International trade transaction use to do through Letter of credit or Transfer of money etc. PG is a guarantee of the transaction under an independent contract. The main difference between a BG and a documentary credit is that the latter also functions as a means of payment.
The prevailing rules and regulations in Bangladesh do not permit standby L/C, open account transactions and some categories of guarantees, which are widely used to facilitate international trade in other countries. In fact, the banking system in Bangladesh follows traditional banking business in case of L/C and small trade finance such as deferred L/C against mortgage and security.
The prevailing rules and regulations in Bangladesh do not permit standby L/C, open account transactions and some categories of guarantees, which are widely used to facilitate international trade in other countries. In fact, the banking system in Bangladesh follows traditional banking business in case of L/C and small trade finance such as deferred L/C against mortgage and security.
This presentation is prepared by Ozgur Eker - CDCS. You can find more articles about international trade finance at www.letterofcredit.biz. keep reading...
This infographic is published by Bronze Wing Trading, the trade finance providers in Dubai. Look at this infographic to know the difference between Letter of Credit & Bank Guarantee. Are you looking to get letter of credit or bank guarantee for your upcoming trade deal or contract, contact us today! And to read more on Letter of Credit vs Bank Guarantee, https://www.bwtradefinance.com/letter-of-credit-vs-bank-guarantee/
To get LC MT700 & SBLC MT760 from us, contact us today!
Email us: support@bwtradefinance.com
Call Us: +971-4-5519699
Call/WhatsApp/BOTIM: +971-50-4648761
Characteristics of Collateral As A Special Guarantee in The Banking EnvironmentAJHSSR Journal
ABSTRACT: The characteristics of collateral as special guarantees in the banking environment can be
divided into two, namely general guarantees and special guarantees. existing or new ones that will exist in the
future, become dependents for all individual engagements". And a special guarantee is regulated in article 1132
BW: “The object becomes a joint guarantee for all those who owe it; The income from the sale of the objects is
divided according to the balance, that is, according to the size of each bill, unless there are valid reasons for the
debtors to take precedence. Special guarantees are born from material guarantee agreements, namely: liens,
mortgages, mortgages and fiduciaries which give birth to liens, mortgage rights, mortgage rights and fiduciary
rights. As for the main characteristics of collateral, among others: the first is absolute. Material rights are
absolute, meaning that rights can be enforced against anyone Droit de suite. Material rights will follow the
object in the hands of whoever the object is. Second, there is the principle of priority, meaning that material
rights that were born first take precedence over material rights that were born later. The third is preferential,
meaning that material rights are rights given to creditors to take precedence in taking repayments over other
creditors.
Keywords: main characteristics of collateral, special guarantees, banking
Be aware of the legal consequences of issuing guarantee cheques in uaeDr. Hassan Mohsen
The bank Guarantee in UAE is governed under Civil Transaction law No 5 of 1985 owing to its commercial nature heedless of the capacity of the party to whom such an instrument is issued or the reason for which it is issued. The concerned article by Civil lawyers of Dubai not only discuss the meaning of guarantee cheque but the legal consequences surrounding such cheques when issued in UAE.
Bank guarantee or guarantee commitment is a document issued by the guarantor or counter-guarantee or the guarantee-confirming party in the form of a Letter of Guarantee or a Guarantee Contract
A demand guarantee is usually a concise and simple instrument issued by a bank, or another financial institution, under which the obligation to pay a Beneficiary a fixed or maximum sum of money arises merely upon the making of a demand for payment in the prescribed form and sometimes also the presentation of documents as stipulated in the guarantee within its period of validity. Many demand guarantees are payable on first demand without any additional documents, which reflects their origin in replacing cash deposits, although increasingly guarantees require at least a person planning to enter into a contract for the purchase of goods or the construction of works by the intended counterparty to the contract may wish to have security for the counterparty’s performance of his obligations, especially when no previous dealings have taken place between them. A question that troubles bankers and lawyers is how strictly the documents must conform to the terms of the demand guarantee and LoC. Is the standard a “strict one”, so that even the minor deviations entitle the bank to refuse payment and, indeed, oblige it to do so unless otherwise authorised by the Applicant or Principal of the credit or guarantee? Or is it a standard of “substantial compliance” in terms of which deviations that the bank has no reason to believe are of commercial significance are ignored? Or does the law adopt another standard, i.e. strict compliance in suits by the Beneficiary against the issuing bank or Guarantor, but only substantial compliance in suits by the Applicant or Principal against the Guarantor, in terms of which the bank is free to invoke a strict standard of commonly known as standby LoC.
