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Chapter I
Sphere of Application
Article 1
Substantive scope of application
This law applies to
international guaranty letters.
Article 2
Guaranty letter
A guaranty letter ['however
named or described'] is an [express] undertaking of independent [and
essentially documentary] character, given by a bank or other institution or
person ([„guarantor“] [„issuer“]).
Var. A: at the request of its customer („principal“) or on
the instruction of another bank, institution or person („instructing party“)
acting at the request of that instructing party’s customer („principal“),
Var. B: whether or not so requested or instructed by another
bank, institution or person, to pay to another person („beneficiary“) a certain
or determinable amount of a specified currency or union of account [or other
item of value] [or to accept or to negotiate without recourse a bill of
exchange for a specified amount] in conformity with the terms of the
undertaking upon receipt of a demand
Var. X: made in the manner prescribed in the undertaking,
provided that the undertaking [indicates that it] is given for the purpose of
[indemnifying the beneficiary for the consequences of a specified contingency]
[securing the beneficiary against the non-fulfilment of certain financial or
other obligations by the principal or against another specified risk].
Var. Y: stating or, if so required in the undertaking,
certifying or otherwise establishing that payment is due.
Article 3
Independence of undertaking
(1) An
undertaking is independent if ['according to its terms'] the payment obligation
[does not depend on] [is not subject to, or qualified by'] the existence or
validity of an underlying transaction ['whether or not referred to in the
undertaking'] [between the principal and the beneficiary or between an
instructing party and the guarantor] or of any other relationship, and the
guarantor may [therefore] not invoke any defence arising from a relationship
other than its relationship with the beneficiary. [The independent character of
an undertaking is not affected by the fact that the guarantor, as provided in
article 17 (1) (c), may raise certain objections to payment that might be based
on facts relation to any such other relationship.]
(2) (a) An
undertaking is [irrefutably] deemed to be independent when it contains the
heading „[Independent guaranty letter] [Independent documentary promise] [First
demand guaranty letter]“ and contains the same words also in its text. [Where
an undertaking is deemed to be independent, any term or condition that would
have the effect of rendering the undertaking to be accessory shall be treated
as void.]
(b)[Otherwise]
[Subject to the provisions of subparagraph (a) of this paragraph, any
characterization or a single term found in the text of the undertaking shall
not be deemed conclusive [of whether or not the undertaking is independent] if
other terms clearly weigh in favour of the opposite result. In evaluating the
terms in their totality, the following factors may be regarded as points
weighing in favour of independence:
(i) The
undertaking to pay is expressed to be „on simple demand“, „on first demand“,
„on demand“, „upon receipt of a written request“, „unconditional“,
„irrespective of the validity or existence of X—contract“, „waiving all rights
of objection and defences arising from said contract“, „without proof of
default“ or is qualified by any other words of similar import
(ii) Payment
is due upon receipt of a statement by the beneficiary or any document by a
third party, and the guarantor is not required to verify any fact outside its
preview
(iii) Any
underlying transaction is referred to in the undertaking only in a preamble or
otherwise in a recital of what has gone before, and not in operative clauses
['provided that the text of the undertaking is divided in that manner]
(iv) The
undertaking is stated to be subject to the Uniform Customs and Practice for
Documentary Credits or the Uniform Rules for Demand Guarantees of the
International Chamber of Commerce.
Article 4
Internationality of guaranty letter
(1) A
guaranty letter is international if:
Var. A:(a) the places of business specified in the guaranty
letter of any two of the following are in different States: guarantor,
beneficiary, principal [instructing party, confirming guarantor]
Var. B: (a) any two of the guarantor, beneficiary and principal
have their place of business in different States, provided that this fact is
apparent to the guarantor and the beneficiary either from the undertaking or
from information disclosed not later than the time of receipt the guaranty
letter by the beneficiary
['or
(b) if the
guaranty letter expressly so states].
(2) For the
purposes of the preceding paragraph:
(a) if a
party has more than one place of business, the place of business is that which
has the closest relationship to the guaranty letter
(b) if a
party does not have a place of business, reference is to be made to its
habitual residence.
