International Chamber of Commerce Uniform Rules for Demand Guarantees (URDG 485)

Author: International Chamber of Commerce National Committee of China
Publisher:
Publishing Date: 2004-05-01
Features: With the globalization of international economic exchanges, the increase in transaction types, and the growth in transaction amounts, the demand for guarantees in the international community has been rising. Particularly in fields such as international lending, project financing, engineering contracts, tendering and bidding, leasing, labor export, and technical cooperation, due to their long terms, large amounts, and high risks, the commitments made by one party in the underlying contract are no longer sufficient to mitigate risks. Third-party guarantees are thus increasingly needed to provide security for payment and performance of contract obligations. As a relatively new credit instrument, guarantees serve two primary functions: first, as a payment guarantee for contract amounts; and second, as a means of compensation for the aggrieved party in case of contract breach or as a penalty for the defaulting party. These functions expand the scope of guarantees far beyond that of general commercial letters of credit. Guarantees come in various types, each with distinct characteristics, and are widely applicable with flexible procedures. However, legislation on guarantees varies across countries, and disputes over guarantees frequently occur, which to some extent hinder the smooth development of guarantee business. In light of this, international organizations such as the International Chamber of Commerce and the United Nations have long been committed to coordinating and harmonizing practices in the field of guarantees across countries.