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The Uniform Rules for Demand Guarantees:
The International Chamber of Commerce (“ICC”) published a new guide on international standards for demand guarantee practice that came into effect on 1 July 2010. The ICC’s new Uniform Rules for Demand Guarantees (“URDG758”), which comprise a set of contractual rules applicable to demand guarantees and counter-guarantees, supersede the first 1992 rules (“URDG458”).
The URDG 758 sets out to achieve a clearer, more precise and more comprehensive model for parties at each stage of a guarantee’s lifecycle. It is the URDG 758 goal to encourage acceptance in the use of demand guarantees worldwide and balance the legitimate interests of the applicant, the guarantor and the beneficiary to a guarantee or a counter-guarantee, as the case may be.
Major Features of URDG 758:
The URDG 758 consists of a set of contractual rules designed to regulate demand guarantees and counter-guarantees. The rules apply where they have been expressly incorporated by reference in a guarantee or counter-guarantee. Where this is the case the URDG 758 applies entirely unless specific articles are explicitly ruled out or amended. Also, the URDG 758 may apply even if they are not expressly incorporated by reference to the text of a guarantee or counter-guarantee: (1) in the event of indirect, asymmetrical guarantees and (2) as a result of trade usage or a consistent course of dealing.
As with the URDG 458, the URDG 758 maintains the notion of the guarantee or counter-guarantee as independent of the underlying relationship and of the application, as well as its irrevocability upon issuance even where this is not expressly stated therein.
URDG 758 also preserves the documentary nature of the guarantee or counter-guarantee by requiring that any demand under a guarantee be supported by such other documents as the guarantee specifies and, in any event, by a statement of the beneficiary indicating in what respect the applicant is in breach of its obligations under the underlying relationship.