Business clients dealing with international trade frequently asked us whether an independent bank guarantee issued under the URDG 758 (the ICC Uniform Rules for Demand Guarantees 2010) is valid, binding and enforceable under the Italian law or not and, if not, whether and how it can be amended in order to ensure it is valid, binding and enforceable as an independent bank guarantee under the Italian law.
Any major transaction nowadays does not take place without this kind of guaranty support. The principal feature of this kind of guarantee is its autonomy from the principal contract of the transaction.
The guarantee is a contract between a guarantor/bank and the beneficiary and underneath there is always a contractual relationship (the “principal” or “underlying” contract) between a creditor and a debtor which includes the obligation of providing a guarantee in favor of the creditor in case of debtor’s default in performing its obligations.
Its purpose is to indemnify the beneficiary from the possible default of the debtor in the underlying relationship: the beneficiary’s right to claim the payment is to be determined only with reference to the guarantee and the bank has to pay with no right to remedies arising out from the underlying contract.
The most used is the “first demand” guarantee which entitles the beneficiary to receive the payment from the bank when the conditions of the guarantee are met, without any proof of the debtor’s default.
In general terms, according to the Italian statutory law and Italian Courts’ rulings, an independent guarantee issued under the URDG 758 will be considered a valid, binding and enforceable independent guarantee, provided that it includes a clause binding the guarantor to pay any amount demanded under the guaranty notwithstanding any contestation concerning the underlying contract and by which it waives the right to require exhaustion of remedies against the debtor, any right to withhold performance, any right of retention, any right of avoidance, any right to offset, and the right to assert any other claims which the debtor or any third party may have under the principal contract or in connection with it or on any other grounds (such clause being known as “senza eccezioni”).
Anyway, a deep analysis of the text guarantee is always recommended.
DISCLAIMER: This summary is intended for general information purposes only. It is not to be considered accurate, updates, complete or a legal opinion. It is neither an offer nor a binding lawyer / client contract or relationship.