Party that gave the guarantor its instructions

With the introduction of Uniform Rules for Documentary Guarantee or URDG 758, the rules for Documentary Guarantee seem to be popular again. It can be imagined from the increasing number of questions that have popped up in recent days. Documentary Guarantee Forum is an effort to develop a platform to discuss these questions.
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Party that gave the guarantor its instructions

Post by shahriar » Sat Jan 22, 2011 10:43 am

In URDG 758, article 9, the term "the party that gave the guarantor its instructions" is used. the rationale is that unless the guarantor issues the guarantee, there is no instructing party.

but in article 11, the same line is used which is confusing to me. because the the guarantee has already been issued its the same instructing party that is requesting for the amendment. so wasn't it rational to use instructing party instead of this line?

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Instructing party

Post by abrar » Sun Jan 23, 2011 3:01 am

My view is that in both cases (Art 9 & 11) there is an intended decision not to pre-determine whether the party giving the instructions to the guarantor is an "applicant" or an "instructing party".

Previously, under URDG458, the term "instructing party" was intended specifically to refer to a counter-guarantor. Under URDG758, an "instructing party" is intended to refer to a party, other than a counter-guarantor, that gives instructions to issue a direct guarantee, or an indirect counter-guarantee. In most cases, the "instructing party" and the "applicant" will be the same party, but depending on circumstances, an "instructing party" might for example, be a parent company providing an indemnity to the bank on behalf of its subsidiary, the latter being a party to the underlying contract, and the actual "applicant".

So, although under Art. 11, the identity of the party giving instructions to the guarantor would already have been established, (by virtue of the fact that the guarantee itself has already been issued), there is no way for the rules to be so prescriptive as to identify this party as either an "instructing party" or an "applicant"; it could be either.

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Instructing Party

Post by iLC » Sun Jan 23, 2011 10:08 pm

In my opinion, its not always necessary that applicant be the instructing party of an amendment. for example a guarantor may request the counter guarantor to issue an amendment and in that case if the counter guarantor issue the amendment, the guarantor becomes the instructing party. thats why URDG 758 used that term.

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