URDG 758 To be Effective from 1st July 2010 By-Amit Bhushan Contact: amitbhushan@rediffmail.

com

URDG 758 consists of 35 articles that set out the liabilities and responsibilities of the parties to a demand guarantee. Compared to its predecessor URDG 458, the URDG 758 explain vital phases in the lifecycle of a demand guarantee; for example how to examine a demand and the extend or pay situation. The language is clear and precise and the terms, wordings and structure are close to that of UCP 600 (ICCs rules for documentary credits).

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Basics Whether Guarantees are subject to Local Laws, URDG, ISP or UCP ??? Most common is local law. However ICC is trying for a big push for URDG to be accepted. ICC standard text provided as part of handout. These are obviously subject to URDG but may be made subject to local laws, ISP or UCP depending on partys needs. ISP 98 also updated to reflect these rules cover guarantees.

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Guarantees are subject to local laws, but banks often may not be aware that which laws, domestic or international, shall be applied to guarantees. Sometimes law state that the expiry date of the guarantee is expiry date plus 30 years, especially for guarantees issued to government Often, laws may also state that the expiry of the guarantee is when the original guarantee is returned Laws sometimes may state that the expiry date of the guarantee is the stated expiry date plus a grace period of X (days/months etc.)

In the URDG 758 it is strongly recommended that any demand guarantee includes information on expiry. This could be either in the form of an expiry date or an expiry event. Any presentation must be made on or before expiry. A new rule to the URDG is that if the guarantee states neither an expiry date nor an expiry event, the guarantee shall terminate after the lapse of three years from the date of issue.

Banks issuing counter guarantee that are subject to URDG, ISP or UCP. But the guarantees are subject to local laws. There is a mismatch. What if there is a conflict ? Requirement for presentation of commercial and/or shipping documents. What level of review is expected from a banks?

Definitions articles following the concept in UCP 600 definitions of advising party (UCP- advising bank), business day (UCP-banking day), complying demand and complying presentation (UCP-complying presentation), presentation and presenter following those in UCP 600. Interpretations article following the concept in UCP 600 branches in different countries and irrevocable nature of guarantee following interpretation given in UCP in article.

Interpretations articles following concept in UCP-600; From, to, until, till and between and before and after terms such as first class, well known, qualified, competent etc. follows those in UCP 600. Guarantor deals with documents and not with Goods, services or performance, to which the guarantees may relate. Non-documentary conditions same position as in UCP and ICC Opinion TA644.

Content of the instruction 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 party. Language of all documents Language of the guarantee. Advising party satisfying itself as to the apparent authenticity of the guarantee or amendment.

Amendment 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. Place of Demand - Guarantee must state where it is available and the place of presentation Mode of delivery of demand paper or electronic (as is the case under ISP 98) Demand of payment must contain within itself or another document an indication of respect in which the applicant is in breach

Seperateness 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 demand (as is the case under ISP 98) Partial and multiple demands may be made as is the case in ISP 98

Article covering standard of examination of documents including wordings that appear 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.

Refusal notices along the lines of UCP 600 article 16 except for the 4 statuses of the document. Disclaimer article and Force Majeure article similar in approach to UCP 600 articles 34-37, however no mention of documents lost in transit. Extend or pay provisions included-similar to ISP 98 Transfer or assignment of proceeds-similar to ISP 98

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The URDG 758 make emphasis on the independent and documentary nature of demand guarantees. This means that all requirements in a demand guarantee should also stipulate a document to indicate compliance. In guarantee transactions there are however situations where a document need not be presented and this is duly acknowledged in the article. Consequently the exceptions are: Dates or the lapse of a period For example where the amount of the guarantee is reduced on a certain date if no complying demand is made prior to that date. Guarantors own Index specified in the guarantee. For example the payment of a specified amount to a given account held with the guarantor. An Index specified in the guarantee. For example the use of a Platts index.

The rule is that non-documentary conditions are disregarded. It should be noted however that this should be read in conjunction with sub-article 19(b) meaning that data in a document presented must not conflict with data in the guarantee. So for example the requirement Goods of China origin in a guarantee is a non documentary condition. However if a document (for example the commercial invoice) shows that goods are of Swedish origin the presentation is discrepant and may be rejected.