This presentation is prepared by Ozgur Eker - CDCS. You can find more articles about international trade finance at www.letterofcredit.biz. keep reading...
This infographic is published by Bronze Wing Trading, the trade finance providers in Dubai. Look at this infographic to know the difference between Letter of Credit & Bank Guarantee. Are you looking to get letter of credit or bank guarantee for your upcoming trade deal or contract, contact us today! And to read more on Letter of Credit vs Bank Guarantee, https://www.bwtradefinance.com/letter-of-credit-vs-bank-guarantee/
To get LC MT700 & SBLC MT760 from us, contact us today!
Email us: support@bwtradefinance.com
Call Us: +971-4-5519699
Call/WhatsApp/BOTIM: +971-50-4648761
Characteristics of Collateral As A Special Guarantee in The Banking EnvironmentAJHSSR Journal
ABSTRACT: The characteristics of collateral as special guarantees in the banking environment can be
divided into two, namely general guarantees and special guarantees. existing or new ones that will exist in the
future, become dependents for all individual engagements". And a special guarantee is regulated in article 1132
BW: “The object becomes a joint guarantee for all those who owe it; The income from the sale of the objects is
divided according to the balance, that is, according to the size of each bill, unless there are valid reasons for the
debtors to take precedence. Special guarantees are born from material guarantee agreements, namely: liens,
mortgages, mortgages and fiduciaries which give birth to liens, mortgage rights, mortgage rights and fiduciary
rights. As for the main characteristics of collateral, among others: the first is absolute. Material rights are
absolute, meaning that rights can be enforced against anyone Droit de suite. Material rights will follow the
object in the hands of whoever the object is. Second, there is the principle of priority, meaning that material
rights that were born first take precedence over material rights that were born later. The third is preferential,
meaning that material rights are rights given to creditors to take precedence in taking repayments over other
creditors.
Keywords: main characteristics of collateral, special guarantees, banking
Be aware of the legal consequences of issuing guarantee cheques in uaeDr. Hassan Mohsen
The bank Guarantee in UAE is governed under Civil Transaction law No 5 of 1985 owing to its commercial nature heedless of the capacity of the party to whom such an instrument is issued or the reason for which it is issued. The concerned article by Civil lawyers of Dubai not only discuss the meaning of guarantee cheque but the legal consequences surrounding such cheques when issued in UAE.
Bank guarantee or guarantee commitment is a document issued by the guarantor or counter-guarantee or the guarantee-confirming party in the form of a Letter of Guarantee or a Guarantee Contract
A demand guarantee is usually a concise and simple instrument issued by a bank, or another financial institution, under which the obligation to pay a Beneficiary a fixed or maximum sum of money arises merely upon the making of a demand for payment in the prescribed form and sometimes also the presentation of documents as stipulated in the guarantee within its period of validity. Many demand guarantees are payable on first demand without any additional documents, which reflects their origin in replacing cash deposits, although increasingly guarantees require at least a person planning to enter into a contract for the purchase of goods or the construction of works by the intended counterparty to the contract may wish to have security for the counterparty’s performance of his obligations, especially when no previous dealings have taken place between them. A question that troubles bankers and lawyers is how strictly the documents must conform to the terms of the demand guarantee and LoC. Is the standard a “strict one”, so that even the minor deviations entitle the bank to refuse payment and, indeed, oblige it to do so unless otherwise authorised by the Applicant or Principal of the credit or guarantee? Or is it a standard of “substantial compliance” in terms of which deviations that the bank has no reason to believe are of commercial significance are ignored? Or does the law adopt another standard, i.e. strict compliance in suits by the Beneficiary against the issuing bank or Guarantor, but only substantial compliance in suits by the Applicant or Principal against the Guarantor, in terms of which the bank is free to invoke a strict standard of commonly known as standby LoC.
