CATEGORY TYPE: Finance & Accounting

COURSE NAME:Foreign trade operations: letters of credit and letters of guarantee


UPCOMING EVENTS


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INTRODUCTION:

 

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.

OBJECTIVES:

 

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
OUTLINE:

 

Day 1

Introduction: the role of guarantees in international trade

  • The nature of risk in international trade
  • Payment and performance obligations
  • The role of guarantees in risk allocation

Workshop 1: the nature of the undertaking

Delegates will be presented with various documents for analysis regarding the nature of the obligations created under them.

The development of guarantees

  • Guarantees proper
  • Contracts of surety
  • Indemnities
  • Corporate guarantees and letters of comfort

Legal analysis and terminology (1)

  • Primary and secondary obligations
  • Formal requirements
  • Consideration and cause
  • Subrogation
  • The rule in Holme vs. Brunskill
  • Case study: Mercers vs. New Hampshire

Workshop 2: primary and secondary obligations

Delegates consider the implications of the decisions in Associated Japanese Bank vs. Credit du Nord, Gold Coast Limited vs. Caja De Ahorros Del Mediterraneo and Marubeni Hong Kong and South China Ltd vs.Government of Mongolia

Legal analysis and terminology (2)

  • Bankers autonomous undertakings
  • Autonomy and conditionality
  • Irrevocability
  • Indirect guarantees and counter-guarantees
  • Mandate and the basis of the guarantor’s obligation
  • Common and civil law comparisons
  • Consideration and cause in tripartite relationships
  • The origin of ‘bonds’

Day 2

Case study 1: international construction contracts

– Bid and tender bonds

– Advance payment guarantees

– Retention money bonds

– Performance bonds

– Maintenance and warranty bonds

Bank guarantees in the Middle East

  • Perceived problem areas
  • Applicable law
  • Statutory regulation
  • Expiry dates
  • ‘Pay regardless’ clauses

The New Uniform Rules for Demand Guarantees: URDG 758

  • Major changes from URDG 458
  • Relationships and terminology
  • Fundamental principles
  • Non-documentary conditions
  • Presentation of demand
  • Time for examination of demand and payment
  • Force majeure
  • Extend or pay demands
  • Relationship between guarantee and counter-guarantee
  • Governing law and jurisdiction

Standby letters of credit

  • The origins, nature and use of standby letters of credit
  • Comparison of standby and non-standby letters of credit
  • Comparison of standby letters of credit and demand guarantees
  • Standby letters of credit as payment mechanisms

Case study 2: development of standby LCs in the oil trade

  • Standby letters of credit as counter-guarantees

Case study 3: nature of standbys Wichita Eagle & Barclays vs. MNB

Workshop 3: assessing counter-guarantee risk

Delegates investigate the risk posed to the issuer of a demand guarantee by the terms of the standby LC offered as a counter-guarantee.

Day 3

The syndication of risk in large guarantees

  • The nature of syndicated guarantees facilities
  • When they are used
  • Comparison of guarantees issued by a syndicate and an issuing bank
  • Relationship between syndicate banks, issuing banks and the obligor

Guest speaker: Michael Kenny, Partner of Watson, Farley & Williams

The International Standby Practices (ISP98)

  • Scope and application
  • Relationships and terminology
  • Fundamental principles
  • Irrevocability and effectiveness
  • Nature of document(s) required
  • Treatment of document(s)
  • Extend or pay demands
  • Expiry
  • Governing law and jurisdiction

Standby LCs under ISP98 compared to UCP600

  • Amendments
  • Normal SBLCs
  • Automatically amendable SBLCs
  • Documentation
  • Demand required
  • Documentary compliance
  • Consistency of documents
  • All American Semiconductor vs. Wells Fargo Minn
  • Time Limits
  • Transfer
  • Transferability
  • General rules
  • Insolvency: FDIC vs. Bank of Boulder
  • Assignment of proceeds
  • Expiry

Standby LCs: potential risks

  • Financial
  • Revolving SBLCs: Nissho Iwai Europe vs. Korea First Bank (2002)
  • Legal
  • Foreign attachment orders: Sabolyk vs. Morgan Trust Co (1984)
  • Varying definitions of fraud in foreign jurisdictions
  • Customer relations
  • Comparison of banks’ position under ISP98 & URDG

Day 4

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

Case study 4: the Russian steel case and Olex Focas

– Fraudulent and abusive calling

Case study 5: preventing calls on the guarantee or standby

Considering the Themehelp, Bristol Meci, Czarnikow & TTI vs. Hutchinson cases.

Fraud and international bank guarantees

  • Fraudulently issued standby credits
  • Fraud in the transaction

Case study 6: AJB v CDN

  • Post-Iranian revolution cases

Case study 7: actions against the proceeds of the guarantee

  • Cargill v Bandladesh Sugar

Applicable law in indirect guarantees

  • Conflict of laws in international trade transactions
  • The EC Convention on the Law Applicable to Contractual Obligations
  • Issuers Law – an unsafe assumption
  • Proposed EU Regulation (‘Rome 1’)

Workshop 4: applicable law in bank guarantees

Delegates consider the decision on Marconi v Pan Indonesian Bank regarding the law applicable to bank guarantees in the absence of express party choice.

Jurisdiction under the Brussels Convention

  • Domiciliary jurisdiction
  • Special jurisdiction
  • Jurisdiction under the EC ‘Brussels’ Regulation No 44/2001

Case study 8: Jurisdiction based on place of payment

Delegates consider the decision in Chailease v Credit Agricole Indosuez regarding special jurisdiction based on the place of payment.

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
DURATION:
    • 5 Day(s)
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