Reed Smith In-depth

In a landmark judgment running to 105 pages, the Singapore International Commercial Court (SICC) determined a number of important and interesting issues relating to (i) the autonomy of letters of credit, (ii) the so-called ‘fraud exception’, (iii) ‘round-tripping’ commodity transactions, (iv) the transfer of title thereunder and (v) payment letters of indemnity.

The decision and this summary may be of interest or guidance to commodities market participants and financiers dealing with issues that have arisen in cases following the relatively recent failures of a number of commodities trading firms, as well as courts and tribunals tasked with determining such issues.


This is one of the most recent in a series of cases decided in the Singapore courts following the bankruptcy of Zenrock Commodities Pte Ltd (Zenrock). The case examined, and the court decided, several complex issues relating to the financing and trading of commodities. The decision may be of assistance to commodities market participants, including banks, in connection with transactions involving:

  1. Structured commodity trading, in particular, so-called transit, ‘circular’ or ‘round-tripping’ transactions;  
  2. Documentary letters of credit;
  3. Payment letters of indemnity (LOIs);
  4. The transfer of title under contracts for the sale of goods; and
  5. Fraud in the context of letters of credit.

Crédit Agricole Corporate & Investment Bank (CACIB) commenced proceedings against PPT Energy Trading Co Ltd (PPT), and the case was referred to the SICC by the High Court. The SICC was tasked with determining claims arising out of trading activities conducted by Zenrock, with Zenrock having been placed under judicial management in May 2020 amidst allegations by creditors that Zenrock had engaged in a series of dishonest transactions designed to defraud its financiers.

What happened between the parties in the case?

PPT was the beneficiary of a letter of credit (LC) issued by CACIB with Zenrock being the applicant of the LC and purchaser of a crude oil cargo under a sale contract with PPT (the PPT Sale Contract).

The crude oil cargo was subject to what the court described as ‘round-tripping’ transactions. These transactions comprised the following sales and purchases:

  1. A crude oil cargo was sold by Total Oil Trading SA (TOTSA) to SOCAR Trading SA (SOCAR).
  2. SOCAR sold the cargo to Zenrock.
  3. Zenrock sold the cargo to Shandong Energy International (Singapore) Pte Ltd (Shandong).
  4. Shandong, in turn, sold the cargo to PPT.
  5. PPT then sold the same cargo to Zenrock.
  6. Finally, Zenrock sold the cargo back to TOTSA, thereby completing the series of so-called ‘round-tripping’ transactions.

Crédit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another suit graphic