The Financial trading companies operating in Bangladesh were dealing such transaction without explicit law or policy of legality of transfer of right over the invoice. The conservative foreign exchange law has indirect restriction on many transactions of foreign currency of modern days.
Bangladesh Bank have filled up the legal gap through the FE circular no 43 dated 17 November 2019 titled "Discounting of direct or deemed export bills - transfer of right". It has granted general permission for assigning rights to the dues at maturity of a usage bill of export from Bangladesh in favor of a license bank / financial institution abroad by paying usance bill in full, final and without recourse.
What Is Bank Instrument Monetization And How Does It Works.pptxhansongroupus
In Return for the Risk Assumed, the Bank Receives Certain Commissions, Depending on the Term, Type & Risk of the Guarantee. Bank Instrument Monetization Can Be Defined as Indefinite.
How Standby Letter Of Credit Is Different From A Normal Letter.pptxProminence Bank
Standby letter of credit is a very reliable means of payment for activities related to foreign trade, and is used to guarantee different kinds of obligations.
Bank Guarantee In The Form Of Standby Letter of Credithansongroupus
The beneficiary has to make use of a standby letter of credit in addition to the aforementioned written statement additionally (export) documents submitted. Visit here: https://bit.ly/3KXdmJ9
How Standby Letter of Credit Is Different From A Normal Letter?hansongroupus
The standby letter of credit (or contingent credit) does not constitute a means of payment per se but functions more as a guarantee against the possible non-payment of an importer. Visit here: https://bit.ly/3NRONP3
A demand guarantee is a guarantee that must be honoured by the guarantor upon beneficiary's demand. The beneficiary is not required to first make a claim or take any action against the obligor of the guaranteed obligation that the guarantee supports
Tax justice from 100 years old income tax law.pdfM S Siddiqui
Roughly 94 per cent of income-tax revenue comes from tax deducted at source. The Tax deduct as source (TDS) has been imposed at border during release of imported goods and services, supply of goods and services to government and corporates entities. This deduction is on gross sales value but not on net profit. The advances taxes are non-refundable and considered as tax on income. In many cases the tax burden are more than 100 percent of the net income of the business enterprises.
Bangladesh’s cross border transaction in Chinese RMB.pdfM S Siddiqui
Banks are finally allowed to maintain accounts in Chinese currency RMB with their correspondents or overseas branches for cross-border transactions executed in Bangladesh.
Meanwhile, China has introduced cross-border interbank payments system (CIPS) with the RMB as an alternative trading currency. CIPS payment system offers clearing and settlement services for participates in cross-border RMB payment and trade.
Over the last decade the Chinese government has consistently strived to overcome China’s dependence on foreign supplies in the sector, and as a result China’s market share in semiconductors has increased from 5 percent in 2010 to 13 percent in 2020, more than doubling in ten years. China is moving along with the planned schedule to achieve supremacy in manufacturing semi-conductors.
Evaluation of Bangladesh’s Data Protection Bill.pdfM S Siddiqui
The draft Data Security Law did not make difference between data privacy and data security and a big concern was how to maintain the privacy of such data. The problem is that the government has expressed a controlling attitude to make the law a control mechanism rather than data security and data privacy.
Rights of the nominee vis-à-vis legal heirs.docxM S Siddiqui
Currently, the banks may follow the rule of Bangladesh Bank and the principle of the judgment of the High Court Division that the nominee is entitled to the money of the deceased person and pay to the nominee at the first instance to complete their responsibility. Subsequently, the nominee will be treated as a custodian in case of a succession certificate given by the court and distribute the amount accordingly.
Bangladesh bank’s rules of export documents require an amendmentM S Siddiqui
The Factoring services provide security of payment and financing through transfer of shipping documents along with ownership and rights over the payments. The circular no. 32 (dated October 03, 2021) restricting transfer of document will hamper smooth service of Factoring and export financing by trade finance companies. The BB should revisit the circular addressing the embargo over transfer of full set of documents.
