BANK GUARANTEES

1. Introduction

   1. The role of Guarantees in the International Trade
      • The nature of risk in international trade
      • Payment and Performance Obligations
   2. The role of guarantees in risk allocation
      
      

2. Development of Guarantees

   1. Financial Documents
      • Guarantees proper
      • Contracts of surely
      • Indemnities
      • Corporate guarantees and letters of comfort
        
        

3. Legal Analysis and Terminology

   • Primary and Secondary Obligations
   • Formal requirements
   • Consideration
   • Co-extensive of obligations
   • Bonds - Definition and Origin
   • Key distinction between bank guarantees and Sureties
   • Bank Guarantee – definition
   • Demand based Guarantees
   • Range of Demand Based Guarantees
   • Autonomy and Conditionality
     1. Case Study
        
        

4. International Bank Guarantees – Risk Analysis

   • Guarantees and the allocation of risks
   • Obvious and hidden risks in demand guarantees
   • “Unfair calling”
   • “Extend or Pay” demands
   • What should a banker look for when issuing the guarantee
   • Default and Demand based Guarantees
     1. Case Study
        
        

5. Types of Guarantees

   • Bid/ Tender Bonds
     
   • Advance Payment/Retention Money Guarantees
     
   • Performance Bonds
     
   • Labour Guarantee
     
   • Maintenance Guarantee
     
   • Standby Letters of Credit(SBLC) - Origin, nature and use of SBLC
     
   • Comparison of SBLC and non-SBLC
     1. 5.1 Comparison of SBLC and Demand Guarantees
        
        

6. Perceived Problem Areas

   • Un-enforceable Expiry Date
     
   • Application of foreign laws
     
   • Applicable Law– Primary Sources and Subsidiary Sources
     
   • Statutory regulations– UAE, Kuwait, Iraq, Bahrain
     
   • Specific country positions– Egypt, Oman, Syria, Lebanon, Algeria, Saudi Arabia, India

1.1 Drafts

• Essential features of draft
• Calculation of maturity dates
• Correction and alternation
  
• Un-enforceable Expiry Date
• Definition of draft
  
  

1.2 Case study on draft

1.3 Commercial Invoice

• Issuer
• Signature
  
• Description of goods
  
• Understanding as per Art 18 of UCP 600




1.4 Transport Documents covering at least two different modes of transport.

• Issuer
  
• Signer
  
• No need to show the name of the master
• Concept of transshipment
• Understanding as per Art 19 of UCP 600
  


1.5 Exercises



2.1 Bill of Lading

• Issuer
• Signer
• No need to show the name of the master
• Elimination of “port to port” shipment
• Intended Vessel/Intended Port
• Exclusion of carrying vessel by propelled by sail
• Overriding a prohibition against transhipment
• Understanding as per Art 20 of UCP 600
• Non-Negotiable Sea Waybill
• Issuer
• Issuer
• Exclusion of carrying vessel by propelled by sail
• Intended Vessel/Port
• Understanding as per Art 21 of UCP 60
  
  

2.2 Charter Party Bill of Lading

• Issuer
• Signer
• Permit signed by charterer or named agent for and on behalf of charterer
• Omits “ if a credit calls for a permits….”
• No need to show the name of the master
• May or may not show the name of the carrier
• Understanding as per Art 22 of UCP 600
  
  

2.3 Exercise




3.1 Air Transport Document

• Issuer
  
• Singer
• Actual date of Issuance
  
• Understanding as per Art 23 of UCP 600
  
  

3.2 Road, Rail or Inland Water Transport Document


• Issuer
  
• Signer
  
• Signature or stamp acceptable as evidence of rail transport document
  
• Original for shipper or consignor
  
• Rail transport document marked as “duplicate” is acceptable as “original”
  
• Understanding as per Art 24 of UCP 600
  
  

3.3 Courier Receipt, Post Receipt or Certificate of Posting


• Authentication of courier receipt
• Omission of Expedited delivery service
• Signed or Stamped
• Issuance by a named courier service
• Understanding as per Art 25 of UCP 600
  
  

3.4 Exercise

4.1 Insurance Documents

• Definition– What is insurance document.
• Inclusion of “Proxy”
• Omits reference to cover notes issued by brokers
• Coverage 110% of the value of the goods
• Coverage between the origin and end of carriage
• Reference to any exclusion clause is acceptable
• Acceptability of signature by proxy or agent
• Understanding as per Art 25 of UCP 600
  
  

4.2 Insurance Terms

• Deck shipment
• Average
• Claims payable in New York/London/UAE
• Warehouse to Warehouse clause
• All risks cover
  
  

4.3 Other documents – Issuer, Contents and Purpose

• Certified Invoice
• Certificate of Analysis
• Certificate of Weight
• Inspection Certificate
• Packing List
• Weight list
  
  

5.1 Documents for Official Purpose– Issuer, Contents, Purpose

• Certificate of Origin
• Consular Invoice
• Legalised Invoice
• Health Certificate
  
  

5.2 What is not discrepancy in the eyes of UCP

5.3 Miscellaneous Provisions

• Extension of expiry date or last day of Presentation
• Tolerance in Credit Amount, Quantity and Unit prices
• Partial drawings or shipments
• Hours of Presentation
• Understanding as per Art 29-33 of UCP 600
  
  

6.Checking of documents under letters of credit – 2 cases

(Based on real life issues input to be given by the bank)

7. Comprehensive Exercise

8. Q & A and Feedback