Establishment Of Agreements In International Bank Letters Of Guarantee

When a letter of guarantee needs to be issued through a bank in a different country as a result of legal relationships established between persons residing abroad, different and multiple banks are involved in the relationship. Guarantee letter relationships established in this manner will be referred to as foreign guarantee letters in this study.

In foreign guarantee letter relationships, the beneficiary and the addressee are located in different countries, and the guarantee letter is delivered to the addressee through a bank abroad. In the past, guarantee letters were issued by telex and telegram, but today a new system is used. The system used here is called SWIFT^[1]. The SWIFT system is used between banks for guarantees, counter-guarantees, and letters of credit. Guarantees and counter-guarantees issued using the SWIFT system are prepared using digital signatures (encryption), allowing transactions to be carried out electronically. As it is a system that has been used by banks for a long time, it has established trust.^[2]

With the SWIFT system, letters of guarantee are issued to correspondents based abroad and sent through the relevant bank located abroad. For example, upon the request of the beneficiary, Bank X sends the relevant guarantee letter to the bank in the country where the beneficiary is located and which will establish the letter relationship, for delivery to the beneficiary. The guarantee letter relationship is established in this way.

There are various message types in guarantee letter texts issued via SWIFT, and these message types have different purposes. MT760 is used for guarantee issuance, MT767 for guarantee amendments, MT768 for acknowledgment, and MT769 for liability reduction and risk reduction.^[3] These message types are specified in the first part of the letter text and provide information to the other bank and parties regarding the general request of the transaction.

In summary, unlike domestic guarantee letters, the SWIFT system is used in foreign guarantee letters, and a second bank is involved. Additionally, while both the beneficiary and the addressee are domestic residents in domestic guarantee letters, a foreign resident is involved in foreign guarantee letters. In terms of application, while electronic guarantee letters have begun to be used in domestic guarantee letters, the general practice is to issue guarantee letters on paper. In foreign guarantee letters, guarantee letters are issued through the SWIFT system, and transactions are carried out through this system.

Year: 2025

Application: Establishment Of Agreements In International Bank Letters Of Guarantee

Lawyers: Mehmet Said Sarıbaş & Bilal Akbaba

E-mail: info@saribasakbaba.av.tr

Website: saribasakbaba.av.tr

^[1] SWIFT, Society Worldwide International Funds Transfer, an international organization headquartered in Belgium.

^[2] Ekici and Durukanoğlu, p. 386.

^[3] Ekici and Durukanoğlu, p. 388.