Historical Development Of Bank Guarantee Agreements

1. a) The Historical Development and Application of Letters of Guarantee in the International Arena

Guarantee agreements, which play an active role in international commercial life, have not been directly regulated in national or international law.

In Roman law, guarantee contracts established as “Stipulatio” ([1] ) and “Promissio Indemnitatis” ([2] ) form the basis of bank guarantee contracts.[3] In the modern sense, guarantee contracts first emerged in France in the 18th century. Here, individuals seeking to acquire shares in a company were encouraged to do so by being guaranteed a specific share of profits, either directly or through a partnership, with the aim of preventing the company from defaulting on interest payments and going into bankruptcy. [4]

In his work titled “Garanti Sözleşmesi” (Guarantee Agreement) published in 1866, German jurist Rudolf Stammler examined the legal nature of the guarantee of profit shares that emerged in France. As a result of his research, findings were made regarding the independence of guarantee agreements.[5]

As a result of the rapid development of international trade, various international regulations were established to address the uncertainties and uniform application requirements arising from local laws. The first of these regulations was the ICC’s “Model Rules on Contract Guarantees” (ICC 325), which was published and entered into force in 1978. [6](ICC 325- Uniform Rules for Contract Guarantees) These rules could not find an application area due to the difficulties in the indemnity clauses, the lack of any enforceability, and their conflict with banking practices ([7] ). Following these rules ( ), the ICC’s 458th “Uniform Rules on Demand Guarantees” were adopted in 1992. (URDG-458) These rules are more comprehensive than MTO-325 and have been approved by UNCITRAL (United Nations Commission on International Trade Law) and accepted by FIDIC (International Federation of Consulting Engineers).[8] Finally, the ICC published its Rules No. 758, which came into effect on July 1, 2010. These rules are generally accepted in international banking and trade and are frequently encountered in practice. The United Nations accepted these rules on July 5, 2011, FIDIC on March 14, 2012, and the World Bank on June 26, 2012.[9]

France[10] , Belgium[11] , and Switzerland[12] are subject to the continental European legal system, and guarantee contracts are widely used in Belgium, both by banking institutions and by natural or legal persons. In commercial practice, when a guarantee is requested from a bank regarding a payment obligation, it is typically issued in the form of a bank guarantee letter.

1. b) The Historical Development of Guarantee Letters in Turkish Law

There is no specific legislation regulating guarantee contracts in Turkish law. The fundamental principles governing guarantee contracts are established in accordance with doctrine and case law.

Bank guarantee contracts, or guarantee letters, were first implemented pursuant to the Decree No. 6048 dated January 8, 1928, issued by the Council of Ministers in accordance with Article 1 of the Law No. 1025 dated March 12, 1927.[13] The guarantee letters issued in 1928 contained the term “guarantor,” which was later replaced with “bank as guarantor” in subsequent amendments.[14] Over time, the distinction between guarantee letters and surety was clarified and differentiated. [15]While the guarantee letters issued in the early years were considered to have the nature of surety, the Supreme Court’s 1967 and 1969 decisions on the unification of judicial precedents ruled that such guarantees were not surety.[16] The practice of guarantee letters was initially requested by public institutions, but over the years, it has also been requested by various public and private institutions.

Year: 2025

Application: Historical Development Of Bank Guarantee Agreements

Lawyers: Mehmet Said Sarıbaş & Bilal Akbaba

E-mail: info@saribasakbaba.av.tr

Website: saribasakbaba.av.tr

[1] Stipulatio: A unilateral contract in oral form that gives rise to narrow legal disputes. See Ejder Yılmaz, Legal Dictionary, Yetkin Publications, Revised 4th Edition, Ankara, 2010, p. 686; “It is understood that great importance is attached to the word given and witness in legal transactions, and the Stipulatio contract, as an oral contracẗ  , has emerged as a contract subject to form, applicable without the need for a written document or witness.” See Fırat KORKMAZ, Stipulatio in Roman Law (Master’s Thesis), Eskişehir, 2014, p. 109.

[2] Promissio indemnitatis: A commitment made by a third party to compensate for any potential damage arising from a legal transaction. See Akın Ekinci and Nihayet Durukanoğlu, Guarantee Letters, Guarantees, and Counter-Guarantees in Turkish Law and Banking Practice, Istanbul, Legal Publishing, 2016, p. 32.

[3] Ekici and Durukanoğlu, p. 31.

[4] Reisoğlu Seza, Guarantee Agreement, Ankara, 1963, p. 39; Ekici and Durukanoğlu, p. 31.

[5] Ekici and Durukanoğlu, p. 31.

[6] Özalp, Abdurrahman, ICC Rules on Bank Guarantees (2010 Revision-URDG 758), Articles, Editor: Nuray Ekşi, Istanbul, Beta Publications, 2011, p. 3.

[7] Ekici and Durukanoğlu, p. 35.

[8] Özalp, p. 3.

[9] Ekici and Durukanoğlu, p. 213.

[10] Louis de Longeaux. Ed. Yann Aubin, Louis de Longeaux, Jean-Claude Vecchiatto, International Bank and Other Guarantees Handbook: Europe, Chapter 8 France, The Netherlands, Wolters Kluwer, 2017, pp. 218-219.

[11] Frédéric Heremans, Ed. Yann Aubin, Louis de Longeaux, Jean-Claude Vecchiatto, International Bank and Other Guarantees Handbook: Europe, Chapter 3 Belgium, The Netherlands, Wolters Kluwer, 2017, pp. 61-62.

[12] Alexandre Both and Tervel Stoyanov, International Bank and Other Guarantees Handbook: Europe, Chapter 28 Switzerland, The Netherlands, Wolters Kluwer, 2017, p. 1240.

[13] Reisoğlu Seza, Bank Guarantees and Counter-Guarantees, Ankara, 2003, p. 21.

[14] Reisoğlu Seza, Bank Guarantees and Counter-Guarantees, Ankara, 2003, pp. 21-22.

[15] To be discussed later…..

[16] YİBK dated 11.06.1969, No. E.1969/4 K.1969/6 (Official Gazette 03.10.1969, No. 13317) and 13.12.1967, E.1966/16 K.1967/7 (Official Gazette 05.04.1968, No. 12867)