Everything you need to know about Bank Guarantees. We aim to answer the questions “What is a Bank Guarantee?” and “How can a Bank Guarantee Facility be Monetised?” Secure a Line of Credit for Capital Project Finance. Providing accurate information helping you to achieve the Project Funding you require.
Welcome to bankguaranteefacts.com. This site has been specifically written for those companies who have been refused credit facilities. We will show you how to monetise Bank Guarantee Facilities for capital project finance.
Many of you will be new to the market. We can guide you by providing a full range of bank guarantee information. Once you have read the content you will fully understand how the process works. More importantly, you will know how to obtain credit lines.
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We have a range of useful documents and information to assist you with gaining finance for your projector company.
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Welcome to the world of Bank Guarantee Facilities. We will delve into the history books and look at the earliest banks and their systems, before moving into the modern age and the role that bank guarantees play in today’s markets.
A Bank Guarantee Facility is a financial instrument issued by a bank upon receipt of instructions from one of their clients, often referred to as the applicant. It is a legally binding obligation by the bank that ISSUES the Bank Guarantee to pay the beneficiary of that Bank Guarantee should the applicant fail in their fiduciary duty and not honor any financial or contractual obligations.
Bank guarantee Facility are issued for many different purposes and this will be dealt with later. There are however two types of bank guarantee, a Performance Guarantee, and a Financial Guarantee.
Financial Guarantee is a legally binding promise to pay by the issuing bank should the applicant renege on payment(s) to the beneficiary
Performance Guarantee is a legally binding promise to pay by the issuing bank to the beneficiary if it is proven the applicant is guilty of non-performance on a contract.
We provide free information and facts about Bank Guarantees and the mystique that often surrounds them. Feel free to contact us to ask us any questions, we will respond with current and correct impartial, independent advice.
We can introduce you to companies that specialise in this market and who can also offer other facilities that may meet your specific financial requirements and help with your project funding.
We can to provide various documents that you may find useful. We encourage the use of properly worded legal documents as this goes a long way towards eliminating fraud. For this reason, we are happy to share various documents with our visitors. These are free to view and download here. You are welcome to use them for either private or commercial purposes.
We aim to provide various documents that you may find useful. We aim to eliminate fraud within this financial sector and encourage the use of properly worded legal documents.
For this reason, we are happy to share various documents with our visitors. These are free to view and download. You are welcome to use them for either private or commercial purposes.
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The first banks or prototype banks were founded around 2000 BC in such places as India, Sumeria, and Assyria. These banks were actually world merchants who were giving grain loans to traders and farmers who were transporting goods between various cities. There are many other examples of very early banking such as ancient Greece, the Roman Empire, and ancient China.
The word “Bank” comes from the ancient Roman practice of transacting business from long benches that were called “Bancu”, the word evolved into “Banco” and then “Bank” in the English language. These Bancu would usually be placed in a courtyard marketplace called a “Marcella”.
The world’s first bank guarantee was formalised during the Roman Empire. A law during this time called “receptum argentarii” obliged a bank to pay its client’s debts under guarantee. All bank guarantees since Roman times stem from this law and practice
Historians credit the first banking system to medieval and Renaissance Italy. Three cities that were particularly involved were Genoa, Florence, and Venice as they were at the time considered to be very affluent. The most famous bank was the Medici Bank established by their namesake Giovanni Medici in 1397, and the oldest bank that was still operating until 2019, was Banco di Napoli.
Banco di Napoli was headquartered in Naples and opened in 1463 but was absorbed into Intesa Sanpaolo S.p.A in 2019. However, similar banks were founded in Napoli in the late 1500’s and mid-1600’s. Seven of these banks, such as Banco del Popolo and Banco del Salvatore, operated independently until 1794 when a Decree by Ferdinand 1V of Bourbon stipulated they would all merge into one entity the Banco Nazionale di Napoli.
Further banking institutions opened up in the 15thand 16th centuries and spread throughout the Roman Empire and into northern Europe. Finally, in the 17th-century banking in London and other cities in northern Europe started to take shape.
Banking in the United Kingdom was started by goldsmiths who accumulated large stocks of gold. Many of the goldsmiths were associated with the monarchy but when Charles 1st seized the Roya Mint, (containing gold), the goldsmiths started trading with the aristocracy and learned gentry.
