Guarantees & Standby Letters of Credit in International Trade

Guarantees & Standby Letters of Credit in International Trade

Euromoney Training
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Course overview: With the arrival of the new Uniform Rules for Demand Guarantees (URDG 758), the course is more than ever a pre-requisite for all involved in the use of guarantees in international trade and project finance structures. The use of international guarantees, bonds and standbys has proliferated in recent years yet documentation errors, fraud and unfair calling have made guarantees a legal minefield and subject to more court proceedings than any other financial instrument. This Euromoney Legal Training course will highlight the areas of potential risk and teach effective documentation techniques. You will analyse the legal issues in bonds and guarantees, explaining the products an…

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Course overview: With the arrival of the new Uniform Rules for Demand Guarantees (URDG 758), the course is more than ever a pre-requisite for all involved in the use of guarantees in international trade and project finance structures. The use of international guarantees, bonds and standbys has proliferated in recent years yet documentation errors, fraud and unfair calling have made guarantees a legal minefield and subject to more court proceedings than any other financial instrument. This Euromoney Legal Training course will highlight the areas of potential risk and teach effective documentation techniques. You will analyse the legal issues in bonds and guarantees, explaining the products and their uses. How this course will help you You will learn: The responsibilities and legal relationships of the various parties The comparative merits and drawbacks of standby and demand guarantees When courts will intervene to prevent payment of guarantees How to avoid operational problems How to avoid problems of applicable law How big-ticket guarantees are syndicated The benefits and drawbacks of using the new uniform rules for demand guarantees (URDG 758) Who should attend: Bankers with responsibility for trade finance Bankers with responsibility for guarantees Banks' in-house legal counsels Lawyers with clients in international banking, commodity trading and construction Executives responsible for monitoring and controlling guarantee risk Executives responsible for negotiating construction of supply/installation contracts
Day 1 Introduction: The Role of Guarantees In International Trade The nature of risk in international trade Commercial, credit and political risk Payment and performance obligations The role of guarantees in risk allocation Guarantees & Related Instruments Guarantees proper Contracts of surety Indemnities Corporate guarantees Letters of comfort Workshop: Identifying the Nature of the Undertaking Participants will be presented with various documents for analysis regarding the nature of the obligations created by them. Legal Analysis and Terminology: Primary and secondary obligations Formal requirements of guarantees Consideration and cause The origin of ‘bonds’ Co-extensiveness of obligations Subrogation The rule in Holme v Brunskill Workshop: The Practical Importance of the Distinction between Primary and Secondary Obligations Participants consider the implications of the courts’ decisions in Associated Japanese Bank v Credit du Nord, Marubeni Hong Kong and South China Ltd v Government of Mongolia and ILG Capital Llc v Van Der Merwe Banker’s Autonomous Undertakings The origin of autonomous undertakings Autonomy and conditionality Irrevocability Indirect guarantees and counterguarantees Mandate and the basis of the guarantor’s obligation Guarantees & Standby Letters of – Conditional wording Demand compliance with the guarantee’s terms Case study: IE Contractors v. I.A.E Case study: Bonding Structures in International Construction Contracts Bid and Tender Bonds Advance Payment Guarantees Retention Money Bonds Performance Bonds Maintenance and Warranty Bonds Day 2 Demand Guarantees: Obvious and Hidden Risks Guarantees and the allocation of risk Obvious and ‘hidden’ risks of using demand guarantees Political risk: sanctions and embargos Case study: Shanning International Ltd v Rasheed Bank ‘Unfair calling’ Extend or pay demands Ineffective expiry dates: Where & Why? The Uniform Rules for Demand Guarantees 2010 Background and history of the URDG Main changes in URDG 758 Relationships and terminology Issue and effectiveness Non-documentary conditions Amendments Variation of guarantee amount Presentation of demand Time for examination of demand and for payment Force majeure closure Extend or pay demands Relationship between guarantee and counter-guarantee Fundamental Principles Irrevocability and Effectiveness Nature of Document(s) Required Treatment of Document(s) Extend or Pay Demands Expiry Day 3 Standby LCs under ISP98 compared to UCP600 Amendments Normal SBLCs Automatically amendable SBLCs Documentation Demand required Documentary compliance Consistency of documents Time limits Transfer Transferability General rules Insolvency Assignment of proceeds Expiry Court Intervention: Common Law Jurisdictions Autonomy and the fraud exception The letter of credit analogy The standard of proof of fraud for an injunction The ‘balance of convenience’ test Court Intervention: Civil Law Jurisdictions Absence or illegality of cause Abuse of right and manifestly abusive calling Fraudulent and abusive calling Case study: The Russian Steel Case and Olex Focas Applicable Law in Indirect Guarantees Conflict of laws in international trade transactions The EC Convention on the Law Applicable to Contractual Obligations Issuer’s Law – an unsafe assumption EU Rome 1 Regulation Jurisdiction under the European Regime Domiciliary jurisdiction Special jurisdiction Jurisdiction under the EU Brussels Regulation Jurisdiction under the 2008 Lugano Convention Case study: Jurisdiction Based on Place of Performance Participants consider the decision in Chailease v Credit Agricole Indo-Suez regarding special jurisdiction based on the place of payment
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