7 October 2025
The letter of indemnity would be a familiar instrument to those involved in the shipping and commodities trade. These are typically used to procure the discharge and delivery of cargo from a vessel when the bills of lading are unavailable for presentation at the discharge port. Through the letter of indemnity, the risks of a claim for misdelivery are transferred from the carrier to the party issuing the letter of indemnity (typically the shipper/charterer), provided the letter of indemnity is properly worded and valid. Such letters of indemnity are often referred to as discharge letters of indemnity.
A less familiar use of the letter of indemnity would be in commodity finance where the letter of indemnity is issued by a beneficiary of a letter of credit (“LOC”) and tendered in lieu of original bills of lading in order to draw on the LOC. Such letters of indemnity, known as payment letters of indemnity (“Payment LOIs”), are not a recent innovation. They are commonplace in the oil trade and were mentioned in the UK Law Commission Report on Rights of Suit in Respect of Carriage of Goods by Sea issued in 1991.
However, it is only in recent years that Payment LOIs have received attention from the Singapore courts. This has come about in cases brought by trade financiers to recover their loans following the insolvencies of major oil traders. The judgment by the Singapore Court of Appeal in The Maersk Katalin [2025] SGCA 42 is the most recent of these cases.
This article discusses the High Court and Court of Appeal decisions in The Maersk Katalin – decisions which go a long way towards restoring faith in the bill of lading and the presentation rule in Singapore.
Allen & Gledhill Partners Corina Song and Daniel Liang represented the successful bank in The Maersk Katalin.
To read the article, please click here.