Standby & Demand Guarantee Practice: Understanding UCP600, ISP98, and URDG 758

  • ID: 3042933
  • Book
  • Region: Global
  • 270 Pages
  • Institute of International Banking Law & Practice
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What book compares and contrasts these three sets of ICC rules? This one does. Standby & Demand Guarantee Practice: Understanding UCP600, ISP98, and URDG 758 helps you anticipate and understand real world situations in this area of banking practice. If you have experience working with two sets of these rules, but need to increase your knowledge of the other, then this book is ideal!

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Dedication iii
Preface v

Chapter One: Independent Undertakings
1.1 Types of LCs and Their Characteristics
1.1.1 Types of Independent Undertakings/LCs
1.1.2 Common Characteristics of all Independent Undertakings
1.1.2.1 Documentary Promises
1.1.2.2 Independence
1.1.2.3 Payment on Underlying Transaction
1.1.2.4 Not a Consumer Transaction
1.1.2.5 Binding and Irrevocable
1.1.2.6 Definite Promise
1.2 Independent Undertakings Distinguished from Dependent Undertakings
1.2.1 Traditional or True Guarantees
1.2.2 Bonds or Indemnities
1.2.3 Insurance Undertakings
1.2.4 Commercial or Financial Contracts
1.2.5 Negotiable Instruments
1.3 Types of Standbys and Demand Guarantees
1.4 Practice Rules
1.4.1 What is Practice?
1.4.2 Uniform Customs and Practice for Documentary Credits (“UCP600”)
1.4.3 International Standby Practices (“ISP98”)
1.4.4 Uniform Rules for Demand Guarantees (“URDG 758”)
1.4.5 Uniform Rules for Bank-to-Bank Reimbursements (“URR 725”)
1.4.6 Practice Rules Overview
1.5 LC Law
1.5.1 The Relationship Between LC Law and Practice
1.5.2 Sources of LC Law
1.5.2.1 Statutes
1.5.2.2 The Supreme People’s Court of the People’s Republic of China
1.5.2.3 Judicial Decisions
1.5.2.4 Bank Regulations
1.5.3 Litigation
1.6 Forms and Standardization
1.6.1 SWIFT Messages
1.6.2 ISP98 Model Forms
1.6.3 Other Forms
1.7 Standbys vs. Demand Guarantees
1.7.1 Definitions
1.7.2 Secondary Differences between Standbys and Demand Guarantees
1.7.3 Historical Evolution
1.7.3.1 Evolution of Standby LCs
1.7.3.2 Evolution of Bank Guarantees
1.7.4 Geography
1.7.5 Transactions and Rules
1.7.6 Familiarity
1.7.7 Practices
1.8 Achieving and Determining Independence
1.8.1 Factors in Determining Whether an Undertaking is Independent
1.8.1.1 The Undertaking
1.8.1.2 Terms and Phrases
1.8.1.3 Name of the Undertaking
1.8.1.4 Applicable Practice Rules
1.8.1.5 Applicable Laws
1.8.1.6 Person Making the Promise
1.8.2 Interpreting Undertakings to Determine Independence
1.8.3 Intent
1.9 Review Questions

