《國際結(jié)算（英文）》chapter7 Guarantee

INTERNATIONALSETTLEMENTChapter7LetterofGuaranteeChapter7LetterofGuarantee7.1DefinitionofLetterofGuarantee7.2CharacteristicsandfunctionofGuarantee7.3PartiesofLetterofGuarantee7.4ContentsofLetterofGuarantee7.5BasicProceduresofLetterofGuarantee7.6TypesofLetterofGuarantee7.7DifferencesbetweenBankGuaranteeandDocumentaryLetterofCredit7.8internationalcustomsandpracticeofL/G

7.1DefinitionofLetterofGuarantee

Definition：Letterofguarantee(L/G)isawrittenundertakingmadebytheguarantorattherequestoftheapplicanttothebeneficiary,guaranteeingthattheapplicantwillperformobligationsunderthecontractsignedbetweentheapplicantandthebeneficiary.7.2CharacteristicsandfunctionofGuarantee1CharacteristicsofLetterofGuarantee1）AssurableTheissuingbankwillassuretothebeneficiarythatapplicantwillfulfilltheresponsibilityandobligationofthecontractwithitsownreputation,onlywhentheapplicantbreachofthecontractcanthebeneficiaryclaimreimbursementonissuingbank.Whenthecontracthasbeenfulfilled,theguaranteewillbeastandbydocumentsandwillceasedtobevalidatmaturitydateautomatically.2）IndependentLetterofguaranteeisissuedonthegroundofthebasistransactioncontractbetweentheapplicantandthebeneficiary.Onceitisissued,itwillnotbeboundtothebasiccontractandconstituteaindependentdocuments,bearstheindependentlegaleffect.3）DocumentaryPaymentunderletterofguaranteeisbasedonthedocumentspresentedbybeneficiaryaccordingtotheguaranteeregulationclause.Itincludesbeneficiary’scertificate,applicant’sdefaultdeclarationandotherrelativedocuments.2FunctionofLetterofGuaranteeAssistthebiddertoawardtenderFacilitatetheconclusionofcontractPromotethestartofprojectBesides，L/Gcanalsobeusedtopromisethequalityoftheproject,paymentofthecontract,therepaymentofloanprincipalandinterestandetc.7.3PartiesofLetterofGuarantee1Applicant——Itisthepartyappliesletterofguaranteetothebank.Itcanbeeitherthebuyerortheseller.Itisthepartythatbearsresponsibilityintheunderlyingcontract.Itpaysbacktheguarantorafteritspaymenttothebeneficiary.ItfillstheformofapplicationforL/Gandthusbearsrelativecommission.2

Beneficiary——ItistheacceptorofL/G,itcanexecuteitsrecourserighttotheguarantorunderL/G,itisnormallyanotherpartyoftheunderlyingcontract.Iftheapplicantdoesnotfulfillitsduty,thebeneficiarycanuseL/Gtoaskforcompensationfromtheguarantor.3

Guarantor——Itisthepartythatacceptsapplicant’sentrustandopenstheL/G.Itisoftenabank.Itsliabilitiesis:Whenthebeneficiarypresentsdocumentsorcertificatesoftheapplicant’sbreachingofcontract,itmushmakepaymentorcompensation.Afterthis,itcanmakeclaimstotheapplicantorthecounterguaranteebank.4AdvisingBank——ItisthepartyhandstheL/Gtothebeneficiaryunderthecommitmentofguarantor.WhenaL/Gisissued,itcanbedirectlysenttothebeneficiary,withoutreachingtheadvisingbank;Oritcanbesenttotheadvisingbankforverificationfirst,thenbesenttothebeneficiary,thisisfrequentlyhappenedwhentheguarantorandbeneficiaryareindifferentplaces.5CounterGuarantor——Itisthepartythatopenscounter-guaranteefortheapplicant.Inordertoavoidrisks,theguarantorcanrequireathirdpartytoguaranteetheL/G(nottheapplicantitself),thethirdpartyiscalledcounterguarantor,itcanbeabank,abureauoragovernmentorganization.Whenthebeneficiaryclaimrightstotheguarantor,afterthepayment,theguarantorcanusecounterguaranteetomakeclaimstothecounterguarantor.Thecounterguarantorhaslowertheriskofguarantor.6

