6 th ICCUAE TRADE FINANCE CONFERENCE Bank Guarantees

6 th ICC-UAE TRADE FINANCE CONFERENCE Bank Guarantees in UAE “Contentious Points” PETER MENDES COMMERCIAL BANK OF DUBAI

CLAIM AFTER EXPIRY DATE Article 418 of the Commercial Transaction Law No. 18 of 1993 (“CTL”) “The bank shall be discharged from liability vis-à-vis the beneficiary if within the validity period of the letter of guarantee no request for payment is received from the beneficiary, unless it had expressly agreed to renew said term prior to its expiry. ” Vs. UAE Civil code: Article 1092 “If a debt is due, the creditor must claim for it within six months from the date on which it fell due, otherwise the surety shall be deemed to have been discharged. ” Suggested way out: Add text to disallow claim after expiry. e. g. “no claims whatsoever will be entertained after expiry date” or quote URDG 758 ( with support of - Article: 14)

‘OPEN ENDED’ VALIDITY Article 411 of the Commercial Transaction Law No. 18 of 1993 (“CTL”) 1. A bank guarantee is an undertaking issued by a bank to settle the customer's debt to a third party in accordance with the conditions agreed and included in the guarantee, which may be for a definite or indefinite term. Suggested way out: üBank Guarantees subject to URDG 758 (Article 25 (c) “terminate after lapse of three years from date of issue” or, üEmulate Article 422 (1) of CTL No. 18 of 1993 “provided notice of cancellation is sent to the beneficiary at least thirty days before the date set for the cancellation”

EXPIRY DATE A NON-BUSINESS DAY / HOLIDAY The standard practice/ Rules: ØURDG 758 Article 25(d) (Reduction and Termination) provides that the expiry date is extended to “the first following business day” Other Similar rules: ØISP 98 Rule 3. 13(a) (Expiration Date on a Non-Business Day) ØUCP 600 Article 29(a) (Extension of Expiry Date or Last Day for Presentation) Law: Procedural Justice: if the last day of a time limit falls on a legal holiday such time limit shall not expire before the end of the first subsequent working day.