Chapter Two: Obligations of Parties to an Independent Undertaking
2.1 Issuance
2.1.1 Meaning of Issuance
2.1.2 Meaning of “Issuer” and Related Terms
2.1.3 Issuance in Practice
2.1.4 Issuance Via Advising Banks or Other Third Parties
2.1.5 Conditional Issuance, Pre Drawing Conditions, or Non-Operative Provisions
2.1.6 Non-Documentary Conditions to Issuance
2.1.7 Obligation Where Undertaking Not Issued
2.1.8 ISP98 Model Form 1 (Standby Incorporating Payment Demand)
2.2 Obligations of Issuer/Guarantor
2.2.1 “Issuer”/“Guarantor” Defined
2.2.2 “Credit” Definitions
2.2.3 Substantive Rules Regarding the Undertaking
2.2.4 Characteristics of an Independent Undertaking
2.2.5 ISP98 Model Form 1 (Standby Incorporating Payment Demand): The Undertaking
2.3 Additional Undertakings in the Standby/Demand Guarantee
2.3.1 Undertakings Supplementing Those of the Issuer/Guarantor
2.3.2 Confirmation and Confirmer
2.3.3 ISP98 Model Forms 7, 8, IX, and X Regarding Confirmation
2.3.4 Counter Undertakings
2.3.5 Challenges of Counter Undertakings
2.3.5.1 Challenge 1: Parallelism
2.3.5.2 Challenge 2: The Compliance of Documents
2.3.5.3 Challenge 3: The Separate and Independent Character of the Counter Undertaking and the Local Undertaking
2.3.5.4 Challenge 4: Governing Law
2.3.6 ISP98 Model Form 6 (Counter Standby)
2.3.7 Comparing Confirmations and Counter Undertakings
2.4 Advice
2.4.1 The Meaning and Significance of Advice
2.4.2 Who is an Adviser, Whether it is Nominated, and Second Advising Banks
2.4.3 Obligations of an Adviser
2.5 Nomination and Confirmation
2.5.1 A Confirmer as a Nominated Bank
2.5.2 Confirmers
2.6 Amendments
2.6.1 Meaning of “Amendment”
2.6.2 Issuance of an Amendment: the Issuer/Guarantor
2.6.3 Confirmer and Beneficiary Bound by an Amendment?: Consent
2.6.4 Routing of Amendments
2.7 Expiry of an Independent Undertaking
2.7.1 The Meaning and Significance of Expiry
2.7.2 Substantive Provisions Regarding Expiry
2.7.3 Expiry Events
2.7.4 The Place of Presentation for Expiry
2.7.5 Open Ended Undertakings
2.8 Automatic Amendment and Variation
2.8.1 Meaning of Automatic
2.8.2 Automatic Extension of the Expiration Date
2.8.3 Automatic Increase or Decrease
2.9 Informing the Instructing Party of a Payment Demand
2.9.1 The Applicant’s Relationship to the Undertaking
2.9.2 The Applicant vs. the Instructing Party
2.9.3 The Issuer/Guarantor’s Duty Under Different Practice Rules
2.10 Review Questions

Chapter Three: Timely Presentation of Documents
3.1 What is a “Presentation” and a “Presenter”?
3.2 Where is Presentation to be Made?
3.3 To Whom is Presentation to be Made?
3.3.1 Providing for Exclusive Presentation to an Entity Other Than the Issuer/Guarantor
3.3.2 Timely Presentation
3.3.3 Problems with Specifics Regarding Presentation
3.4 The Manner of Presentation: How
3.4.1 Mode of Presentation
3.4.2 Documents Lost in Transit
3.5 Incomplete Presentations
3.6 Partial and Multiple Drawings
3.6.1 Re-Presentation
3.6.2 Installments
3.6.3 Separateness of Each Presentation
3.6.4 Cure
3.6.5 Wrongful Dishonour
3.7 Presentation After Normal Banking Hours
3.8 Extend or Pay Demands
3.8.1 Consequences of Extension
3.9 Deadline When Bank is Ordinarily Closed
3.10 Closure When the Expiration Date is on a Business Day
3.10.1 Closure Due to Force Majeure
3.10.2 Inadequacy of Force Majeure as a Basis for LC Practice
3.10.3 Solutions and Guidance to Closure from the Practice Rules: UCP600
3.10.4 Solutions and Guidance to Closure from the Practice Rules: ISP98
3.10.5 Solutions and Guidance to Closure from the Practice Rules: URDG 758
3.10.5.1 URDG 758 Article 26 (Force Majeure): Force Majeure Preventing Presentation
3.10.5.2 URDG 758 Article 26 (Force Majeure): Documents Presented, but Force Majeure Preventing Examination
3.10.5.3 URDG 758 Article 26 (Force Majeure): Force Majeure Preventing the Issuer/Guarantor from Paying
3.10.5.4 Closure and Extension in Counter Undertaking
Situations & Confirmation
3.10.5.5 ISP98 Approach to Closure in Counter Undertaking Situations; UCP600
3.10.5.6 URDG 758 Article 26 (Force Majeure): Application to Counter-Guarantee Situations
3.10.5.7 Does URDG Force Majeure Rule Affect Inability to Present?
3.10.5.8 Closure Prior to Expiry
3.11 Review Questions