As the Royal Mint was now considered unsafe the goldsmiths became famous for and known as “Keepers of Running Cash”, and accordingly accepted gold in exchange for their receipts. The goldsmiths also started lending money on behalf of the depositor. The goldsmith would accept loans and would issue promissory notes in return. Such notes eventually evolved into banknotes and are seen as the beginning of what we know as banking practice. Finally, in Nottingham circa 1650, the first provincial bank was opened by a cloth merchant named Thomas Smith.
Banks diversified their services to offering security investments, clearing facilities, and overdraft protection. We also saw in the second half of the 18th century the first introduction of the Circular Letter of Credit. This type of letter of credit was usually issued to well-to-do individuals or businessmen as it was used to draw funds from correspondent banks. It was deemed much safer than carrying large quantities of cash.
The 18th century saw the rise of the Merchant Banks whose name, (Merchant), was derived from medieval merchant cloth traders. Originally these banks were considered to be the first modern banks whose business was the financing or facilitating of the trade and production of commodities.
Two very famous names first appeared in the latter half of the 18thcentury, both immigrant families and were known as Rothchild and Baring. Both these banks, (referred latterly as Investment Banks), went on to become very influential in banking circles in the 20thcentury. Sadly, Barings Bank was bought by a Dutch bank for £1 following the Nick Lesson scandal in February 1995.
The 19th century saw the rise of the Joint Stock Bank. This is where a publicly-traded company issues shares to investors that can be bought and sold on approved exchanges and at the same time the owners of the company can split profits and liabilities. Early on in the 19th century saw the Bristol Old Bank go from a private bank to a joint-stock bank.
New joint-stock banks were formed such as the Lancaster Banking Company, Manchester and Liverpool District Banking Company, and the National Provincial Bank. The National Provincial Bank was considered to be the first truly national bank with 20 branches throughout Wales and England.
The banks suffered early on with the depression between the two world wars, but by the time the 1950’s arrived the banks were in much better shape having offered new savings schemes to attract the less wealthy.
Banks began to expand at a rapid pace helped with the arrival of Information Technology or computing, deregulation, and the arrival of the ATM, (Automatic Teller Machine). The first of these appeared on 27th June 1967 at the Barclays Bank Enfield Town Branch. The first person to use an ATM was a famous TV actor of the time Reg Varney.
During the 1970’s and 1980’s, the UK banking system went through some significant structural changes. Up till this time, different institutions existed to fulfill the demands of different segments of the financial markets. The market was broken up into housing finance, (building societies were the main source of housing finance), life assurance, fund management, securities trading, investment banking, and commercial and merchant banking.
There were clear differences between these institutions such as investments banks who catered to domestic as well as international clientele with services such as investment advice and the issuance of equity. Building societies stood out as the main source of housing finance, clearing banks, (referred to as the big 4), provided cash transfers, clearing, and commercial banking facilities to a largely domestic audience.
International banks, such as the then Standard and Chartered Banking Group, (now Standard Chartered Bank, PLC), utilised their London office as a head office mainly as an administrative center, whilst making the bulk of their profits in the middle east, the sub-continent, (India, Pakistan and Sri Lanka, now all part of Asia), the far east, southeast Asia and the continent of Africa. The same applied to other international banks such as HSBC and Grindlays Bank who also featured in countries across the globe.
Such demarcations were controlled and kept in place by differing types of regulations such as exchange control, credit ceilings, and lending constraints, which basically restricted competition and kept the various institutions within their own sphere of business.
Between the 1970’s and 1980’s there was a major increase in competition and this can be put down to five major factors. Many banks that were associated with the Eurodollar market entered the British banking system as the City of London featured prominently in this market. Thus, the major clearing banks were forced into expanding their business activities into markets such as unsecured lending and corporate lending.
Secondly, in 1979 the removal of exchange controls increased global competition. Whereas before 1979 UK sterling pound activities were ring-fenced from global competition whose branches were already in the United Kingdom. Now such banks as Chase Manhattan and Citibank were free to compete and expand their business into both corporate and wholesale banking.
Thirdly, in the early 1980’s the domestic mortgage market that had been dominated by building societies were now facing stiff competition from the retail banks. This competition led the building societies to abandon their lending cartel, which had effectively restricted prices.
Fourthly, again in the 1980’s bank’s faced increasing competition from non-bank providers of household credit finance and other institutions offering mediums of savings. They faced further competition in the external provision of finance to companies from capital markets.
Fifth and last is the deregulation in 1986 of the securities markets, otherwise referred to as the “Big Bang”, which brought the banking system and the securities industry much closer together.
The upshot was that many retail and overseas banks became large players in the securities market usually by purchasing or acquiring stakes in investment banks and securities houses.
