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
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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@collyerconsulting.com
www.collyerconsulting.com
Contact : Jorge Riva
Email : jorgeriva@rivaalvarezagudo.com.ar
www.rivaalvarezagudo.com.ar
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