Chapter Four: Examination and Compliance of Documents Presented
4.1 Standard of Compliance
4.1.1 Beyond Compliance: Preclusion
4.1.2 Compliance Standards in the Practice Rules
4.1.3 Strict Compliance
4.1.4 The Standard for Data
4.2 Complying Presentation
4.3 Extraneous Documents
4.3.1 Extraneous Data
4.4 Inconsistency or Conflict within Documents Presented
4.4.1 Conflict in LCs
4.4.2 Conflict in Standbys
4.4.3 Conflicts and Non-Documentary Conditions
4.5 Language
4.5.1 ISP98 Approach to Language
4.5.2 UCP600 Approach to Language
4.5.3 URDG 758 Approach to Language
4.6 Identification of the Undertaking
4.6.1 No Instructions in Standby/Demand Guarantee and No Identification of Number in Documents, But Identification in Presentation
4.6.1.1 Under ISP98
4.6.1.2 Under URDG 758
4.6.1.3 Under UCP600
4.6.2 No Instructions in Standby/Demand Guarantee and No Identification of Number in Document or Presentation
4.6.2.1 Under ISP98
4.6.2.2 Under URDG 758
4.6.3 Time for Examination Where There is No Identification
4.6.3.1 Under URDG 758 & ISP98
4.6.3.2 Under UCP600
4.6.4 Instructions in Standby/Demand Guarantee, But No Identification in Presentation
4.6.4.1 Under ISP98
4.6.4.2 Under UCP600 & URDG 758
4.6.5 Identification Revisited
4.7 Document Issuer, Document Date, and Amount Drawn
4.7.1 Early Presentation
4.7.2 Greater Amount Due Than Demanded
4.7.3 Lesser Amount Due Than Demanded
4.7.4 Demand in Excess of Balance on Standby/Demand Guarantee
4.7.5 Use of Imprecise Terms
4.7.5.1 “Unconditional” or “Abstract”
4.7.5.2 “Absolute”
4.7.5.3 “Primary”
4.7.5.4 “Payable From the Issuer’s Own Funds”
4.7.5.5 “Payable on Demand” or “Clean”
4.7.6 Calculations
4.8 Formality Requirements for Documents that are to be Presented
4.8.1 Is a Signature Required?
4.8.2 Is Formalization Other than a Signature Required?
4.9 Standby/Demand Guarantee Requirements for the Insertion of Specified Text or Provisions
4.10 Applicant Approval
4.11 Non-Documentary Conditions in Standbys/Demand Guarantees
4.11.1 Practice Rules Regarding the Issuer/Guarantor’s Own Records
4.11.2 The Practice Rules as Applied
4.11.3 Non-Documentary Conditions Not Limited to Presentation of Documents
4.11.4 Conflicts Between Non-Documentary Conditions and Data in Other Documents
4.12 Merger of Issuer/Guarantor or Confirmer with Another Entity and Change of its Name
4.13 Originals and Copies
4.13.1 Originality of Documents
4.14 Presentation of Demands or Drafts
4.14.1 Elements of a Demand
4.14.1.1 Demands Under ISP98
4.14.1.2 Demands Under UCP600
4.14.1.3 Demands Under URDG 758
4.14.2 Problems in the Use of “demand” in URDG 758
4.14.3 Drafts or Bills of Exchanges
4.14.4 Drafts Under the Practice Rules
4.14.5 Explanatory Statements
4.14.6 ISP98 Model Form 1 (Standby Incorporating Payment Demand)
4.14.7 Default Under URDG 758
4.14.8 Excluding or Modifying a Supporting Statement Under URDG 758
4.15 Requirement that Legal Documents be Presented
4.16 Requirements that Negotiable Documents Other than Drafts be Presented
4.17 Documents Related to Counter Undertakings
4.18 Examination of Documents Under Commercial Standbys
4.19 “Other Documents”
4.20 Review Questions

Chapter Five: Honour and Dishonour
5.1 Making a Decision to Honour or Dishonour
5.1.1 Time Frame for Examination
5.1.2 Beginning to Calculate Time
5.1.3 Acceleration of Time Frame
5.2 Honour of a Complying Presentation
5.2.1 Discretion in the Decision to Honour
5.2.2 Payment
5.2.3 Waiver of Discrepancies Prior to Refusal
5.3 Reimbursement of Nominated Banks
5.3.1 Documents Lost in Transit
5.3.2 LC Fraud or Abuse
5.4 Dishonour
5.4.1 Notice of Refusal: ISP98
5.4.2 Notice of Refusal: URDG 758
5.4.3 Notice of Refusal: UCP600
5.4.4 Adequate Notice of Refusal
5.4.4.1 Indication of Refusal
5.4.4.2 Statement of Discrepancies
5.4.4.3 Disposition of the Documents
5.4.5 Effect of LC Fraud or Abuse
5.4.6 Waiver of Discrepancies
5.5 Preclusion
5.5.1 Preclusion Under UCP600
5.5.2 Preclusion Under ISP98
5.5.3 Preclusion Under URDG 758
5.5.4 Beneficiary Options After Notice of Refusal Received
5.5.5 Separate Presentations
5.6 Applicant Reimbursement
5.6.1 Who is the Applicant?
5.6.2 Reimbursement in the Practice Rules
5.6.3 Binding the Applicant
5.6.4 Confirmer’s Right to Reimbursement from Applicant
5.7 Review Questions