There was therefore much more competition across the board with building societies competing for a slice of the unsecured lending markets and raising funds from the wholesale market. Retail banks were now actively competing in the securities markets and some of the larger retailers obtained banking licenses to offer traditional banking services.
A derivative is a contract between two parties, (sometimes more), where the value is based upon a pre-agreed financial asset. Such assets can be stocks, currencies, commodities, bonds, market indexes, and interest rates. There are four major types of derivatives, being swaps, forwards, options, and futures.
In the 1970’s and into the 1980’s and 1990’s derivative trading became highly profitable for many financial institutions in the United Kingdom. These financial products were initially used as risk reduction for financial managers especially during bond and stock market volatility and swings in interest rates.
From the mid 1980’s derivative trading expanded exponentially, not only in the United Kingdom but across the major financial centers of the world. A major part of the growth was from 1986 to 1991 which coincided with the Big Bang. However, derivative trading continued to increase throughout the 1990’s.
There were massive changes in the banking system in the 1970’s and 1980’s leading to larger baking institutions and financial conglomerates, and the demand for bigger profits, gave rise to more risk culminating in a catastrophic global financial collapse in the 21st century.
In the early part of the 21st century, banking continued to grow, with investment banks producing mammoth profits, traders’ bonuses reaching all-time highs, and risk-taking reaching an unprecedented level. However, the one event that will remain in everyone’s memory is the Global Financial Crisis of 2008, marked by the collapse and closing of the investment bank Lehman Brothers.
The global financial crisis refers to the massive stress experienced by global financial markets between June 2007 and the early months of 2009. It all started in the United States of America, where a free fall in the housing market precipitated a financial crisis that spread from the USA to all parts of the world.
In the first part of September 2008, GBP90 billion was wiped off the value of some of Britain’s largest companies, and one of the world’s largest investment banks Lehman Brothers went bankrupt. Only government bail-outs with tax payer’s money stopped many banks and insurance companies from going to the wall thus preventing a complete meltdown of the global financial markets. However, the cost to global economic growth was in excess of USD2 trillion.
How did it all start? Leading up to 2007, there was a huge housing bubble and very easy credit. Banks in the United States were lending into the mortgage market include the subprime market. The subprime market is where loans are granted to those people who require housing but do not have the credit standing to get a mortgage, and with houses prices going up, banks assumed (wrongly), that the borrowers if they defaulted, would not default at the same time.
The next step for the 2008 crisis is the Mortgage-Backed Security, (MBS) which is a CDO or collateralised debt obligation. Essentially an MBS is the securitisation of mortgages, especially subprime, in other words where mortgages are packaged together to produce a debt instrument that can be sold to other banks to raise further funding to sell more mortgages. Even European banks were obtaining wholesale funding from the United States and were lending these funds back to US residents.
Most of the MBS were packaged up with subprime mortgages. They were offering larger returns due to the high-interest rate being paid by the subprime borrowers. To add to the impending crisis, the rating agencies gave these instruments excellent ratings. Thus, these assets were used as leverage to control many trillions of dollars which were of course many many times the face value of the underlying assets. It is alleged that some banks were leveraged to the tune of 50.
In 2007 the overall value of subprime mortgages had reached USD1.7 trillion. The US economy began to weaken, and the housing bubble began to burst. Most subprime borrowers had adjustable-rate mortgages which as house prices fell the interest rate on the mortgages increased. Mortgage delinquencies began to increase and by July 2008 nearly 30% of subprime mortgages were badly delinquent with one-fifth actually delinquent.
The housing market was rapidly collapsing and the value of mortgage-backed securities was in freefall. The rest as they say is history as banks and financial institutions were left holding trillions of these financial instruments at a fraction of the value that they had been purchased. They were, therefore, unable to sell these instruments resulting in banks refusing to lend to each other for fear they may collapse. The wholesale market completely dried up and governments were forced into multi-billion bail-outs.
Most bank guarantee facility are Demand Guarantees and are widely used on a daily basis for a multitude of business purposes throughout the world. A Bank Guarantee is governed by ICC Uniform Rules for Demand Guarantees, (URDG), 758. This Demand Bank Guarantee is payable on first demand.
A very important point is that a Bank Guarantee can be subject to monetisation. As with all Bank Guarantees, the format will contain specific, exact, and precise wording. Thus, a lender when reading the wording contained within the format of the Bank Guarantee will understand they can lend without fear of losing their loan.
