APPLICATION OF URDG 758 IN TERMS OF GUARANTEES AND COUNTERGUARANTEES

The application of URDG rules is regulated in Article 1 of URDG 758. Paragraph a of the article clearly states that URDG rules shall apply to any guarantee and counterguarantee relationship where the application of URDG rules is expressly agreed. Even if the underlying contract between the parties specifies that the guarantee is subject to URDG 758, URDG 758 will not apply if this is not explicitly stated in the guarantee text.[1]

URDG Article 1/b stipulates that, as a rule, unless otherwise specified, where a guarantee is subject to URDG, the counter-guarantee shall also be subject to URDG. If the counter-guarantee specifies that it is not subject to URDG, the URDG rules shall not apply to the counter-guarantee. Here, it is stipulated that the counter-guarantee may be excluded from the scope of the URDG. If the counter-guarantee does not specify otherwise and both the guarantee and the counter-guarantee are subject to URDG 758, the counter-guarantor shall be deemed to have accepted the rights and obligations imposed on it by URDG 758.

In the absence of an explicit indication in the guarantee text regarding which URDG rule applies, proceedings shall be conducted in accordance with URDG 758 Article 1/d. The relevant provision states that if a guarantee or counter-guarantee issued on or after July 1, 2010, is subject to the URDG but does not specify whether it is URDG 758 or URDG 458, the rules of URDG 758 shall apply. This provision in URDG 758 clarifies the applicable rules in cases of uncertainty.

In doctrine, it is argued that if the parties have consistently referred to the URDG rules in their previous guarantee relationships, the URDG rules may be applied as commercial practice to the extent permitted by the applicable law.[2] Although such views exist in doctrine, we believe it is more appropriate to explicitly mention URDG 758 in guarantee texts to avoid potential risks.

Year: 2025

Application: Application Of Urdg 758 In Terms Of Guarantees And Counterguarantees

Lawyers: Mehmet Said Sarıbaş & Bilal Akbaba

E-mail: info@saribasakbaba.av.tr

Website: saribasakbaba.av.tr

[1] AFFAKİ, Georges, GOODE, Roy, Guide to ICC Uniform Rules for Demand Guarantees, URDG 758, Paris and Oxford, 2011, p. 31.

[2] AFFAKİ, Georges, GOODE, Roy, Guide to ICC Uniform Rules for Demand Guarantees, URDG 758, Paris and Oxford, 2011, p. 33. For opposing views, see Develioğlu, p. 59, footnote 210.