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NEWS LETTER 2 0 1 0
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Uniform Rules for Demand Guarantees
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The International Chamber of Commerce’s (hereinafter referred to as
the “ICC”) revised Uniform Rules for Demand Guarantees (hereinafter
referred to as the “URDG”) entered into force on July 1, 2010.
The rules, approved by the ICC in 1991, have as their objective the
balancing of the conflicting interests of applicants, beneficiaries, and
guarantors. In simplifying the drafting of demand guarantees, they serve
as a model for guarantee practice worldwide.
Demand guarantees are irrevocable undertakings, independent of
underlying contracts, issued by a guarantor on the instructions of an
applicant to pay the beneficiary any sum that may be demanded up to a
maximum amount stated in the guarantee. Whereas a documentary credit
assures the exporter of being paid upon the presentation of complying
documentation showing that a shipment was made, a demand guarantee
provides protection to the importer against non-performance, or late or
defective performance, by the exporter.
In recent years, the URDG have gained increasing worldwide
acceptance. They were adopted by the International Federation of
Consulting Engineers (hereinafter referred to as the “FIDIC”) in their
model guarantee forms and later by the World Bank. National lawmakers
have taken the URDG as a model for independent guarantee statutes.
The revision, formally called URDG 758, replaces URDG 458 and
was agreed to after a two-and-a-half year revision process that produced
five comprehensive drafts based on 600 comments from 52 countries.
The revised rules contain new definitions and interpretation rules
to provide greater clarity and precision, as well as the solution to non-
documentary conditions, asymmetrical guarantees, and counter-guarantees.
In this brief study, URDG 758 will be compared to URDG 458 as to
four points chosen from the contractors’ point of view.
1. InURDG458, there is a risk of contradiction between the description
of the beneficiary in the description part and the definition of
“demand guarantee” in the definitions part (Article 2(a) of URDG
458). The description of the beneficiary in the introduction part
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Article of April 2010