Known as the International Chamber of Commerce, is headquartered in Paris, France. The ICC lays down the laws, rules, and standards for global business. These rules are not recognised as law but are guidelines that are complied with by their 45 million membership which includes all major and most minor banks.
URDG 758 is the accepted practice for demand guarantees and counter-guarantees, (where URDG 758 is referenced). This rule was adopted by the ICC on 3rd December 1999 and came into force on 1st July 2010 and is adhered to by all major banks. Under URDG, whenever the word guarantee appears it is deemed to be a Demand Bank Guarantee.
Also recognised as a first demand guarantee and is an irrevocable obligation or undertaking that has been issued by the guarantor, most often a bank. When a bank issues a demand guarantee, it does so on instructions received from their client, (referred to as “the applicant”).
Any claim against a demand guarantee will only be paid on the presentation of a demand. The demand must not exceed the face value of the guarantee and comply with the terms and conditions contained therein.
A demand is a signed document by the beneficiary, (or the beneficiary’s bank acting on their behalf), be it in electronic or paper form, demanding payment that is compliant with the term and conditions of said guarantee.
If the applicant is in breach of contract, the beneficiary can claim any loss by issuing a demand against the guarantee. Under the rules of “first demand”, the beneficiary does not have to prove breach but will be expected to indicate how or where the applicant is in breach. Thus, proof of loss and the actual breach is postponed until after the beneficiary has received payment. Hence, the guarantee is payable on first demand.
If the applicant is of the opinion that they are not in breach of contract, then they are permitted to reclaim any payments made to the beneficiary. However, this will be between the applicant and the beneficiary, and if no agreement can be reached the dispute will have to be settled in court. Any reimbursements are strictly outside the purview of the URDG,
There are many types of bank guarantees that are used in commerce across the world. The guarantee may only be used for the end purpose as specified in the format contained within the guarantee. Guarantees cover all categories of trade and industry obligations, which include payments non-performance and performance.
A tender guarantee otherwise known as a bid bond is issued by banks on instructions received from their client/applicant or tenderer. This guarantee is issued to cover the risk of the company that is offering the tender, should the company submitting the tender not perform on the offer detailed within the tender. The value of the tender guarantee is usually between 2% and 5% of the value of the tender.
Insures the beneficiary of non-performance on a contract by the applicant. If the applicant defaults in any way and is guilty of non-performance, the issuing bank will make good any losses suffered by said non-performance, to the beneficiary. The value of the performance bond is typically 5% t0 10% of the value of the contract.
Is a certain sum of money withheld by an employer or contractor under a construction contract. This sum is typically withheld to ensure that the contractor is not guilty of non-performance and executes all their obligations within the terms and conditions of the contract. These funds are usually withheld from the final payment made in advance usually at the behest of the contractor or supplier. These guarantees are also well established in takeovers and corporate acquisitions.
Is a guarantee that covers advance payments for such items as equipment, goods, and services. An advance payment guarantee is often requested by companies with a history of bad credit. These companies are often required to pay in advance for their purchases, so an advance payment guarantee covers them in the event that the seller does complete their side of the contract.
Guarantees the standard and the condition of a product. A simple example is where a construction company or builder builds an office block or a house to pre-set conditions and standards as detailed within the warranty guarantee. Other end-products guaranteed by a warranty guarantee, can be anything from commercial goods such as washing machines and televisions all the way up to cruise ships. They can also cover general repairs throughout the industry as a whole. A typical value for a warranty guarantee is 5% of the face value of the contract.
Is issued to cover any debts to customs arising from the importation of any form of goods be it a household, commercial or industrial. This guarantee facilitates the arrival of goods through customs and means any duties can be paid at a later date rather than on the day of pick-up. They have become more widely used as the United Kingdom has left the European Union and under the new regulations, custom guarantees will be required, whereas before the goods would just go straight through without the need to pay any duty. The customs guarantee also covers goods that are supposed to be re-exported within a specific timeframe, but for whatever reasons do not get re-exported.
Are simply demand guarantees used by reinsurers to spread the insured risk. The reinsurance guarantee is spread amongst a number of different insurers, where said insurers are the beneficiaries.
Guarantee payment as ordered by a judge, and are obtained by one or both litigants. These guarantees cover a number of instances such as barrister, solicitor, and arbitrator fees. They may also final settlement obligations such as performance or financial.
