Trends in New International Rules

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• Trends in New International Rules
• for Demand Guarantees
• - URDG758
• XXV Latin American Foreign Trade Congress - CLACE
• Guatemala
• June 3-5, 2009
• Gary Collyer Jorge Riva

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Guarantees

• Basic question is subject to local law, URDG,
  ISP or UCP?
• Most common is local law, but a big push for URDG
  to be accepted. URDG 458 is currently being
  revised and will be published as URDG 758.
• ICC Standard texts provided as part of the
  handouts. These are, obviously, subject to URDG
  but could be made subject to local law, ISP or
  UCP depending on the needs of the parties.
• Commentary to ISP98 being updated to reflect that
  these rules cover guarantees.

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Guarantees

• Whilst a guarantee subject to local law is the
  most common form of issuance today, are banks
  really aware of the law that will be applied to
  the guarantee??
• Laws that state that the expiry date of the
  guarantee is the stated expiry plus up to 30
  years!
• Laws that state that the expiry date of the
  guarantee is when the original guarantee is
  returned
• Laws that state that the expiry date of the
  guarantee is the stated expiry date plus a grace
  period of X days/months

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Guarantees

• Banks issuing counter guarantees that are subject
  to UCP, ISP or URDG but the guarantee is subject
  to local law. Is there a mismatch and what if
  there is a conflict?
• Requirement for presentation of commercial and/or
  shipping documents. What level of review is
  expected of the banks?
• Is a standby letter of credit the answer rather
  than a guarantee?
• Benefits of a standby letter of credit over a
  guarantee

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Guarantees

• Highlights of the proposed changes in URDG 758
• Definitions article following the concept in UCP
  600 definitions of advising party (UCP -
  advising bank), beneficiary, business day (UCP
  banking day), complying demand and complying
  presentation (UCP complying presentation),
  presentation and presenter follow those in UCP
  600.
• Interpretations article following the concept in
  UCP 600 branches in different countries and
  irrevocable nature of the guarantee follow the
  interpretation given in UCP in article 7

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Guarantees

• Highlights of the proposed changes in URDG 758
• Interpretations article following the concept in
  UCP 600 from, to, until, till and between and
  before and after plus terms such as first
  class, well known, qualified, competent etc.
  follow those in the UCP
• Guarantor deals with documents and not with
  goods, services or performance to which the
  documents may relate.
• Non-documentary conditions same position as UCP
  and ICC Opinion TA644

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Guarantees

• Highlights of the proposed changes in URDG 758
• Content of the instructions to issue a guarantee
  or amendment must be clear and precise same
  position taken in UCP 500 article 5 but not in
  UCP 600
• Concept of a second advising party same as UCP
  600 second advising bank
• Language of all documents language of the
  guarantee

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Guarantees

• Highlights of the proposed changes in URDG 758
• Advising party satisfying itself as to the
  apparent authenticity of the guarantee or
  amendment
• Amendments follow the concept in article 10 of
  UCP 600 cannot be amended without the agreement
  of all parties, guarantor bound as of the time of
  issuance, acceptance or rejection in advance or
  as evidenced by the claim, partial acceptance not
  allowed and time limits will be disregarded
• Governing law and jurisdiction articles

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Guarantees

• Highlights of the proposed changes in URDG 758
• Place for demand the guarantee must state where
  it is available and the place for presentation
• Mode of delivery of a demand allows for paper
  or electronic (as is the case under ISP98)
• Demand for payment must contain within itself or
  another document an indication of the respect in
  which the applicant is in breach

10
Guarantees

• Highlights of the proposed changes in URDG 758
• Separateness of the demand making a
  non-complying demand does not waive or prejudice
  the right to make another timely demand. Wrongful
  rejection does not constitute rejection of any
  other demand and payment of a non-complying
  demand does not prejudice the right of the
  guarantor to refuse subsequent demands (as is the
  case under ISP98)
• Partial and multiple demands may be made.
  Language similar to that in ISP98

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Guarantees

• Highlights of the proposed changes in URDG 758
• Article covering standard for examination of
  documents including wording that appears in UCP
  600 sub-articles 14 (a) (d), (f), (g), (i) and
  article 3 in relation to visaed, certified and
  legalized documents.
• Five business days to determine if a demand is
  complying. Period not curtailed or reduced by any
  upcoming event similar to UCP 600 sub-article
  14 (b)
• Insertion of language similar to sub-article 15
  (a) of UCP 600

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Guarantees

• Highlights of the proposed changes in URDG 758
• Refusal notices along the lines of UCP 600
  article 16 except for the 4 statuses of the
  documents
• Disclaimer articles and force majeure article
  similar in approach to UCP 600 articles 34-37 (no
  mention of documents lost in transit)
• Extend or pay provisions included similar to
  those in ISP98
• Transfer and assignment of proceeds similar to
  those in ISP98

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Trends in New International Rules for Demand
Guarantees

• Thank You
• Contact Gary Collyer, Collyer Consulting LLP
• Email gary_at_collyerconsulting.com
• www.collyerconsulting.com
• Contact Jorge Riva
• Email jorgeriva_at_rivaalvarezagudo.com.ar
• www.rivaalvarezagudo.com.ar