Presentation provided at the Annual ICC Banking Commission Meeting by Andrea Hauptmann on 10 April 2019.

1. URDG and Their Increasing Influence on Local Laws

2. • RUSSIA
• CHINA
• Court Rulings

3. • New redaction of the Civil Code (effective as of June 01, 2015)
• Significant changes:
 Guarantee = independent obligation
 Corporate guarantees allowed
 Amendments allowed
 Instructing party responsible for indemnifying the Guarantor may or may not be the
Applicant
• What is still missing:
 Extend or pay
 open-ended guarantees
Russian law on bank guarantees

4. • Guarantees under commercial contracts => parties may agree on the governing law and the
place of jurisdiction
• Guarantees in favour of state authorities (including state procurement system) => subject to
Russian legislation only, all disputes shall be settled by the competent court of the location of
the beneficiary. The wording of such guarantees is prescribed by law and has little in common
with URDG guarantees.
Nevertheless ….
• The Supreme Court, basing on, inter alia, article 24 of URDG 758, ruled in favour of the
complainant (the state owned entity) and ordered the guarantor to pay under the guarantee.
(Ruling of the Supreme Court of the Russian Federation N 305-ЭС17-5496 dd 03.11.2017. )
Influence of URDG 758

5. The General Situation of Trial Involving the Disputes of Demand Guarantee
Cases in Chinese （Mainland） Courts Statistical Data & Judicial Opinions
1. Caseload Involving the Disputes of Demand Guarantee Cases In Chinese
( Mainland ) Courts：
1.1 by province
1.2 by year
1.3 by trial-level
2. Observation : The Basic Principles Being Emphasized Repeatedly

6. The General Situation of Trial Involving the Disputes of Demand Guarantee Cases in Chinese
（Mainland） Courts Statistical Data & Judicial Opinions
1.1 Caseload Involving the Disputes of Demand Guarantee Cases In Chinese ( Mainland ) Courts：by
province the judgements being made
0
50
100
150
200
250

7. The General Situation of Trial Involving the Disputes of Demand Guarantee
Cases in Chinese （Mainland） Courts Statistical Data & Judicial Opinions
1.2 Caseload Involving the Disputes of Demand Guarantee Cases In
Chinese ( Mainland ) Courts：by year the judgments being made
0
200
400
600
800
1000
2019 2018 2017 2016 2015 2014

8. The General Situation of Trial Involving the Disputes of Demand Guarantee
Cases in Chinese （Mainland） Courts Statistical Data & Judicial Opinions
Judicial Interpretation
The Provisions on Issues
Concerning Demand Guarantee
Cases Trial
Published on 18 November,2016
Being effective from 1 December,2016

9. The General Situation of Trial Involving the Disputes of Demand Guarantee
Cases in Chinese （Mainland） Courts Statistical Data & Judicial Opinions
1.3 Caseload Involving the Disputes of Demand Guarantee Cases In
Chinese ( Mainland ) Courts：by court level
0
200
400
600
800
1000
Supreme
People’s Court
High people’s
Court
Intermediate
People’s Court
Primary
People’s Court

10. The General Situation of Trial Involving the Disputes of Demand Guarantee
Cases in Chinese （Mainland） Courts Statistical Data & Judicial Opinions
Types of Cases Tried by The SPC
再审审查
50%
管辖权异议
27%
实体审理
23%
re-trial
review
50%
challenge of
jurisdiction
27%
entity
judgement
23%

11. The General Situation of Trial Involving the Disputes of Demand Guarantee
Cases in Chinese （Mainland） Courts Statistical Data & Judicial Opinions
2. Judicial Opinions
Analyzing the cases tried by the SPC, it is clear that some basic
principles are emphasized repeatedly:
* The terms of demand guarantee are independent of the underlying
transaction.
* The order of termination of payment should be issued cautiously, which
means that the identification of fraud should be made with prudence , too.

12.  Independence principle and documentary nature
- Definition of Independent Guarantee
- Distinction between the Independent Guarantee and Accessory Guarantee
 the Incorporation of the URDG758
 Standard for Examination of documents
 termination of the rights and obligations under the independent guarantees
Influence of URDG on China’s Guarantee Rules

13.  Criteria of identifying an independent guarantee
 Conflicts between factual qualification and payment upon demand;
 Conflicts between Joint and several liability and payment upon demand;
- Dalian Gaojin Investment Co.,Ltd v.ICBC Dalian Xinghai Sub-branch,Dalian Deheng Real Estate Development Co.,Ltd.
ZuigaofaMinZhong No.647,the Supreme Court of China
- Shanghai Northsea Shipping Co., Ltd v. China Everbright Bank Co., Ltd Nanjing Branch , Jiangsu Rongsheng Heavy
Industries Group Co., Ltd （2014）WuHaiFaShangZi No.00823 Wuhan Maritime Court
 If the Issuer was not a bank or financial institution.
 Fraud exception
- Cautious position of courts towards injunction
- Types of Fraud
- INMOBILIARIA PALACIO ORIENTAL S.A v.Anhui Foreign Economic Construction (Group)Co.,Ltd,（2017）
ZuiGaoFaMinZai No.134,the Supreme People’s Court
Overview after 2 years’ implementation

14. • A claim by a party that a guarantee is independent will be supported by a
people’s court if “the guarantee specifies that it is subject to the model rules on
independent guarantees such as the ‘Uniform Rules for Demand Guarantees’ of
the International Chamber of Commerce. (Art. 3(2) of the Provisions of the
Supreme People’s Court on Several Issues Concerning Adjudication of Cases of
Independent Guarantees)
Influence of URDG on Chinese Law

15. • Silent about independent guarantees: “A guarantee contract is an ancillary
contract of the principal contract. If the principal contract is null and void, the
guarantee contract shall be null and void, unless provided otherwise under other
laws. (Article 472 of the Chapter of Contract Law)
• “Civil disputes shall be resolved in accordance with the law; or if the law is silent,
customs may apply, but not contrary to public order and good morals.” (Art 10 of
the General Provisions of the Civil Law of the PRC)
Position of the Draft of the Civil Code towards Independent Guarantees

16. Europe
• Commercial Court of Brussels, S.A. Fabricom and S.A. Laurent Bouillet Ingenierie vs
Generale de Banque and ACEC Union Miniere
- Guarantee not subject to URDG, but the court referred to URDG when deciding
upon trade usage in demand guarantee practice (expiry date – expiry event)
Court Rulings

17. Asia
• Banca Commerciala Italiana v. Jiangsu Liyang . .Ltd (Supreme People‘s Court of
China)
• A landmark judgment of the Supreme Court, wherein URDG where applied as Trade
Usage though the guarantee was not issued subject to URDG. Lower courts were
expected to follow this precedent and indeed some time later the Liaoning Shenyang
Intermediate Court based it‘s decision on URDG absent incorporation in the
guarantee.
• Nowadays only URDG guarantees can be treated under URDG
. . . .

18. Questions ?