Access to finance for the informal sectorM S Siddiqui
Bangladesh may formulate policies to use these sources to in credit reporting systems. There may be even legal framework like some other some economies to allow the sharing of information from non-traditional sources and authorised CRSPs to prepare CR for MSMEs.
Ad free channel ends unfair privileges to overseas manufacturersM S Siddiqui
The Clean Feed Strategy would give a level playing field to Bangladeshi manufacturers and foreign manufactures. Although late the government has taken a bold decision.
Pandemic recession and employment crisisM S Siddiqui
The policy of Bangladesh Bank and attitude of commercial banks have many challenges to overcome regarding these programmes. They require a change in mind-set and political will to recognize the crisis and probable solution. There should a recognition that informal workers and their livelihood activities represent the broad base of the economy producing essential goods and services not only for low-income customers but also for the general public and for the formal economy.
How to upgrade bangladesh’s banking almanacM S Siddiqui
The confidence of users is a big challenge for an almanac. The authentication of information is a basic criterion of a good almanac. The authority may take initiative to upload the almanac in their web-site and make easily accessible for the end users specially the FI in other countries.
Bangladesh needs rules on odourised lpgM S Siddiqui
It is impossible to detect the leak because of the lack of odour. This has led different countries to enact new regulations that require gas suppliers to odourise LPG.
The experience of the other countries doesn’t support the fear of NBR officials. This conception of officials is a challenge of introduction of PCA in Bangladesh.
With the ratification of the TFA in 2016, Bangladesh has obligation to introduce PCA in the customs rule. The relevant SRO should be issues as early as possible.
Abrupt indian ban on onion seeds not legalM S Siddiqui
Bangladesh became self-reliant in Cattle production after restriction on cattle export / smuggling during last few years. Let's hope that the statistics of Bangladesh Agricultural Department are correct and Bangladesh will hopefully continue to be self-reliant of onion despite Indian ban on export of onion and onion seed.
Miniket may be branded for marketing by any company but cannot claim this as local variety of rich. It cannot be registered under patent act. The fate of Miniket is depends upon teste and demand of the consumers.
Psi of govt purchase contrary to import policyM S Siddiqui
The inspection by government official is against the Import Policy Order as well as it is expensive for the nation and not serving the real purpose. The inspectors are not liable for any incidence of wrong delivery.
Disappearance of border pillars and death from lightning strikeM S Siddiqui
In south Asia the casualties have been increases in recent years. But apart from climate change, the recent increase of death of lightning has linkage with the silent disappearance of Border pillars of Mouja installed by British rulers in South Asia.
The standard global practice of other countries, the credit information reports neither express any opinion about the borrower creditworthiness nor assign any rating to the borrowers.
Hashem foods fire determining the liability of regulatorsM S Siddiqui
Despite all the irregularities, how industries get fitness certificate from DIFE on yearly basis is a question. Hashem Food started their business in 1982 and DIFE has been certifying it on yearly basis since then.
Regional co-operation under SAARC may be an additional blessing to solve the problem. Bangladesh apparently failed to get mutual co-operation from neighboring countries. Bangladesh may shift the policy on prevention, education and training of all stakeholders to eradicate drugs from our society.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
CRISIL evaluates lenders in India by analyzing financial performance, loan portfolio quality, risk management practices, capital adequacy, market position, and adherence to regulatory requirements. This comprehensive assessment ensures a thorough evaluation of creditworthiness and financial strength. Each criterion is meticulously examined to provide credible and reliable ratings.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdf
Bank guarantees in international trade
1. https://dailyasianage.com/news/151976/bank-guarantees-in-international-trade
EDEN BUILDING TO STOCK EXCHANGE
02 December 2018
Bank guarantees in international trade
M S Siddiqui
Bank guarantee (BG) to exclusively describe a transaction in which one party makes an independent
guarantee commitment in respect of another party's liabilities, regardless of the latter's form and
enforceability. A and B come to an agreement that A will supply certain quantity of product P to B
within some specific term and condition. C a Bank has issue a BG to B guarantying the performance
of A. C will make the payment of agreed amount of performance guarantee (PG) upon claim. PG in
the form of BG is widely used in local and foreign trade.
