Contents Of International Bank Letters Of Guarantee

There is no requirement regarding the contents of international letters of guarantee. It is important that instructions requesting the issuance of guarantees and counter-guarantees, as well as the guarantees and counter-guarantees themselves, are clear and unambiguous. In practice, it is observed that each bank has its own printed forms and requests customers to fill them out.^[1]

URDG Article 8 introduces regulations regarding the content of instructions and guarantees. According to this regulation, instructions given for the provision of guarantees and the text of the guarantee must be clear, precise, and not overly detailed.^[2]

Article 8 of the URDG also lists the contents that are recommended to be included in the letter. The contents listed in this article are as follows:

– Beneficiary,

– Drawee,

– Guarantor,

– A reference number or other information identifying the underlying debt relationship,

– A reference number or other information identifying the guarantee or, if provided, the counter-guarantee,

– The amount to be paid or the maximum amount and the currency in which it is to be paid,

– The termination of the guarantee,

– Conditions for payment request,

– Whether the payment request or other document shall be submitted in writing or in electronic format,

– Language in which the document specified in the guarantee shall be provided, and,

– Who shall bear the expenses.^[3]

All of the above provisions are recommendations and do not constitute any obligation. The expiration of the guarantee, the conditions for payment requests, whether payment requests or other documents are to be submitted in written form or electronic format, the language in which the document specified in the guarantee is to be provided, and who is responsible for the expenses are optional, and if not specified, they will be interpreted in accordance with the other provisions of the URDG.^[4]

Model forms are available in Annex 758 of the URDG, and these forms are ready-to-use packages.^[5] They contain sample texts in line with the provisions of the rules. These forms are easy to use and can be used for any purpose. There are only 13 blank fields for the model forms, which can be customized for any purpose and will have a significant impact on ensuring compliance with international practice.^[6]

There is no regulation under URDG 758 regarding the language of the documents required for guarantees and counter-guarantees. In international practice, it is accepted that the documents required must be in the language in which the guarantee or counter-guarantee is issued.[7]According to one view, there are matters that must be included, are not required to be included, and may be included in guarantees and counter-guarantees issued under the URDG.[8] If the required matters are not included, the URDG rules themselves will not be sufficient, and there will be risks of them being unusable and unenforceable.

Provisions that are not required may be interpreted in accordance with the provisions of the URDG. Provisions that may be included refer to matters that may be specified in the text of the guarantee at the discretion of the parties and are not mandatory.

The matters that must be included in guarantees and counter-guarantees include the beneficiary, the drawee, the reference number or information indicating the underlying relationship, the reference number or other information identifying the guarantee issued, the maximum amount to be paid, and the currency. ^[9] These matters are important for the interpretation and enforceability of the letter of guarantee, otherwise there may be problems in the interpretation and continuation of the letter of guarantee relationship.

Matters that are not required to be included in guarantees and counter-guarantees cover those parts that can be interpreted in accordance with the provisions of the URDG. These matters include which version of the URDG applies, the effective date of the guarantee and/or counter-guarantee, the independence of the guarantee and counter-guarantee, the independence of each claim, the termination of the guarantee and/or counter-guarantee, liability for expenses, the transferability of the guarantee and/or counter-guarantee, and the applicable law.^[10]

Matters that may be specified in guarantees and counter-guarantees include provisions regarding increases or decreases in the amount (separate from partial payments), whether presentation shall be made on paper or electronically, the termination date or terminating event, and provisions relating to arbitration or litigation.^[11]

Year: 2025

Application: Change Of Ownership Of The Leased Property The Tenant’s Obligation Regarding Vat And Withholding Tax

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^[1] Ekici and Durukanoğlu, p. 229.

^[2] URDG 758, Article 8: “The instructions for issuing a guarantee and the guarantee itself must be clear, unambiguous, and not overly detailed.”

^[3] Translation by Develioğlu, p. 343.

[4] AFFAKİ, Georges, GOODE, Roy, p. 68.[5] For relevant examples, see https://library.iccwbo.org/content/tfb/pdf/Model%20forms%20758.pdf (accessed on 19/11/2022).

[6] AFFAKİ, Georges, GOODE, Roy, pp. 68-69.

[7] Ekici and Durukanoğlu, p. 230.

[8] AFFAKİ, Georges, GOODE, Roy, pp. 62-68.

[9] For detailed explanations, see AFFAKİ, Georges, GOODE, Roy, p. 65.

[10] For a detailed review and comparison with URDG articles, see AFFAKİ, Georges, GOODE, Roy, pp. 62-64.

[11] For detailed explanations, see AFFAKİ, Georges, GOODE, Roy, p. 65.