The latest revision of the ICC Uniform Rules for Demand Guarantee (URDG 758) have been officially endorsed by the UN Commission on International Trade Law (UNCITRAL) during its 44th annual session held in Vienna, ICC Paris through its Chapter in Bahrain announced on Monday.
Comprising 60 member states, all elected by the United Nations General Assembly, UNCITRAL represents the world’s principal geographic regions and economic and legal systems.
“The UNCITRAL endorsement of the ICCURDG will undoubtedly define the direction of banking practice for demand guarantees, establish international unity with regards to these practices, and alleviate any confusion and miscommunication which could arise in the completion of trade transactions,” Jean-Guy Carrier, ICC Secretary-General said.
Delegates welcomed URDG 758 and praised the text for its intelligibility and pedagogic style.
Destined to become the international standard for all demand guarantee practices, the extensively updated URDG 758 rules apply to billions of dollars of guarantees securing monetary and performance obligations in a wide array of international and domestic contracts, including construction, capital markets, commercial lending, corporate restructuring and structured finance.
The revision of the URDG spanned two-and-a-half years and was a cooperative effort by the ICC Commission on Banking Technique and Practice and Commission on Commercial Law and Practice, which are made up of representatives from banks, companies and law firms worldwide.
Clearer, more precise and more comprehensive than the URDG 458 they replaced, the new rules aim to maintain risk control through the high level of certainty and predictability that they foster. Comprising 35 articles, the new URDG also comes with embedded model guarantee and counter-guarantee forms and a set of optional clauses in a ready-to-use package.
Paris based ICC was invited to attend the UNCITRAL session as an international non-governmental organization observer and to provide expertise and international experience to facilitate the deliberations on URDG matters.
“The URDG can adequately provide an operational framework for harmonising international practices by setting out the liabilities and responsibilities of trading partners. Agreeing to issue a guarantee according to URDG spares the parties the effort of drafting extensive clauses to describe the independence of the guarantee, its irrevocability, and the guarantor’s duties and more,” ICC Bahrain Chairman Ebrahim Zainal, said.
“ICC Bahrain’s Trade Finance Forum had a representation in the URDG Drafting Group. Through such endeavours, ICC Bahrain aims to support and supplement the efforts of the Government of Bahrain, the Bahrain Chamber of Commerce and Industry (BCCI) and the Central Bank of Bahrain (CBB). The idea is to project the Kingdom as a major financial centre which not only follows international rules and best practices but also participates in framing of such rules and best practices,” Zainal, added.
“The TFF organised a workshop on URDG 758 in December 2010, which was attended by over 60 participants from banks and corporates. The intention was to give practitioners an opportunity to gain insights into the advantages of issuing guarantees subject to ICC’s URDG and to know the key changes in URDG 758 which are expected to increase the certainty of the instrument,” Zainal said.
“The universal acceptance of URDG 758 stems from the fact that they successfully manage to strike a balance between the conflicting interests of various parties to a Demand Guarantee namely, Applicant, Beneficiary, Guarantor and a Counter-Guarantor,” Pradeep Taneja, Chairman of the ICC Bahrain Trade Finance Forum, who was a member of the URDG 758 Drafting Group, said.
“The drafting exercise comprised some three years of intensive effort during which the Drafting Group met some 15 times scanning over 600 pages of compiled comments received from over 50 countries, before a final draft acceptable to all, could be agreed upon,” he added.