Case a.DEF Bank, at the request of its customer A, arranges for a guarantee to be issued by C Bank, which is located in another country, against DEF Bank’s counter-guarantee. Under the laws of that other country, C Bank is required to obtain a license before issuing a guarantee upon the instructions of a non-resident and to pay a stamp duty on the guarantee.
Remarks: Article 31 does not apply in the above case because the requirements are imposed by C Bank’s own law, not by a foreign law. C bank has no right of indemnity against A, with which it has no direct relationship. The only party from which C bank can claim an indemnity is DEF Bank, and this right depends not on the URDG but on the arrangements between them and the law governing those arrangements. However, the guarantor may well be able to recoup the stamp duty under article 32 as charges.
Case b.DEF Bank, at the request of its customer A, arranges for a guarantee to be issued by its correspondent C Bank in favor of B, which is located in another country, against DEF Bank’s counter-guarantee. The guarantee is stated to expire on 1 May and the counter-guarantee on 1 June. Both the guarantee and counter-guarantee are stated to be governed by the laws of the country where C Bank is located. This law requires guarantors and counter-guarantors to prolong their undertaking for a maximum of one year if so demanded by the beneficiary before expiry, regardless of what the undertaking may indicate. On 30 April, B presents an extension request for one year and C Bank extends the guarantee. On 5 May, C Bank informs DEF Bank of the extension and asks for a similar extension under the counter-guarantee, which DEF Bank grants.
Remarks: A is bound by the extension of the counter-guarantee because it is imposed by the law of the location of C Bank – a foreign law for DEF Bank. Any charges imposed by DEF Bank based on the duration of its counter-guarantee commitment will continue to be paid by A through the duration of the extension.