Comparison Of Urdg 458 And 758 Rules In Bank Letters Of Guarantee

In 1992, the ICC adopted the “Uniform Rules on Demand Guarantees” No. 458, which will be referred to as URDG 458 in this study. The URDG 458 rules were used in international banking practice until 2010. However, in line with the evolving commercial life and banking practices, the 758 rules, which came into effect on July 1, 2010, began to be applied. However, URDG 458 has not been repealed, and guarantees and counter-guarantees may still be issued in accordance with these rules. There are some differences and innovations between the URDG 458 and URDG 758 rules, which are evaluated as follows:[1]

– URDG 458 consists of 28 articles, while URDG 758 consists of 35 articles.

– The URDG 458 rules do not include examples of guarantee and counter-guarantee texts, while the URDG 758 rules include examples of guarantee and counter-guarantee texts as a new feature.

– The terminology in the URDG 458 rules was confusing and difficult to understand, which limited their scope of application. In the URDG 758 rules, the terminology has been harmonized with the UCP 600, which contains model rules for letters of credit, and the definitions and interpretations section has been simplified to make the rules clearer and more understandable.

– The URDG 458 rules contained very few provisions on counter-guarantees, and countries generally preferred to apply their own legal rules. The URDG 758 rules include detailed provisions on counter-guarantees, specifying that counter-guarantees are also subject to the URDG 758 rules unless otherwise stated.

– In the URDG 458 rules, in cases of requests to “extend the term or pay,” the guarantor bank grants the beneficiary and the principal a reasonable period to agree on the extension and delays fulfilling the indemnity claim until the principal documents the extension. Under URDG 758 rules, in cases of “extend the term or pay” requests, the guarantor bank has the right to delay the extension of the term for a maximum of 30 days, while the counterguarantor has the right to delay payment for 26 days, and the bank may, if it so desires, immediately fulfill the indemnity claim.

– The URDG 458 rules contain unclear provisions for situations not based on documents. In the URDG 758 rules, unclear provisions for situations not based on documents have been removed or amended to make them clearer and more understandable.

– The URDG 458 rules do not contain detailed provisions regarding changes to guarantees. The URDG 758 rules state that the change of guarantor bank becomes binding upon notification, but that the beneficiary has the right to refuse to accept the change.

– The URDG 458 rules state that the beneficiary’s right to claim compensation is not transferable unless expressly stated. Under URDG 758 rules, even if a guarantee is stated to be transferable, the guarantor is only obligated to fulfill the claim in accordance with the scope and manner explicitly approved by the guarantor, and there is no obligation to fulfill the claim beyond the scope and manner specified.

– Under URDG 458 rules, the decision on whether to fulfill a claim for compensation under a guarantee must be made within a reasonable period, but this period is not explicitly specified. Under URDG 758 rules, the guarantor bank has a five-business-day period from the receipt of the claim for compensation.

– Under URDG 458, if the guarantee document does not specify a maturity date or an event that terminates the guarantee, it is deemed to be indefinite. Under URDG 758, if the guarantee document does not specify a maturity date or an event that terminates the guarantee, the guarantee will lapse three years after the date of issuance.

The counter-guarantee shall lapse 30 days after the expiry of the guarantee.

There are many differences between URDG 458 and URDG 758, the main difference being that URDG 758 contains much more detailed and comprehensive provisions than URDG 458.[2]

URDG 758 is based on the UCP methodology, and its provisions have been made clearer and more applicable by taking into account the needs of today. With these changes, URDG 758 has found a broader scope of application and, with its clear terms and concepts, has been more widely accepted and adopted in international commercial life compared to URDG 458.

Year: 2025

Application: Comparison Of Urdg 458 And 758 Rules In Bank Letters Of Guarantee

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, pp. 24-29. For similar distinctions, see Durukanoğlu, Nihayet, ICC’s Uniform Rules on Guarantees and Their Application to the Public Sector, ICC Rules on Bank Guarantees (2010 Revision – URDG 758), Articles, Editor: Nuray Ekşi, Istanbul, Beta Publications, 2011, pp. 87-89.

[2] Ekşi, Nuray, ICC Model Rules on Bank Guarantees, ICC Rules on Bank Guarantees (2010 Revision-URDG 758), Articles, Editor: Nuray Ekşi, Istanbul, Beta Publications, 2011, p. 113.