United Nations Convention on Independant Guarantees and Stand-by Letters of Credits

General Information

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What is it about?

This Convention provides a uniform regime of law for both stand-by letter of credit and independent guarantees. It addresses such matters as the “form and content of undertaking”, “rights and obligations”, and “demands by the beneficiary”. It as well offers guidance to settle conflict of law matters. The Convention sets forth the basic principles of law for independent undertakings in a manner which fully assures their independent nature, which guarantees widest possible party autonomy and which establishes a uniform international legal standard for limits to the exception for fraudulent or abusive drawings.

Why is it relevant?

The Convention assists parties doing cross-border business based on letters of credit in those countries which do not have a developed body of law governing letters of credit. This Convention was welcomed by the International Chamber of Commerce (ICC). ICC rules cannot be fully effective in all countries without their being recognized under local law. In this respect, the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit provides an important impetus to attain this objective. The Convention was drafted in full recognition of the role of the various ICC rules in this field.

Additional Information

This Convention strongly influenced the revision of the ICC's Uniform Rules for Demand Guarantees (URDG) and its recently adopted rules on International Standby Practices (ISP 98).

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