Chapter
II
Interpretation
Article 5
Interpretation of this [Law] [Convention]
Version for Model Law: In the interpretation of this Law, regard is to be
had to its international origin and to the need to promote the observance of
good faith in international guaranty and credit practice.
Version for Convention: In the interpretation of this Convention, regard is
to be had to its international character and to the need to promote uniformity
in its application and the observance of good faith in international guaranty
and stand-by letter of credit practice.
[Article 6
Definitions and rules of interpretation
For the purposes of this Law
and unless otherwise indicated in a provision of this Law or required by the
context:
(a)
„guaranty letter“ includes „counter-guaranty letter“ and „confirming guaranty
letter“ and „guarantor“ includes „counter-guarantor“ and „confirming guarantor“
(b) any
reference to the terms of the guaranty letter or the undertaking of the
guarantor is to the text as originally established in accordance with article 7
or, if later amended in accordance with article 8, to the text in its last
amended version
(c) where a
provision of this Law refers to a possible agreement of the parties, the
parties meant are the guarantor and the beneficiary of the guaranty letter in
question and the reference is to any term of the guaranty letter or its
amendment or to any separate agreement between the guarantor and the
beneficiary.]
Chapter III
Effectiveness of guaranty letter
Article 7
Establishment of guaranty letter
(1) Var. A: A guaranty letter may be established by any means of
communication that [itself] provides a record of the text of the guaranty
letter.
Var. B: A guaranty letter may be issued in any form which
preserves a complete record of the information contained therein [and is
authenticated as to its source by generally accepted means or by a procedure
agreed upon by the parties].
Var. C: The guaranty letter shall be issued by a means of
communication that provides a record thereof, including by an authenticated
teletransmission or equivalent electronic data interchange message.
(2) Var. X: The guaranty letter becomes binding and, unless it
expressly states that it is revocable, irrevocable, when it is issued by the
guarantor [, provided that the beneficiary does not reject it promptly upon
receipt]. The guaranty letter becomes effective at that time, unless it states
a different time of effectiveness [, by a reference to a fixed date or to a
determinable period of time,] or [it expressly provides that its effectiveness
is subject to a specified condition that is determinable by the G on the basis
of a document specified in the guaranty letter][it makes its effectiveness
depend on the occurrence of a specified, uncertain future event, in which case
the guarantor may require the beneficiary to certify that occurrence, unless
the parties have agreed on another means of establishing that occurrence or its
verification is within the preview of the guarantor.]
Var. Y: Unless otherwise stated therein, a guaranty letter
becomes effective and irrevocable when it is issued by the guarantor [,
provided that the beneficiary does not reject it promptly upon receipt].
Article 8
Amendment
(1) A
guaranty letter may be amended in the form agreed upon by the parties or,
failing such agreement, [in the form in which the guaranty letter was
established] [in any form referred to paragraph (1) of article 7]. [A party may
be precluded by its conduct from asserting non-compliance with such form
requirement to the extent that the other party has relied on that conduct.]
(2) The
amendment becomes effective, unless it states a different time of
effectiveness,
Var. A: when it is issued by the guarantor [, provided that
the beneficiary does not reject it promptly upon receipt].
Var. B: when it is issued by the guarantor, provided that the
guarantor receives notice of the acceptance by the beneficiary within [ten]
business days.
Var. C: when the guarantor receives notice of the acceptance
by the beneficiary.
(3) Var. X: The provisions of paragraphs (1) and (2) of this
article do not excuse the failure of the guarantor to obtain the consent of the
principal as may be required by the instructions of the principal or an
agreement with the principal.
Var. Y: The provisions of paragraphs (1) and (2) of this
article do not entitle the guarantor to invoke the amendment in support of any
claim for reimbursement against the principal if the guarantor failed to obtain
the consent of the principal as required by instructions of the principal or an
agreement between the principal and the guarantor.
Var. Z: When issuing an amendment, the guarantor shall
promptly dispatch a copy thereof to the principal.
