 98, the confirming bank is bound by an amendment when the amendment leaves its control (unless it indicates that it does not confirm the amendment).

Both sets of rules contain provisions as to how waivers should be obtained in the case of a discrepant presentation under the credit. Strict procedures and timeframes must be adhered to, and a failure to act in accordance with these could result in the issuing bank being in the position that it must honour a discrepant presentation with a clear risk that it will not be able to seek reimbursement from its applicant.

Participation agreements

Participation agreements are often drafted as master agreements, which provide a framework for the parties to enter into transaction-specific participations from time to time. As such, the master agreement will need to address the process for amending the master agreement itself, and for amending the terms of individual participation agreements entered into under it.

To give a practical example, the most recently published version of the BAFT master participation agreement for trade transactions (the BAFT MPA) contemplates that two ‘master parties’ will enter into a master participation agreement, and that affiliates of either master party may subsequently enter into bilateral participation agreements without needing to become parties to the master agreement itself. As a result, different procedures will need to be followed in respect of an amendment or waiver of a provision of the master agreement as compared to a specific participation agreement. Further, amendments made by the master parties to the master agreement will not usually be effective to amend the terms of the individual participation agreements, until the specific parties to those participation agreements have expressly consented to the amendment.

A participation agreement will also contain provisions dealing with the ability of the grantor of the participation to agree to amendments to the underlying participated transaction. This will be considered further later in this series, where we will explore how the terms of arrangements commonly used to distribute trade finance risk (such as participation agreements and credit insurance policies) can impact how a lender manages amendments or waivers to the underlying finance documents.


Amendments and waivers can be far from straight forward and can prove to be a trap for the unwary. This is particularly the case where the requested amendment or waiver arises in challenging circumstances such as the current pandemic, where each day can bring new developments that might impact the proposed amendment or waiver.

It is critical for parties to understand not just the impact of a proposed amendment or waiver, but the process by which it can be agreed or rejected. Parties should also understand the risks around delays in responding to requests, particularly time sensitive requests, and the impact their conduct may have on the rights available to them. As always, in the event of any uncertainty, legal advice should be sought.

[1] [2018] UKSC 24

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