Are issued to cover a plethora of transactions. Examples of payment guarantees are guarantees covering all rent obligations on rented or leased property, ensuring that creditors or sellers get paid on a specific date, ensuring the repayment of a bank facility such as a line of credit or loan. They can replace a DLC, (documentary letter of credit), ensuring payment for goods received, and on the industrial front, they cover the costs of decommissioning oil refineries or nuclear power plants.
Are utilised to enhance the credit risk profile of companies looking to raise funds on better terms. The guarantee will also give the company a better chance to borrow funds whereas before borrowing was extremely difficult.
Parent Company Guarantees – or PCG, are issued to cover any default on obligations is its performance or financial, by the parent company’s subsidiaries.
As has been explained above, a bank guarantee facility is exceptionally versatile and can be used throughout commerce and industry. One of the more fascinating aspects of a Demand Bank Guarantee Facility is that under certain circumstances it can be turned into a line of credit, a loan, or used for a capital injection. In this day and age where access to credit facilities for the smaller and medium companies sized companies is dwindling, a bank guarantee that can be utilised for obtaining credit facilities is mana from heaven.
As already explained a Demand Bank Guarantee Facility is governed by ICC Uniform Rules for Demand Guarantees, (URDG), 758. This means that whatever is written within the format of a bank guarantee will dictate the end-use of the instrument. Thus, if for example, the part of the text is reading “we guarantee to underwrite a credit line”, then lenders will be happy to lend to the beneficiary.
However, the text will be absolutely precise and exact, so there can be no misinterpretations. The text will therefore allow the lender to lend without fear of loss and secondly will dissuade any future potential litigation by interested parties. Finally, as extra security for the lender the bank guarantee is payable on first demand, which has been explained above, (see under heading Bank Guarantees 5th paragraph).
Demand Bank Guarantee Facility sadly do not grow on trees. If a company is struggling to obtain credit facilities their own bankers are hardly likely to offer the same to a company that they won’t afford credit facilities. There are however a number of companies that specialise in providing Demand Bank Guarantees to companies in need of credit facilities.
These specialist companies work hand in hand with “Providers”. These providers are companies who are happy to lend or lease a Bank Guarantee for a specified fee. The term leased or to lend a bank guarantee is a misnomer as the technical term is Collateral Transfer.
Companies seeking to be a beneficiary of a Demand Bank Guarantee will sign a contract with the provider, usually for one year that can be extended upon expiry of the contract. The contract is referred to as a Collateral Transfer Agreement, and the fee paid to the provider by the beneficiary is referred to as a Collateral Transfer Fee.
Once a company has signed a collateral transfer agreement, and the Demand Bank Guarantee has successfully arrived on their account, they are now in the possession of security or collateral. They can now confidently approach their bankers with a request for credit facilities offering the Demand Bank Guarantee as suitable collateral. Their bankers should have no problem lending against this Demand Bank Guarantee, providing that the proffered business plan is up to scratch and contains a strong exit strategy.
In some instances, bankers will still decline the opportunity to lend against a Demand Bank Guarantee, despite being in possession of an acceptable business plan. The good news is that the above-mentioned specialist companies can also provide third-party lenders, who have a track record of lending against Demand Bank Guarantees. They will happily step in to fill the lending space vacated by the bank.
The International Chamber of Commerce was founded in 1919 in Atlantic City, USA, by a group of businessmen from The United Kingdom, Belgium, United States of America, Italy, and France. They called themselves the Merchants of Peace in deference to the end of World War 1, where their objective was to set up the development of peaceful commercial relations and trade between companies.
The main goal of the ICC is the development of international business. To this end, they oversaw the introduction of the first rules for Uniform Customs and Practice for Documentary Credits, (UCP) in 1933.
In 1923, the ICC introduced the ICC Court as the entity to resolve disputes for companies engaging in business from different countries. Today the ICC International Court for Arbitration has dealt with over 24,000 cases since its creation. It is a private procedure accepted by their members who accept the findings of the court as binding and enforceable.
The policies of the ICC and the rules, regulations, and standards that are produced from these policies, are produced by specialised working committees or bodies. Such policy statements are agreed upon between an agreed commission and national committees, before being presented to the Executive Board for approval.
Today, headquartered in Paris, the International Chamber of Commerce has the largest representation of any business organisation in the world. The ICC can proudly boast membership in excess of 45 million covering over 100 countries. Membership ranges from the small private businesses up to the largest international banks and insurance companies.
Whilst the rules, standards, and regulations as laid down by the ICC are not law, their rules are strictly adhered to by all members, thus allowing cross-border and global trade to flow smoothly.