The term "bank guarantee" has no precise definition, particularly in international law. Nordea Trade
Finance, 2010 defined BG as: An independent, documentary undertaking by which a bank or other
legally qualified entity (the guarantor), issues, at the request of its customer (the instructing party), its
irrevocable guarantee to pay a sum of money to a third party, (the beneficiary), provided a complying
demand/document(s) is presented. This definition contains some of the core principles concerning
these kinds of guarantees.
A guarantee is an independent undertaking by a bank (guarantor). This undertaking means that the
guarantor becomes obligated to pay an amount, specified in the guarantee, provided the terms of its
guarantee are complied with. A guarantee is irrevocable, meaning that once issued it cannot be
amended nor cancelled during the validity period without the consent of the parties, i.e. the
guarantor and the beneficiary.
ABG is a contract between the bank and the beneficiary, in general concluded at the request of the
bank's customer (principal). BGs are known by various names, such as 'independent undertakings',
'performance bonds/guarantees', 'tender bonds/guarantees', 'independent (bank) guarantees',
'demand guarantees', 'first demand guarantees', 'bank guarantees', and 'default undertakings'. In
international trade has another form of guarantee is the 'stand by letter of credit'.
BG plays a vital role in international trade and other business transactions. They are used in almost
every phase of the transaction between the buyer and the seller. Trade with counterpart in other
country is different from trade with a company inside the own country. Both parties may experience
unforeseen difficulties to meet their contractual obligations. The law and culture of different countries
are also different.
In these circumstances there may be a requirement for some form of security.BG is considered as
life blood of domestic and international business. BG is a widely used and globally accepted
instrument for securing and enforcing the claims of parties to foreign trade contracts in a way that
optimally protects the interests of all participants.
2. The bank's obligations for payment against PG is autonomous from the underlying contract between
the beneficiary and the principal; which means that, in principle, the bank must pay if proper
complying documents are presented, even if the beneficiary and the principal have not stipulated
that there is a default under the original underlying contract.
Most categories of PGs are payable on first demand without any additional documents, which
reflects their origin in replacing cash deposits, although increasingly guarantees require at least a
statement indicating that the principal is in breach.
The beneficiary is not obligated to furnish proof to the guarantor that the "material" guarantee event
arising from the underlying transaction has occurred, i.e., that the preconditions for the claim under
the guarantee have been fulfilled also in relation to the principal.
If the beneficiary makes a complying claim under the guarantee declaring that an event giving rise to
the guarantee, as defined in the text of the guarantee has in fact occurred, the bank is generally
obligated to make payment to the beneficiary.
The guarantee shall remain valid even if the underlying obligation is extinguished for any reason.
The guarantor must pay upon demand, without making any objection or invoking any defense. On
receiving a claim, the guarantor can therefore merely check that it has been validly made, i.e. that
the formal conditions laid down in the wording of the guarantee have been met.
Therefore, a demand guarantee is like a substitute for cash and must be honoured on presentation
of a written demand that complies with the provisions of the guarantee.After the bank has made
such payment, the principal will be entitled, at its own risk and peril, to bring a counter-claim directly
against the beneficiary due to non-occurrence of the "material" guarantee event.
BGs are governed almost exclusively by the law of the country of domicile of the bank that issues
the guarantee to the beneficiary. Banks around the world tend to stipulate their own wording in
accordance with local practices and the local legal background. In 1992, the International Chamber
of Commerce (ICC) in Paris issued new regulations titled "ICC Uniform Rules for Demand
Guarantees" (URDG) in an attempt to harmonize these different wordings and customs. In some
countries the law also regulated the guarantees.