Article 9
Transfer of rights assignment of proceeds
(1) The
beneficiary may not transfer its right to make a demand for payment under the
guaranty letter,
Var. A: unless so authorized by the guarantor [either in the
guaranty letter or by separate consent in any form referred to in paragraph (1)
of article 7].
Var. B: except where the guaranty letter was given for the
purpose of securing the beneficiary against the non-performance of certain
obligations by the principal and the right to claim performance from the
principal has passed from the beneficiary to the intended transferee.
(2) However,
the beneficiary may assign to another person any proceeds to which it may be
entitled under the guaranty letter. If the guarantor has notice of the
assignment, only payment to the assignee discharges the guarantor from its
liability towards the beneficiary.
Article 10
Cessation of effectiveness of guaranty letter
The guaranty letter ceases to
be effective, irrespective of whether [the instrument] [any document embodying
it] is returned to the guarantor, when:
(a) the
guarantor receives from the beneficiary a statement of release from liability
[in any form referred to in paragraph (1) of article 7].
(b) the
beneficiary and the guarantor agree on the termination of the guaranty letter
(c) the
guarantor pays the maximum amount stated in the guaranty letter or, if that
amount has been reduced according to an express provision in the guaranty
letter [for reduction by a specified or determinable amount or a specified date
or upon presentation to the guarantor of a document specified for this purpose
in the guaranty letter], the remaining balance
or
(d) the
validity period of the guaranty letter expires in accordance with the
provisions of article 11.
Article 11
Expiry
(1) The
validity period of the guaranty letter expires:
(a) at the
expiry date [which may be specified calendar date or the last day of a fixed
period of time stipulated in the guaranty letter]
(b) if
expiry depends according to the guaranty letter on the occurrence of an event,
when the guarantor receives confirmation that the event has occurred by
presentation of the document specified for that purpose in the guaranty letter
[or, if no such document is specified, a statement of the beneficiary or other
conclusive evidence of the occurrence of the event].
(2) If the
guaranty letter states neither an expiry date nor an expiry event or if a
stated expiry event has not yet been established, the validity period expires
[five] years after the establishment of the guaranty letter, unless the parties
agree on an extension of the validity period.
Chapter IV
Rights, obligations and defences
Article 12
Determination of rights and obligations
Subject to the provisions of
this Law, the rights and obligations of the parties are determined by the terms
[and conditions] set forth in the guaranty letter, including any rules,
[general] conditions or usages referred to therein.
Article 13
Liability of guarantor
[The guarantor shall act in
good faith and exercise reasonable care as required by good guaranty and credit
practice.] Guarantors [and instructing parties] may not be exempted from
liability for their failure to act in good faith or for any [grossly negligent
conduct] [act or omission done either with the intent to cause damage or
recklessly and with the knowledge that damage would probably result.]
Article 14
Demand for payment
Any demand for payment under
the guaranty letter shall be made in the form referred to in paragraph (1) of
article 7 and in conformity with the terms of the guaranty letter. In
particular, the demand shall be made, and received by the guarantor, within the
time of effectiveness of the guaranty letter and shall be accompanied by any
statement or document required by the guaranty letter [or this Law]. [If no
statement or document is required, the beneficiary, when demanding payment, is
deemed to impliedly certify that payment is due.]
[Article 15
Notice of demand
Without prejudice to the
provisions of articles 16 and 17, the guarantor shall promptly upon receipt of
the demand give notice thereof to the principal or, where applicable, its
instructing party, unless otherwise agreed between the guarantor and the
principal.]
Article 16
Examination of demand
(1) Var. A: In examining the demand and any required statement or
document accompanying it, the guarantor shall comply with the standard of
reasonable care prevailing in international guaranty and stand-by letter of
credit practice to ascertain their facial conformity with the terms of the
guaranty letter, which are to be construed strictly.
Var. B: The demand and any required statement or document
accompanying it shall be examined by the guarantor with the professional
diligence of a knowledgeable, prudent guarantor to ascertain whether they
appear on their face to conform with the terms of the guaranty letter and to be
consistent with one another.