Chapter Six: Miscellaneous Issues
6.1 Retention of the Operative Instrument
6.1.1 The Operative Instrument as a Required Document
6.1.2 Retention and Return
6.2 Transfer of Drawing Rights
6.2.1 Transfers in Commercial LCs and UCP600
6.2.2 Transfers in Standbys/Demand Guarantees: Whole Transfer
6.2.3 Multiple Transfers
6.2.4 Issuer of Required Documents
6.2.5 URDG Signed Statement
6.2.6 Mandatory Transfer
6.3 Assignment of Proceeds
6.4 Transfer by Operation of Law
6.5 Disclaimers
6.5.1 Loss in Transit and Translation Errors
6.5.2 Acts of an Instructed Party, Foreign Law, and Usage
6.5.3 Force Majeure
6.6 LC Fraud, Abuse, or Unconscionability
6.6.1 LC Fraud or Abuse
6.6.2 Abusive Drawing and Unconscionability
6.6.3 Duty and Right to Dishonour
6.6.4 Injunctions and Similar Court Orders
6.7 Protected Persons
6.8 Sanctions and Illegality
6.9 Bank Charges
6.10 Bank-to-Bank Reimbursement
6.11 Syndication and Participation
6.12 Law, Forum, and Arbitration
6.12.1 Choice of Law
6.12.2 Choice of Forum
6.12.3 ISP98 Model Form: Choice of Law and Forum Clause
6.12.4 LC Arbitration and Mediation
6.13 Review Questions

Questions & Answers

Q&A: Chapter 1 Independent Undertakings
1.1 Types of LCs and Their Characteristics
1.2 Independent Undertakings Distinguished from Dependent Undertakings
1.3 Types of Standbys and Demand Guarantees
1.4 Practice Rules
1.5 LC Law
1.6 Forms and Standardization
1.7 Standbys vs. Demand Guarantees
1.8 Achieving and Determining Independence

Q&A: Chapter 2 Obligations of Parties to an Independent Undertaking
2.1 Issuance
2.2 Obligations of Issuer/Guarantor
2.3 Additional Undertakings in the Standby/Demand Guarantee
2.4 Advice
2.5 Nomination and Confirmation
2.6 Amendments
2.7 Expiry of an Independent Undertaking
2.8 Automatic Amendment and Variation
2.9 Informing the Instructing Party of a Payment Demand

Q&A: Chapter 3 Timely Presentation of Documents
3.1 What is a “Presentation” and a “Presenter”?
3.2 Where is Presentation to be Made?
3.3 To Whom is Presentation to be Made?
3.4 The Manner of Presentation: How
3.5 Incomplete Presentations
3.6 Partial and Multiple Drawings
3.7 Presentation After Normal Banking Hours
3.8 Extend or Pay Demands
3.9 Deadline When Bank is Ordinarily Closed
3.10 Closure When the Expiration Date is on a Business Day

Q&A: Chapter 4 Examination and Compliance of Documents Presented
4.1 Standard of Compliance
4.3 Extraneous Documents
4.4 Inconsistency or Conflict within Documents Presented
4.5 Language
4.6 Identification of the Undertaking
4.7 Document Issuer, Document Date, and Amount Drawn
4.8 Formality Requirements for Documents that are to be Presented
4.9 Standby/Demand Guarantee Requirements for the Insertion of Specified Text or Provisions
4.10 Applicant Approval
4.11 Non-Documentary Conditions in Standbys/Demand Guarantees
4.12 Merger of Issuer/Guarantor or Confirmer with Another Entity and Change of its Name
4.13 Originals and Copies
4.14 Presentation of Demands or Drafts
4.15 Requirement that Legal Documents be Presented
4.16 Requirements that Negotiable Documents Other than Drafts be Presented
4.17 Documents Related to Counter Undertakings
4.18 Examination of Documents Under Commercial Standbys
4.19 “Other Documents”

Q&A: Chapter 5 Honour and Dishonour
5.1 Making a Decision to Honour or Dishonour
5.2 Honour of a Complying Presentation
5.3 Reimbursement of Nominated Banks
5.4 Dishonour
5.5 Preclusion
5.6 Applicant Reimbursement

Q&A: Chapter 6 Miscellaneous Issues
6.1 Retention of the Operative Instrument
6.2 Transfer of Drawing Rights
6.3 Assignment of Proceeds
6.4 Transfer by Operation of Law
6.5 Disclaimers
6.6 LC Fraud, Abuse, or Unconscionability
6.7 Protected Persons
6.8 Sanctions and Illegality
6.9 Bank Charges
6.10 Bank-to-Bank Reimbursement
6.11 Syndication and Participation
6.12 Law, Forum, and Arbitration
Index
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