Letter of Indemnity (Sanctions)

An indemnity given by one party to another to cover losses arising if a trade turns out to breach sanctions. It commonly accompanies a letter of indemnity for delivery without bills of lading, layering sanctions-exposure cover onto the discharge indemnity. The instrument shifts financial risk but cannot cure illegality: a contract to perform a sanctioned act is generally unenforceable, and a P&I club will decline to back an indemnity for a trade that breaches its own sanctions clause and exposes it to designation.