The law stipulates a special type of bank guarantee which contains the clause "without protest",
"first-call" or other words with the same meaning, which specifies that when it comes to this type of
bank guarantee, the bank cannot point out those kinds of objections to the creditor from the main
business, which the principal, as a debtor, has towards the guarantee beneficiary (Law on Obligatory
Relations, Art. 1087).
The principal elements of a guarantee are the following:
(1) it should have a preamble describing the underlying transaction to which the guarantee refers the
type of underlying transaction, the contract number and / or date of signature, and the type of
guarantee to be issued. (
2) It should include the names and addresses of the business partners of the underlying transaction.
(3) The irrevocable and unconditional undertaking of the bank to pay a sum of money up to the
amount of the guarantee, upon the first written demand of the beneficiary, accompanied by a
declaration to the effect that the event giving rise to the guarantee claim, as defined in the terms of
the guarantee, has occurred.
3. (4) An expiry date that clearly limits the duration of the guarantee to a certain date, by which any
claim must have been received by the bank; or in exceptional cases, the duration of the guarantee is
indefinite. (5) Any other special clauses depending on the type of guarantee and also nature of the
underlying transaction.
There is no uniform "international law" that applies to bank guarantees. The governing law of a bank
guarantee is the law chosen in the guarantee or the applicable law determined pursuant to the
conflict of laws rules. Depending on the governing law of the bank guarantee country-specific
requirements may also have to be taken into account of law of contract.
There are two types of guarantee: Direct / indirect guarantees. A "direct" guarantee is issued by a
bank to the foreign beneficiary, constituting a direct legal relationship between the issuing bank and
the beneficiary. The direct guarantee offers several advantages, including the lower cost of such a
guarantee, because there are no fees or costs to be charged by a second bank in a foreign country
of beneficiary.
The indirect guarantee issued by guarantor bank and endorsed or reissued by local of the
beneficiary country. Due to the legal requirements or bank practices of certain countries, the
beneficiary cannot accept direct guarantees issued by a bank domiciled in a foreign country.
The guarantor Bank request their counterpart Bank in country of beneficiary to issue a guarantee in
favor of beneficiary. Furthermore, the guarantee issued by the local Bank will be subject to law of the
own country. Bangladesh does accept guarantee with counter guarantee from any local bank.
The rule of un-conditional encashment of guarantee places the beneficiary in a very strong legal
position. The beneficiary can demand immediate payment, and the guarantor and principal have no
right to raise any objections or present any defence on the strength of the underlying transaction.
Thus the beneficiary is relieved not only of the risk of the principal becoming insolvent but also of the
risk of having to enforce a claim through the courts. As in the case of documentary credits, the rule is
"pay first, sue later."
BG provides protection against non-performance. BG testifies to the principal's ability to carry out the
contract. Since the issuance of a guarantee constitutes an irrevocable payment undertaking, a bank
will undertake a thorough examination of financial status and management and technological
capability to fulfill contractual obligations. The original contract gets legitimacy with the process.
The guarantee is a motivational for the second party due to lose of a certain amount due failure of
abide by the contract. This is a strong incentive to complete the contract, even if the transaction has
lost its appeal in the meantime. If the principal fails to fulfill its obligations, the buyer is entitled to
demand payment of the guarantee sum, which will compensate fully or partly for the financial
consequences of the breach of contract.
International trade transaction use to do through Letter of credit or Transfer of money etc. PG is a
guarantee of the transaction under an independent contract. The main difference between a BG and
a documentary credit is that the latter also functions as a means of payment.
PGs guarantees are typically used in construction contracts, Heavy technology based project
contracts and contracts for the international sale of goods. However, they could also be used for any
other type of contract. Whereas commercial letters of credit are used to ensure that the seller,
exporter or supplier is paid, demand guarantees are intended to safeguard the other party (e.g.,
buyer) against non-performance or late or defective performance by the seller, exporter or supplier
to the underlying contract.
4. Bangladesh government widely use BG in public procurement to ensure act of suppliers and are not
using in export trade. Bangladesh can allow import and export shipment against contract supported
BG from overseas suppliers / buyers without Letter of credit and advance payment.
The writer is a legal economist.
Email: mssiddiqui2035@gmail.com