(2) Unless otherwise
agreed by the parties, the guarantor shall have
Var. X: reasonable time
Var. Y: [four] business days
Var. Z: reasonable time, but not more than [seven] business
days
in which to examine the demand
and to decide whether or not to pay.
Article 17
Payment or rejection of demand
(1) The
guarantor shall make payment as demanded by the beneficiary, unless:
(a) the
guaranty letter is non-existent, invalid or unenforceable or
(b) the
demand does not mean the requirements referred to in article 14 [ or
Var. A: (c) the demand is [manifestly] [clearly and obviously]
improper according to article 19].
(2) Var. B: [The guarantor may make payment despite an assertion
by the principal that the demand is improper according to article 19, provided
that the guarantor acts in good faith. However, if]
[If] the principal asserts
that the demand is improper according to article 19 and the guarantor decides
not to reject the demand, the guarantor shall promptly inform the principal
about its decision [and, if so requested by the principal, defer payment for
[three] business days].
(3) If the
guarantor decides to reject the demand on any ground referred to in paragraph
(1) (a) and (b) of this article, it shall promptly give notice thereof,
indicating, where appropriate, the reason for the decision, to the beneficiary
by teletransmission or, if that is not possible, by other expeditious means.
[(4) If the guarantor fails to comply with the provisions of article
16 or paragraph (3) of this article, it shall be precluded from claiming that
the demand is not in conformity with the terms of the guaranty letter.]
Article 18
Request for extension or payment
If the beneficiary [demands in
the alternative payment or] [combines a demand for payment with a request for]
an extension of the validity period of the guaranty letter, the guarantor shall
comply with the following rules, unless otherwise agreed by the parties:
(a) The
guarantor shall give prompt notice of the alternative demand for extension or
payment to the principal [directly or through an instructing party]
(b) The
guarantor may not extend the validity period without the consent of the
principal however, even the principal consents to the extension, the guarantor
is not obliged to extend the validity period, unless so required by an
agreement with the principal
(c) The
guarantor shall examine the demand for payment in accordance with article 16
and decide whether to pay or to reject the demand if the guarantor decides not
to reject the demand, it [shall] [may] defer payment until [ten] business days
have elapsed after [giving notice to the principal] [receiving the alternative
demand from the beneficiary] and then make payment, unless the guarantor
extends the validity period.
Article 19
Improper demand
Var. A: A demand for payment is improper if:
(a) any
certification by the beneficiary or any required document accompanying the
demand is [untrue] [essentially incorrect] or forged or
(b) the
demand falls clearly outside the purpose for which the guaranty letter was
given or otherwise lacks any plausible basis.
Var. B: (1) [Same as Var. A]
(2) A demand
has no plausible basis, for example where:
(a) in the
case of guaranty letter that [supports][backs up] the financial obligation of a
third party, the principal amount is not due
(b) in the
case of tender guaranty letter,
(i) the
contract has not yet been awarded or
(ii) the
contract has been awarded to a tender other than the principal or
(iii) the
contract has been awarded to the principal and the principal has [accepted]
[signed] the contract and secured any performance guaranty letter
(c) in the
case of repayment guaranty letter, no advance payment has been made
(d) in the
case of performance guaranty letter,
(i) a
competent court or arbitral tribunal has determined [in a final decision] that
the obligations of the principal towards the beneficiary, the performance of
which the guaranty letter was intended to to secure, do not exist or are unenforceable
on the ground that the underlying transaction [between the principal and the
beneficiary] is not existent, violates public policy or is otherwise invalid
(ii) the
principal has completely [to the satisfaction of the beneficiary] fulfilled its
obligations the performance of which the guaranty letter was intended to secure
(iii) the
beneficiary has prevented the principal from fulfilling its obligations, the
performance of which the guaranty letter was intended to secure, by a [wilful]
[serious] breach of its own [fundamental] obligations of the underlying
transaction
(iv) the
amount demanded is [grossly disproportionate to] [at least five times higher
then] the damage suffered due to the failure of the principal to fulfil its
obligations]
(e) ind the
case of a counter-guaranty letter, the beneficiary of the counter-guaranty
letter has paid [or intends to pay] to its beneficiary under its guaranty
letter, the reimbursement for which constitutes the purpose of the
counter-guaranty letter, upon a demand that is [evidently] affected by one of
the infirmities referred to in paragraph (1) of article 17, provided that the
beneficiary of the counter-guaranty letter
Var. X: acted in collusion with its beneficiary.