ConfirmingBank——ItisthebankthatconfirmedtheL/G,itguaranteesthattheguarantorwillexecutecompensationliability.Itcompensatetothebeneficiarywhentheguarantordoesnotfulfillitsobligation.ThecharacteristicsoftheconfirmingbankofL/Gissimilartotheconfirmingbankundercredit.7ReissuingBank——It

isthepartythatissueletterofguaranteetoitsdomesticbeneficiaryaspertherequestoftheforeigncounterguarantor.Reissuingguaranteeisalwaysestablishedasperthebeneficiarycountry’slaw,governmentregulationortherequestofthebeneficiary.7.4ContentsofLetterofGuarantee1basiccontentsofabankguaranteeThenameandaddressofthebeneficiary;Thenameandaddressoftheapplicant;Thenameandaddressoftheadvisingbank;Thename,nationalityanddetailedaddressoftheguarantorbank;Thetypeandpurposeoftheguarantee;Therelativecontractnumber,agreementnumber,tendernumberandtherelativereferencenumberoftheproject;Thecurrencyandamountoftheguarantee;Thedurationorexpirydateoftheguarantee;i.Theclaimingconditionandclaimingmethod.Claimingconditionisthespecificconditionunderwhichtheguarantorundertakestopay.Itisthespecificdocumentsrequirementwhenclaimoccurs.Claimmethodmeanswhichway(T/Treimbursementormailreimbursement)istobeused,whethertheclaimingroutewillpassbytheadvisingbank;j.Thehighestcompensationamountandcurrency,k.Theguarantorbank’sliability(primaryobligationoraccessoryobligation)l.Bankingchargesclausesm.Thestipulationtolanguageusedinguaranteeandclaimdocumentsn.Underwhichlaw,regulationofarbitrationclausetheguaranteeissubjectto2basiccontentsofacounterguaranteeAcounterguaranteemainlycontainstwoclauses:theauthorizationinstructionclauseandthereimbursementclause.Anexampleoftheauthorizationinstructionclause:“pleaseissueunderourfullresponsibilityyourtender/performance/advancepaymentguarantee...”Anexampleofthereimbursementclause:“inconsiderationofyourissuingthesaidguaranteeonourbehalf,weherebyundertaketokeepyoureimbursedsubjecttothesameconditionasmentionedaboveuponourreceiptofyourclaimdeclaringthatyouhavebeencalledupontomakepaymentunderyourguarantee,togetherwithacopyofthebeneficiary’sdemandonyou....”3additionalclauseofaletterofguarantee1)Thevalidityclause——Thisclauseistodefinewhenandatwhatcircumstancethenguaranteewillbeeffective.Example：“

Thisperformancebondwillcomeintoforceonlywhenthesellerhasreceivedaletterofcreditacceptabletohim.”2)Automaticextensionclause——Sinesomeguarantee’smaturitydatescannotbedeterminedatthetimeofissuing,orthebeneficiaryisnotassurableofthetimewhentheprojectwillbecompleted.Example:“Thisguaranteeshallbeautomaticallyextendedforanotherthreemonthsiftheguarantorshallnothavereceivedbytheendofthevalidityhereof,anyconfirmationfromthebeneficiarythatitcanbereleasedfromitsobligationhereunder.”3)Unconditionaltopayclause——Thisclauseguaranteetheguarantortakestheprimaryliabilitytopayuponpresentationofthecomplieddocuments.Example：

“Thebeneficiaryshallbethesoleandfinaljudgesfordecidingwhetherornottheapplicanthasdulyperformedhisobligationofthecontract,andweherebyundertakestopayyouimmediatelyuponreceiptofyouwrittenclaimnotwithstandinganycontestation,defence,orobjectionfromtheapplicantandwithoutitbeingnecessaryforyoutoproduceoradduceanyprooforanyjudicialoradministrativeproceedingswhatsoeverinsupportofyourclaim.....”4)Nochangeoradditionclause——Toensuretheguaranteeresponsibilitynottobechangedaspertheexecutionoftheunderlyingtransaction,thebeneficiarymayrequesttheissuingbanktocontainaclauseintheguaranteetomakesurethatallthetermsandconditionsoftheguaranteeshouldnotbechanged,addedordeducted.Example：“Wefurtheragreethatnochangeoradditiontoorothermodificationtothetermsofthecontractorofworkstobepreformedthereunderorofanyofthecontractdocuments,whichmaybemadebetweenthecontractparties,shallinanywayreleaseusfromanyliabilityunderthisguaranteeandweherebywaiveourrightstoaskfornoticeofanyofsuchchanges,additionsormodifications.....”

