Bank Guarantee format ICC 458

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warlord9609
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Joined: 10/28/2008
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Dears,

 Sorry since there is no page for guarantees, the only place is this blessed page ^^

 1) From your experience what is BG ICC 458, and who issue it, and its risks as well.

A customer provided me a guarantee specimen where it states as follows :

 Quote.

we herewith open our Bank Guarantee No.xxxxxxx as follows:

For value received by us, we xxxxxxxx(Issuing Bank)xxxxxxxx hereby irrevocably and unconditionally without protest or notifications promise to pay against this Bank Guarantee no,xxxxin favour of xxxxx on maturity date the sum of xxxxxxxx in the lawful currency of the xxxxxxxxxxxxx upon presentation to us of the original of this Bank Guarantee at our counters on Maturity date, but not later than fifteen days after the maturity date.

 

Such payment shall be made without set-off and clear of any deduction, charges, fees or withholdings of any nature, now or hereinafter imposed, levied, collected, withheld, or assessed by the government of the issuing Bank or any political subdivision or authority thereof or therein.

 

This guarantee is transferrable and assignable without presentation to us or payment of any transfer or assignable fees.

 

This guarantee is subject to the uniform rules for Bank Guarantee under ICC publication  No.458 and its latest revisions.

 

This is an operative Bank instrument and no mail confirmation will follow

Unquote.

To be honest, I neaver seen an assignable an transferrable guarantee with a maturity date , your advice is appreciated.

 

regards

sapphirecapital's picture
sapphirecapital
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Joined: 03/07/2010
seldom

its legally possible but unusual, seen them in regards of specific government issues and with dark collateral pools and syndicated covered loan structures between participants of the syndicate/pool; however in the quoted form it is often abused as a sample in a bank guaranty fraud/scam, getting the intended beneficiary to transfer funds, its often told that they would use a SWIFT MT103/23 conditional wire to pay and would be safe, unfortunately such conditional SWIFT does not exist in such form. Issueing such a transferrable straight payment irrevocable instrument in guarantee form is a form abuse as it should be done in bond format; some regulators forbid it because it can be abused. Some banks immediately issue the equivalent of a suspicious activity report.

Abrar
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Joined: 03/12/2009
URDG 458

Art. 4 of URDG458: "The Beneficiary's right to make a demand under a Guarantee is not assignable unless expressly stated in the Guarantee or in an amendment thereto".

So, the right to transfer, or assign the right to make a demand exists, but bearing in mind that the underlying contractual relationship is likely to concern only the applicant and beneficiary, it is difficult to envisage under what circumstances the contractual obligation of the applicant to the beneficiary would be novated (in reverse) to another party. There is however no issue with assigning the proceeds under the guarantee, (as opposed to the guarantee itself).

The other unusual issues are:

1. The guarantee does not call for a demand, nor a statement of breach,but simply presentation of the instrument itself.

2. As you point out, there is reference to a "maturity date" but this is not defined, and thus there is no possibility of determining compliance on presentation.

3. There is no benefit in transferring/assigning/trading a guarantee to a third party. It has no intrinsic financial value, and can only be called and paid under a default situation.   

I doubt whether any right minded bank would issue such a guarantee, but then again....

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