Var. Y: [acted in bad faith] [failed to exercise professional
care].
Var. Z: is by virtue of the counter-guaranty letter or any
reimbursement agreement with the counter-guarantor or by virtue of law
[entitled] [under a duty] to reject the demand because of such infirmity].
Var. C: (1) A demand for payment is improper if making it
constitutes fraud ar an abuse of rights,
(2) The
making of a demand constitutes fraud where:
(i) the
beneficiary [has no belief that the amount demanded is due] [knows or cannot be
unaware of the fact that the amount demanded is not due] on the basis asserted
in the demand or any supporting statements or documents or
(ii) any
supporting statement or document is [untrue] [essentially incorrect] or
(iii) any
supporting document is forged.
(3) The
making of a demand constitutes an abuse if:
Var. X: the beneficiary exercises its right for purpose other
than that for which the guaranty letter was given.
Var. Y: the contingency against the consequences of which the
guaranty letter was designed to indemnify the beneficiary has undoubtedly not
materialised or has clearly been brought about by a fundamental breach of the
underlying transaction wilfully committed by the beneficiary.
Var. D: The guarantor [may] [shall] reject a demand as
improper if, having due regard to the independent [and essentially documentary]
character of its undertaking, the guarantor concludes that the demand is made
in bad faith or fraudulently, including fraud or forgery relating to the
documents or fraud in the underlying transaction, or that the making of the
demand constitutes an abuse of rights by the beneficiary, provided that the
facts constituting the basis of the conclusion are clearly and convincingly
established without investigation by the guarantor.
Article 20
Set-off
Var. A: Unless otherwise [expressly] agreed by the parties,
the guarantor may not avail itself of a set-off with any claim against the
demand for payment under the guaranty letter.
Var. B: Unless otherwise agreed by the parties and subject of
the provisions of the law of insolvency, the guarantor may discharge its payment
obligation under the guaranty letter by means of a set-off with any claim not
assigned to it by the principal, provided that the claim of the guarantor is
[liquidated and] certain or undisputed.
Var. C: Unless otherwise agreed by the parties, the guarantor
is precluded from discharging its payment obligation under the guaranty letter
by means of a set-off with any claim, except where:
(a) the
beneficiary is insolvent or
(b) the
guaranty letter is designed to secure the fulfilment of a financial or payment
obligation of the principal or the guarantor and that obligation could have
been discharged by means of a set-off with the claim of the guarantor.
Chapter V
Provisional court measures
Article 21
Preliminary injunction against guarantor
(1) Where,
on an application by the principal,
Var. A: strong prima facie evidence is produced to the
satisfaction of a competent court
Var. B: clear and liquid proof is presented to a court of
competent jurisdiction
Var. C: it is manifestly shown by documentary means,
including [sworn witness statements] [affidavits]
that a demand made for
anticipated to be made] by the beneficiary constitutes an improper demand, the
court may issue a preliminary order enjoining the guarantor from meeting the
demand [or from debiting the account of the principal], provided that [the
court is satisfied that] the refusal to issue such an order would cause the
principal [serious harm] [irreparable loss] which would be [clearly] more
substantial then the loss that might be suffered by the beneficiary as a result
of the issuance of such an order.
(2) Before
deciding on the application of the principal, the court [may hear the
guarantor] [shall provide the guarantor with an opportunity to be heard]. It
may also ['if so permitted by its procedural law'] consider the advisability of
hearing the beneficiary or of allowing the principal to seek injunctive relief
against the beneficiary as co-defendant.
(3) An order
referred to in paragraph (1) of this article shall be issued for a specified
period of effectiveness not exceeding [six] months. An extension of that period
may be made dependent on the initiation by the principal of proceedings other
than preliminary proceedings against the guarantor or the beneficiary.