5)Thevaluereductionclause——Underabankguarantee,theguarantor’sliabilitywillnotbealwaysthesame,itmaychangeaccordingtothefulfillmentoftheunderlyingcontract.Toindicatethispoint,thevaluereductionclausewillalwaysbeincorporated.Example：“TheguaranteeamountoftheL/Gshallbediminishedautomaticallyandproportionallyinaccordancewiththevalueofeachshipmentasshownintherelevantinvoice.”6)Returnclause——IncountriessuchasJordan,PakistanandThailand,thelawsstipulatesthat,byaguaranteeissuedtoagovernmentorquasigovernmentdepartment,eveniftheguaranteeexpires,thebeneficiaryshouldstillhavetherightofclaimingwithinacertainperiodoftime.Example：“Uponitsexpiration,thisL/Gshallbenullandvoid,andshallbeimmediatelyreturnedtousforcancellation.Anyactionofmaintainingtheoriginalofthisguaranteeoranyofitsamendmentshallthengivenorighttothebeneficiaryforlodginganymoreclaimhereunder.”7)Legalclause——Itisaboutthelawapplicabletoabankguarantee.Sincedifferentcountrieshavedifferentlaws,itisaquestionwhichoneshouldbeapplicable.Inordertoassuretheapplicablelaworjurisdiction,abankguaranteeusuallycontainsalegalclause.Example：“Thisguaranteeisgovernedbythelawof...Country,andissubjecttotheexclusivejurisdictionofthecourtof....”7.5BasicProceduresofLetterofGuarantee1DirectL/GBeneficiaryApplicant

Guarantor(1)Thebeneficiaryandapplicantsignstheunderlyingcontract,beneficiaryrequirestapplicanttoopenanL/G(2)ApplicantappliesanL/G,guarantoropensanL/G(3)GuarantorsendstheL/Gtothebeneficiary(4)Underthebreachingofcontractoftheapplicant,thebeneficiaryusesL/Gtoaskforcompensationfromtheguarantor,andguarantormakespayment(5)Theguarantorasksreimbursementfromtheapplicant.2IndirectL/GBeneficiaryAdvisingBank

GuarantorApplicant(1)Thebeneficiaryandapplicantsignstheunderlyingcontract,beneficiaryrequiresapplicanttoopenanL/G(2)ApplicantappliesanL/G,guarantoropensaL/G(3)GuarantorsendstheL/Gtoadvisingbank(4)AdvisingbanksendstheL/Gtobeneficiary;(5)Underthebreachingofcontractoftheapplicant,thebeneficiaryusesL/Gtoaskforcompensationfromtheguarantorthroughadvisingbank,guarantormakespayment;(6)Theguarantoraskspaymentfromtheapplicant.(5)7.6TypesofLetterofGuarantee1ConditionalL/GandDemandlL/GConditionalL/Gmeanstheapplicantsetssomerestrictionstoclaimingrightsandaccepting;DemandL/Gmeanstheapplicantdoesn’tsetanyrestrictionstoclaimingrightsandaccepting,itisanunconditionalL/G;2IndependentL/GandAccessoryL/GIndependentL/Gisissuedbasedonunderlyingcontract,butithasindependentlegaleffect.Theguarantorbearsthefirstpayingliabilitynomatterwhethertheapplicantiswillingtopay.AccessoryL/Gisaattachedagreementtotheunderlyingcontract,itslegaleffectiscoexistwiththecontract.Theguarantorbearssecondaryliability,whichmeansthepayingobligationoftheguarantorisbasedontheliabilityoftheapplicantintheunderlyingcontract.3directL/GandindirectL/GDirectguarantee:isissuedbytheguarantordirectlytothebeneficiaryandmaybeadvisedthroughalocalbankbutwithoutanyresponsibilityonthepartofthelocalbank.

Indirectguarantee:abankrequestalocalbanktoissuetherequiredguaranteeinfavorofthebeneficiaryandthebankissueacounterguaranteeinfavorofthelocalbankinwhichitundertakestoirrevocablypaythelocalbanktheamountpaidbyitunderitsguarantee.4settlementL/GandcreditL/GSettlementguaranteeistheindependenttransactionsettlementinstrumentthattheguarantorbanktaketheprimaryliabilitytoeffectpayment.

