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Letter Of Credit Facility for Saudi Arabia

Letter Of Credit Facility Template for Saudi Arabia

This document establishes a Letter of Credit facility agreement under Saudi Arabian law, incorporating both international banking practices and Sharia law requirements. It outlines the terms and conditions under which a bank agrees to issue Letters of Credit on behalf of the applicant, including facility limits, fees, security arrangements, and compliance requirements. The agreement ensures adherence to Saudi Arabian Monetary Authority (SAMA) regulations and Islamic finance principles while facilitating international trade transactions. It includes specific provisions for documentation, reporting requirements, and event of default scenarios, all structured within the Saudi Arabian legal framework.

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What is a Letter Of Credit Facility?

A Letter of Credit Facility agreement is essential for businesses engaged in international trade in Saudi Arabia, providing a formal arrangement between a bank and its client for the issuance of Letters of Credit. This document is used when a company requires regular access to trade finance facilities for its import or export operations. It details the maximum facility amount, validity period, types of Letters of Credit permitted, and security requirements. The agreement must comply with Saudi Arabian banking regulations, including SAMA guidelines and Sharia principles, making it unique compared to conventional LC facilities in non-Islamic jurisdictions. It serves as a master agreement under which individual Letters of Credit can be issued, typically valid for one year with potential renewal options.

What sections should be included in a Letter Of Credit Facility?

1. Parties: Details of the bank (issuer) and the applicant (customer) requesting the Letter of Credit facility

2. Background: Context of the facility request and relationship between parties

3. Definitions: Key terms used throughout the facility agreement

4. Facility Details: Specific details of the LC facility including type, amount, and purpose

5. Terms and Conditions: General terms governing the facility usage and operation

6. Islamic Finance Compliance: Declarations and structures ensuring Sharia compliance

7. Fees and Charges: Breakdown of all applicable fees, charges, and commission

8. Security and Collateral: Details of required security or collateral arrangements

9. Representations and Warranties: Customer's confirmations regarding their business and capacity

10. Covenants: Ongoing obligations of the customer during the facility period

11. Events of Default: Circumstances constituting default and consequences

12. Governing Law and Jurisdiction: Confirmation of Saudi law application and dispute resolution

What sections are optional to include in a Letter Of Credit Facility?

1. Multiple Currency Provisions: Required when the facility allows for LCs in multiple currencies

2. Syndication Terms: Included when multiple banks are involved in providing the facility

3. Special Trade Terms: For specific trade arrangements or requirements

4. Insurance Requirements: Detailed insurance requirements for specific types of trade or goods

5. Counter-Indemnity: Additional indemnity provisions for high-risk transactions

6. Third Party Security: When security is provided by parties other than the main applicant

7. Special Purpose Vehicle Provisions: When the facility is structured through an SPV

What schedules should be included in a Letter Of Credit Facility?

1. Facility Limit Schedule: Detailed breakdown of facility limits and sub-limits

2. Fee Schedule: Comprehensive list of all applicable fees and charges

3. Form of LC Application: Standard form for requesting individual LCs under the facility

4. Security Documents: List and copies of all security documents

5. Conditions Precedent: List of documents required before facility activation

6. Authorized Signatories: List of persons authorized to request LCs under the facility

7. Compliance Certificates: Standard forms for periodic compliance reporting

8. Sharia Approval: Copy of Sharia board approval and structure

9. Know Your Customer (KYC) Requirements: List of required KYC documents and forms

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Saudi Arabia

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions













































Clauses



































Relevant Industries

Banking & Financial Services

International Trade

Manufacturing

Import/Export

Retail

Construction

Oil & Gas

Agriculture

Mining

Logistics & Transportation

Wholesale Distribution

Telecommunications

Relevant Teams

Legal

Finance

Treasury

Trade Operations

Risk Management

Compliance

Islamic Banking

Corporate Banking

International Trade

Credit Administration

Relevant Roles

Trade Finance Manager

Chief Financial Officer

Treasury Manager

Import/Export Manager

Finance Director

Legal Counsel

Compliance Officer

Credit Risk Manager

Islamic Banking Specialist

Commercial Director

Banking Relationship Manager

Corporate Banking Officer

Trade Operations Manager

Financial Controller

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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