Introduction
In the event of economic sanctions imposed on a country's banking system, often driven by political reasons, such sanctions can act as a shock, causing volatile and destabilizing effects on the financial and banking systems. This disruption can lead to the disturbance of economic income and expenditure structures. Therefore, ensuring the resilience and endurance of banks can enhance their capacity to withstand the negative effects and consequences of these shocks. This article, utilizing a descriptive-analytical method and based on available data (documents, books, articles, previous research, information, and internet sources) through the method of note-taking and library research, seeks to take a step forward by addressing the issue of civil liability of banks in letters of credit. The innovation of this article lies in its focus on the civil liability of Iranian banks in letters of credit and their confrontation with sanctions. In other words, the study aims to critically assess the resilience and strength of the banking system by emphasizing internal capacities and capabilities of Iranian banks, where civil liability in letters of credit is among the significant aspects.
Conceptual Framework
In discussing the conceptual framework, the first step is to define sanctions and classify different types of sanctions, particularly economic sanctions. Then, the nature and function of banking sanctions, which form a significant part of economic sanctions, will be examined.
3.1. Definition of Sanctions and Typology of Economic Sanctions
Sanctions are considered a non-military tool for compelling targeted governments to comply with the actions desired by the sanctioning state or states. In other words, sanctions have two main objectives: 1) to punish (for not adhering to the policies, strategies, or interests of the sanctioning state or states); 2) to force the sanctioned state to comply with their demands. Among the various types of sanctions, economic sanctions are often regarded as the most important because they target the material lifelines of a country and affect other social, political, and cultural levels. Economic sanctions aim to reduce, halt, or threaten the stoppage of normal and natural economic, financial, and commercial relations with the target state by the sanctioning state or states. Hence, economic sanctions can be likened to a weapon in a non-military battlefield that moves diplomacy from the negotiation stage to practical implementation.
Economic and Banking Sanctions Against Iran and Anti-Sanction Strategies
In discussing the nature of the economic sanctions imposed on Iran, it is crucial to note that until 2016, the main sectors of Iran's economy were the primary targets of sanctions. However, after this period, due to increased sensitivity around Iran's nuclear program, the weakening of the country’s financial sector through banking sanctions became a priority. Following new sanctions against the Central Bank and the disconnection of SWIFT services, Iran’s international banking operations faced extensive disruptions. Consequently, the banking system resorted to older methods like informal remittance systems to mitigate the negative impacts of financial sanctions, but many letters of credit in Iranian banks were blocked due to increased restrictions in correspondent banking relations and payment channels, as well as the erosion of trust from foreign sellers.
The Civil Liability of Banks in Letters of Credit in the Context of Sanctions
Since the topic of this research focuses on sanctions, it is essential to examine the exempting causes of contractual liability within this framework. In Iranian law, factors that can mitigate or exempt contractual liability include force majeure, the fault of the injured party, liability due to the actions of a third party, and acts of legal authority, which are not the focus of this article. On the contrary, one might ask: Can sanctions be considered a cause for exemption from liability, or should they be classified under force majeure? There is a significant distinction in the components of force majeure between common law systems and civil law systems. In civil law, unpredictability is a key element of force majeure, whereas in common law, unpredictability is not a requirement, and when a commitment is made, the obligor is expected to anticipate any scenario. Sanctions can also be viewed as a cause of exemption from liability. Sanctions involve the elements of uncontrollability and inevitability, but the contentious issue is their unpredictability, which is not universally agreed upon in both common law and civil law systems. According to common law, every obligor must foresee all possible outcomes, including sanctions, especially in a country like Iran where sanctions have been repeatedly applied. Based on this reasoning, the scope of force majeure should not be expanded. From another perspective, according to Iranian domestic law, which follows civil law traditions, force majeure is often illustrated as an example. Sanctions, being unpredictable and unavoidable, can therefore be classified as force majeure and serve as grounds for exemption from civil liability. If this view is accepted, it raises concerns, such as the possibility that parties could easily evade their obligations in various ways.