Today, URDG 758 is the culmination of 40 years of work where originally there was no worldwide acceptance of standard terms for demand guarantees. Today, thanks to the International Chamber of Commerce, there are now rules and regulations for demand guarantees that are accepted on an international basis. The forerunners to URDG 758 are the URCG, (ICC Uniform Rules for Contract Guarantees), and its successor URDG 458.
On 20th June 1968, (ICC Pub No.325), The ICC Uniform Rules for Contract Guarantees, (URCG), was promulgated. This was the product of 10 years’ work started by bankers, exporters, and their representatives at the ICC, where rules for demand guarantees and counter demand guarantees were agreed to be drafted to be accepted in all jurisdictions.
In 1972, the ICC offered specific forms for the issuance of contract guarantees, (ICC Pub. No 406), which was an attempt to standardise the verbiage for international rules regarding demand guarantees and counter demand guarantees. Sadly, this was rejected by members and the market in general, as only the applicant’s interest was secured leaving guarantors and beneficiaries to fend for themselves.
Essentially URCG was created to stop beneficiaries from making outrageous and false claims. Therefore, beneficiaries when making a claim had to justify the said claim in court where they had to prove the right to claim and further prove the amount. Such justifications excluded the beneficiary in the use of demand guarantees, which at that time were the premier instrument being used in international trade.
URCG failed in its mission to provide a set of Uniform Rules that all parties could agree upon, or understand the full effects their guarantees created. The ICC no longer lists and rules or regulations pertaining to URCG.
Once URCG had been rejected the ICC worked diligently to produce a new URDG that would be accepted by the market whilst avoiding the errors contained within URCG. In 1981 the ICC created a working group whose mission was to create a URDG which would give all parties concerned resolution, thereby creating a demand guarantee and demand counter guarantee acceptable to the market.
This working group was made up of experts, but instead, of deciding the rules by themselves, they requested ideas on URDG to be submitted from banks and companies from all over the world. Such was the response, the working group was able to produce eleven drafts which formed the basis for the creation of URDG 458. These drafts were formally accepted by the ICC Executive council on 20th December 1991 and came into force in the following April. In 1994, the ICC released five URDG demand guarantee and counter demand guarantee forms, (ICC Pub No. 503).
The main features of URDG 458 that allowed all interested parties to agree are as follows,
As opposed to URCG, the beneficiary has now only got to state breach not prove a breach. The actual proof of breach and the amount claimed is postponed until payment has been received by the beneficiary. However, the beneficiary cannot just claim a breach by the applicant. They will have to indicate or show, (not prove) that the applicant is indeed in breach. However, this can all be countermanded if contrary verbiage is held within the format of the demand guarantee or counter demand guarantee.
The underlying relationship is the contract between the beneficiary and the applicant which is underpinned by the demand guarantee or counter demand guarantee.
Under URDG the applicant has no defenses in relation to any underlying relationships. An illustration of such defenses is any breach of obligations by the beneficiary to the applicant within the said underlying relationship and the termination of said relationship. Furthermore, in relation to Breach as stated above, any claim made by the beneficiary under the demand guarantee is free of any connection to the underlying relationship.
Any undertakings by guarantors and counter-guarantors under URDG458 will be subject to their own terms and conditions. Under URDG 458 it is stressed that both the demand guarantee and counter demand guarantee are totally independent plus the documentary proclivity of any undertakings. The results are both guarantor and counter guarantor are isolated from all obligations within the underlying relationship. They are essentially just checking documents.
The balanced rules for all parties under URDG 458 which includes precise and clear verbiage, were accepted by banks and other financial institutions and all other participants and users in countries across the globe. The negotiation time saved on drafting is immeasurable, plus the guarantees are now much shorter with an independent proclivity.
The ICC decided that a new set of rules for URDG was required. The plan was to offer all concerned parties of the demand guarantee and counter demand guarantee a fairer balance than offered by the current URDG 458, the strategy being to reflect updated business practices of the 21st century.
A Task Force was set up comprising experts on guarantees from within the ICC and representatives with similar expertise from 26 countries. This revision was overseen by the ICC Commission on Banking Techniques and the ICC Commission on Commercial Law and Practice. This task force produced five working drafts between the 19th of February 2008, and 10th February 2009, the fifth and final draft being adopted by ICC. As a result, URDG 758 was approved and came into being on 1st July 2010 and applies to all demand guarantees and counter demand guarantees wherever URDG 758 is referenced.
URDG 758 Is Now The Globally Accepted as the International practice for demand Guarantees and counter demand guarantees.
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