CreditL/Gbearsthenatureofstandby,theguarantorbanktaketheprimaryoraccessoryliabilitytocompensatethebeneficiaryintheeventthattheapplicantfailstofulfilltheperformanceoftheunderlyingtransaction.5limitedamountL/GandunlimitedamountL/GLimitedamountL/Gmeansthattheguarantorwillonlyberesponsibleforthepaymentliabilityofaspecificamount(theamountcanbeaccumulativeorun-accumulative),anyclaimexceedingthisamountwillnotbeconsidered.UnlimitedamountL//Gmeanstheguarantorwilltaketheguaranteeresponsibilitytocovertheborrower’sdebt(principalplusinterest)andallthetaxanddefaultcompensationfundswhicharisesfromthedirectdebt.revocableL/GandirrevocableL/GRevocableL/Gmeanswithouttheconsentofotherrelatedparties,theguarantorcanhastherightstocanceloramendtheissuedletterofguaranteeatitsdiscretion.IrrevocableL/Gmeansthatwithoutalltheconsentofthealltherelatedparties,theletterofguaranteecannotbecanceledoramended.limiteddurationL/GandunlimiteddurationL/GLimiteddurationL/GisonekindofL/Gthatstipulatethevalidityperiodintheguarantee,thebeneficiarymustmakeclaiminthestipulatedperiod,otherwise,theguarantorwillrefusetoeffectpayment.UnlimiteddurationL/Gistheguaranteethatdoesnotstipulatethevalidityperiod.Unlessthelegitimatespecificeventoccurs,oralltheclaimsofthebeneficiaryhasbeensatisfied,thenbeneficiaryhastherighttoclaimontheguarantorbankatanytime.8ExportingL/GandImportingL/Ga.ExportingL/G(1)Tender/BidBondGuaranteeIninternationalmarket,majorprojectusuallyopensbidingsoastoattractqualifiedcompanies.ThetendererhastoprovideL/Gofsomeamountsoastoindicateitssincerity.(2)PerformanceGuaranteeTheapplicantusesperformanceguaranteetoassuretothebeneficiarythatitwillperformcontract,deliverygoodsatthescheduleddatewithquantityandquality.(3)AdvancePaymentGuarantee.Itisalsocalledtherepaymentguaranteeordownpaymentguarantee.Underthisguarantee,thebankpromisesthatiftheexportercannotorrefusestofulfillitsperformanceofcontract,thebankwillreturntotheimportadvancedpaymentplusinteresttotheimporter.(4)QualityGuarantee/MaintenanceGuaranteeInthecontractofindustryproduct、mechanicalequipment、vessel、airplaneetc.,inordertoguaranteethequalityofcargo,theimporternormallyaskstheexportertoapplyaqualityguarantee.Itmeansifthegoodscannotmeettherequirementsofcontract,thebankwillcompensatetheimporterforitslosses.(5)retentionmoneyguaranteeRetentionmoneyguaranteeisasubstituteformaintenanceguarantee.Aspertheresponsibilityliabilityoftheguarantorbank,theretentionmoneyguaranteeisinessenceamaintenanceguarantee.b.ImportingL/G(1)PaymentGuaranteeInsightpaymentguarantee,theguarantorguaranteesthatuponthereceiptofshippingdocuments,itwillmakepaymenttothebeneficiaryonpresentation.Paymentguaranteeisatypical“ondemand”guarantee,itbearsthesamefunctionasletterofcredittopromisethepaymentoftheimporter.(2)LeaseGuaranteeWhenimportingmachineryequipmentortransportationvehiclebymeansofleasing,theguarantorbankguaranteestothebeneficiarythatthelesseewillpaytherentinaccordancewiththetermsandconditionsoftheleasingagreement.(3)compensationguarantee/assemblyandprocessingguaranteeIncompensationtrade,attherequestoftheimporter(equipmentpurchaser),theguarantorbankwillissuecompensationguaranteeinfavoroftheexporter(equipmentsupplier),promisingwhentheimporterhasreceivedtheequipmentinaccordancewiththecontractterms,hewilldelivertheproductproducedbytheimportedequipmenttotheexporterorthedesignatedthirdpartytoreimbursethevalueoftheimportedequipment.c.othertypesofL/G(1)LoanguaranteeWhentheenterpriseborrowsfromtheforeignfinancialinstitution,theborrowerneedstoprovidealoantotheforeignlender,promisingintheeventthattheborrowerfailstorepaytheprincipalplusinterestasstipulatedintheloanagreement,theguarantorwilltaketheprimaryliabilitytorepaytheforeignlender.(2)CustomsguaranteeCustomsguaranteeisissuedbytheguarantorbanktotheforeigncustoms,guaranteeingthattheimportedgoodswillbewithdrawnthentaxwillnotbehandedwhentransportthegoodsintotheforeigncountry.(3)OverdraftguaranteeOverdraftguaranteeisissuedbytheguarantorbankattherequestoftheoutwardsprojectcontractingcorporation,forthepurposeofopeningoverdraftaccountinforeignbank.Whenthecontactingcorporationconstructintheforeigncountry,normallyithastherequesttoopenoverdraftaccounttogetmorecreditfacilityfromlocalbank.(4)BailbondBailbondisalwaysusedinmarinedisputes,whenthetwoshipscollisionandcauseslossestothecommodityowner/otherrelatedparities,orbecauseofthecarrier’sfault,shortageordamagesoccurstothecargo.Beforedeterminationofresponsibility,themarinecourtordersthedetentionofvessel,atthissituation,inordertoreleasethevessel,attherequestofthevesselowner,theguarantorbankwillprovideabailbondtolocalmarinecourt,promisingthatvesselownerwillcompensatethelossasperthecourtjudgment.7.7DifferencesbetweenBankGuaranteeandDocumentaryLetterofCreditCommonsBoththeBankguaranteeanddocumentarycreditaresettlementmethodusedininternationaltrade;Theyarebothissuedattherequestoftheapplicant,infavorofthebeneficiary,promisingthepaymentobligationwhencomplyingdocumentsarepresented.Thebankswillonlydealwithdocuments,whilenotbeingresponsiblefortheauthenticityand