Demand guarantee rules gain wider acceptance
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| URDG - avoiding misunderstandings |
Paris, 12 September 2001 - ICC's Uniform Rules for Demand Guarantees are well on their way to widespread acceptance by banks and traders, another major ICC contribution to international trade facilitation.
Ten years after the rules - known as URDG - were introduced, ICC has published a users' handbook that covers the issuance, drafting, advantages and history of the rules.
The author of A User's Handbook to the URDG, Georges Affaki, is head of trade finance legal affairs at BNP Paribas in Paris. Mr Affaki coordinates the bank's worldwide energy practice, involving frequent structuring, negotiating and drafting of international guarantees in the framework of international trade finance.
He explodes several myths about URDG - that they set a trap for unwary beneficiaries, that national laws preclude parties from using them, and that they are inflexible and cannot be adapted to parties' needs.
Dr Affaki notes that international organizations such as
the International Federation of Consulting Engineers (FIDIC), have incorporated the URDG in their model guarantee forms, and this is likely to lead to a widespread use of the rules in the procurement of engineering works.
The URDG are rapidly taking their place in the ICC panoply alongside such time-honoured trade and financial instruments as the ICC rules governing documentary credits and Incoterms, the standard trade definitions that are used in countless transactions worldwide every day.
ICC Secretary General Maria Livanos Cattaui, said in a foreword to A User's Handbook to the URDG: "We sense that a turning point has been reached in acceptance of the rules, a development that we at ICC find most gratifying."
The URDG, the product of 10 years of work by ICC's commissions on banking and international commercial practice, came into force in December 1991.Sir Roy Goode, Chairman of the URDG drafting group, commented: "After a slow start, the rules have increasingly gained favour both with banks and with parties as introducing consistency of practice, and a fair balance of interests while providing the essential need of beneficiaries to have recourse to a speedy method of calling up payment in the event of default."
Dr Affaki cites the following advantages:
·The URDG simplify the drafting of demand guarantees and counter-guarantees by offering read-to-use rules and model forms that
need little - if any - adaptation.
· Because of the fair balance they strike between the parties' interests, the URDG encourage a more serene negotiating atmosphere.
· Being a clear set of rules written in plain language, they help to avoid misunderstandings leading to costly litigation.
ICC Banking Commission
ICC Commission on International Commercial Practice
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