Modifications and Exclusions of URDG758 Articles in Demand Guarantees

Demand guarantees are among the most popular instruments used for securing commercial transactions, are utilized in a variety of situations, and can be issued subject to local law, UCP600, ISP98, or URDG758.

URDG758 Article 2 (Definitions) defines demand guarantee to mean “any signed undertaking, however named or described, providing for payment on presentation of a complying demand”.

Comparing UCP600, URDG 758, and ISP98

The only rule by rule analysis of the three rules: side by side.

Buy Now

URDG758 is a voluntary set of rules and only apply to demand guarantees or counter-guarantees that expressly indicate that they are subject to it. URDG758 is conceived as a balanced set of rules however its acceptance by parties to the contract does not mean that they are unconditionally bound by URDG. Parties can agree to deal with certain issues in ways which differ from how those issues would be handled under the standard URDG758 approach, i.e. specific URDG rules can be modified or excluded. Wording to this effect can be found in URDG758 Article 1(a) (Application of URDG): “The Uniform Rules for Demand Guarantees (“URDG”) apply to any demand guarantee or counter-guarantee that expressly indicates it is subject to them. They are binding on all parties to the demand guarantee or counter-guarantee except so far as the demand guarantee or counter-guarantee modifies or excludes them.”

This means guarantors and counter-guarantors can take comfort that the demand guarantees they issue subject to the URDG can be adjusted to their own terms as needed, while still incorporating the beneficial terms of URDG.

The ICC Banking Commission in Opinion TA914rev (2021) on a query relating to demand guarantees subject to URDG758 used the phrase ‘unless otherwise indicated …’ which stems from URDG758 Article 1. This and other ICC Opinions such as R621/TA454rev have helped clear doubts among demand guarantee practitioners and educated them on instances of provisions contained in URDG which can be modified or excluded.

International Standard Demand Guarantee Practice for URDG758 (ISDGP) which was adopted by the ICC Banking Commission in March 2021 is an indispensable companion to URDG758 and sets forth best practices in relation to use of the rules. Like its UCP600 counterpart, ISBP (International Standard Banking Practice for the examination of documents under documentary credits), ISDGP is a collection of practices (215) that have been identified as best practice for demand guarantees in relation to the URDG758 rules and beyond. ISDGP is the outcome of active participation from 27 ICC national committees on five continents, and countless comments from practitioners across the world, which makes it truly representative of international guarantee practice.

Modifying or Excluding URDG758 Articles: How It is Done

The provisions of URDG can be modified, overridden, or excluded by inserting suitable replacement wording in the text of the guarantee.