(4) The
court may make the effect of an order referred to in paragraph (1) of this
article subject to the furnishing by the principal of such security as the
court deems appropriate.
Article 22
Preliminary injunction against beneficiary
(1) Where,
on an application by the principal, strong prima facie evidence is presented to
a competent court that a demand made by the beneficiary constitutes an improper
demand, the court may order the beneficiary not to accept payment or to
withdraw its demand or, if such a demand is anticipated to be made, not to make
the demand, provided that the refusal to issue such an order would cause the
principal serious harm that would be more substantial than the loss that might
be suffered by the beneficiary due to such an order.
(2) Before
deciding on the application of the principal, the court [may hear the
beneficiary] [shall provide the beneficiary with an opportunity to be heard].
(3) An order
referred to in paragraph (1) of this article shall be issued for a specified
period of effectiveness not exceeding [six] months. An extension of that period
may be made dependent on the initiation by the principal of proceedings other
than preliminary proceedings against the beneficiary. [If an order restraining
the beneficiary from making a demand is repealed or becomes otherwise
ineffective, the period of effectiveness of the guaranty letter shall be deemed
to have been extended so as to allow the beneficiary [ten] days after the tome
of ineffectiveness of the order for making a demand.]
(4) The
court may make the effect of an order referred to in paragraph (1) of this
article subject to the furnishing by the principal of such security as the
court deems appropriate.
[Article 23
Principles of preliminary proceedings
(1)
Injunctive relief may be sought from a competent court against the guarantor by
the principal or by the beneficiary, and against the beneficiary by the
principal or by the guarantor, even if the place of business of the applicant
is not situated in this State.
(2) The
court shall [endeavour to] deal expeditiously with an application for
injunctive relief [and take into due account the special character of the
guaranty letter.]
Chapter
VI
Jurisdiction
Article 24
Choice of court or of arbitration
(1) The
parties may, in the guaranty letter or by a separate agreement in a form
referred to in paragraph (1) of article 7, designate a court or the courts of a
specified State as competent to settle disputes that have arisen or may arise
in relation to the guaranty letter, or stipulate that any such dispute shall be
settled by arbitration.
(2) If the
parties have designated a court or the courts of a specified State in
accordance with paragraph (1) of this article, only the designated court or
courts shall have jurisdiction.
(3) The
provisions of the preceding paragraphs of this article do not constitute an
obstacle to the jurisdiction of the courts of this State for provisional or
protective measures.
Article 25
Determination of court jurisdiction
(1) Unless
otherwise provided in accordance with paragraph (1) of article 24 [or if a
designated court of another State declines to exercise jurisdiction], the
courts of this State [may exercise] [have] jurisdiction over disputes between
the guarantor and the beneficiary relating to the guaranty letter if [the
guaranty letter was issued] [the guarantor has its place of business, where the
guaranty letter was issued,] in the territory of this State.
(2) The
courts of this State may also entertain an application by the principal for a
preliminary order against the guarantor [or the beneficiary] if the guaranty
letter was issued in this State.
Chapter VII
Law applicable to guaranty letter
Article 26
Choice of applicable law
[The rights and obligations
arising out of] [The rights, obligations and defenses relating to] a guaranty
letter are governed by the [rules of] law designated by the parties. Such
designation shall be by an express clause in the guaranty letter or in a
separate agreement, or
Var. A: result without doubt from the terms of the guaranty
letter.
Var. B: be demonstrated by the terms of the guaranty letter
[or the circumstances of the relationship between the guarantor and the
beneficiary].
Var. C: result by implication from the terms of the guaranty
letter.
Article 27
Determination of applicable law
Failing a choice of law in
accordance with article 26, [the rights and obligations arising out of] [the
rights, obligations and defenses relating to] a guaranty letter are governed by
the law of the State where the guarantor has its place of business or, if the
guarantor has more than one place of business, where the guarantor has that
place of business at which the guarantor was issued. [However, if according to
the guaranty letter the examination of the demand and any required documents takes
place in another State, the law of that State applies to the standard of care
and responsibility for such examination, failing a specific agreement to the
contrary.]