87th plenary meeting
11 December 1995
50/48. United Nations Convention on Independent
Guarantees and Stand-by Letters of Credit
The General Assembly,
Recalling its resolution 2205 (XXI) of 17 December 1966, by which it
created the United Nations Commission on International Trade Law with a
mandate to further the progressive harmonization and unification of the law of
international trade and in that respect to bear in mind the interests of all
peoples, in particular those of developing countries, in the extensive
development of international trade,
Being aware of the uncertainty and lack of uniformity currently
prevailing among the various legal systems in the field of independent
guarantees and stand- by letters of credit,
Being convinced that the adoption of a convention on independent
guarantees and stand-by letters of credit will usefully contribute to
overcoming the current uncertainties and disparities in this field of
considerable practical importance and thus facilitate the use of such
Being aware that the Commission, at its twenty-second session in 1989,
decided to prepare uniform legislation on independent guarantees and stand-by
letters of credit and entrusted the Working Group on International Contract
Practices with the preparation of a draft,
Noting that the Working Group devoted eleven sessions, from 1990 to 1995,
to the preparation of the draft United Nations Convention on Independent
Guarantees and Stand-by Letters of Credit, and that all States and interested
international organizations were invited to participate in the preparation of
the draft Convention at all the sessions of the Working Group and at the
twenty- eighth session of the Commission, either as members or observers, with
a full opportunity to speak and make proposals,
Taking note with satisfaction of the decision of the Commission at its
twenty-eighth session to submit the draft Convention to the General Assembly
for its consideration,
Taking note of the draft Convention adopted by the Commission,
1. Expresses its appreciation to the United Nations Commission on
International Trade Law for preparing the draft United Nations Convention on
Independent Guarantees and Stand-by Letters of Credit;
2. Adopts and opens for signature or accession the United Nations
Convention on Independent Guarantees and Stand-by Letters of Credit, contained
in the annex to the present resolution;
3. Calls upon all Governments to consider becoming party to the
United Nations Convention on Independent Guarantees
and Stand-by Letters of Credit
CHAPTER I. SCOPE OF APPLICATION
Scope of application
1. This Convention applies to an international undertaking referred to in
(a) If the place of business of the guarantor/issuer at which the
undertaking is issued is in a Contracting State, or
(b) If the rules of private international law lead to the
application of the law of a Contracting State, unless the undertaking
excludes the application of the Convention.
2. This Convention applies also to an international letter of credit not
falling within article 2 if it expressly states that it is subject to this
3. The provisions of articles 21 and 22 apply to international undertakings
referred to in article 2 independently of paragraph 1 of this article.
1. For the purposes of this Convention, an undertaking is an independent
commitment, known in international practice as an independent guarantee or as
a stand-by letter of credit, given by a bank or other institution or persons
("guarantor/issuer") to pay to the beneficiary a certain or determinable
amount upon simple demand or upon demand accompanied by other documents, in
conformity with the terms and any documentary conditions of the undertaking,
indicating, or from which it is to be inferred, that payment is due because of
a default in the performance of an obligation, or because of another
contingency, or for money borrowed or advanced, or on account of any mature
indebtedness undertaken by the principal/applicant or another person.
2. The undertaking may be given:
(a) At the request or on the instruction of the customer ("principal/
applicant") of the guarantor/issuer;
(b) On the instruction of another bank, institution or person
("instructing party") that acts at the request of the customer ("principal/
applicant") of that instructing party; or
(c) On behalf of the guarantor/issuer itself.
3. Payment may be stipulated in the undertaking to be made in any form,
(a) Payment in a specified currency or unit of account;
(b) Acceptance of a bill of exchange (draft);
(c) Payment on a deferred basis;
(d) Supply of a specified item of value.
4. The undertaking may stipulate that the guarantor/issuer itself is the
beneficiary when acting in favour of another person.
Independence of undertaking
For the purposes of this Convention, an undertaking is independent where
the guarantor/issuer's obligation to the beneficiary is not:
(a) Dependent upon the existence or validity of any underlying
transaction, or upon any other undertaking (including stand-by letters of
credit or independent guarantees to which confirmations or counter-guarantees
(b) Subject to any term or condition not appearing in the undertaking,
or to any future, uncertain act or event except presentation of documents or
another such act or event within a guarantor/issuer's sphere of operations.
Internationality of undertaking
1. An undertaking is international if the places of business, as specified
in the undertaking, of any two of the following persons are in different
States: guarantor/issuer, beneficiary, principal/applicant, instructing
2. For the purposes of the preceding paragraph:
(a) If the undertaking lists more than one place of business for a given
person, the relevant place of business is that which has the closest
relationship to the undertaking;
(b) If the undertaking does not specify a place of business for a given
person but specifies its habitual residence, that residence is relevant for
determining the international character of the undertaking.
CHAPTER II. INTERPRETATION
Principles of interpretation
In the interpretation of this Convention, regard is to be had to its
international character and to the need to promote uniformity in its
application and the observance of good faith in the international practice of
independent guarantees and stand-by letters of credit.
For the purposes of this Convention and unless otherwise indicated in a
provision of this Convention or required by the context:
(a) "Undertaking" includes "counter-guarantee" and "confirmation of an
(b) "Guarantor/issuer" includes "counter-guarantor" and "confirmer";
(c) "Counter-guarantee" means an undertaking given to the
guarantor/issuer of another undertaking by its instructing party and providing
for payment upon simple demand or upon demand accompanied by other documents,
in conformity with the terms and any documentary conditions of the
undertaking, indicating, or from which it is to be inferred, that payment
under that other undertaking has been demanded from, or made by, the person
issuing that other undertaking;
(d) "Counter-guarantor" means the person issuing a counter-guarantee;
(e) "Confirmation" of an undertaking means an undertaking added to that
of the guarantor/issuer, and authorized by the guarantor/issuer, providing the
beneficiary with the option of demanding payment from the confirmer instead of
from the guarantor/issuer, upon simple demand or upon demand accompanied by
other documents, in conformity with the terms and any documentary conditions
of the confirmed undertaking, without prejudice to the beneficiary's right to
demand payment from the guarantor/issuer;
(f) "Confirmer" means the person adding a confirmation to an
(g) "Document" means a communication made in a form that provides a
complete record thereof.
CHAPTER III. FORM AND CONTENT OF UNDERTAKING
Issuance, form and irrevocability of undertaking
1. Issuance of an undertaking occurs when and where the undertaking leaves
the sphere of control of the guarantor/issuer concerned.
2. An undertaking may be issued in any form which preserves a complete
record of the text of the undertaking and provides authentication of its
source by generally accepted means or by a procedure agreed upon by the
guarantor/issuer and the beneficiary.
3. From the time of issuance of an undertaking, a demand for payment may be
made in accordance with the terms and conditions of the undertaking, unless
the undertaking stipulates a different time.
4. An undertaking is irrevocable upon issuance, unless it stipulates that it
1. An undertaking may not be amended except in the form stipulated in the
undertaking or, failing such stipulation, in a form referred to in paragraph 2
of article 7.
2. Unless otherwise stipulated in the undertaking or elsewhere agreed by the
guarantor/issuer and the beneficiary, an undertaking is amended upon issuance
of the amendment if the amendment has previously been authorized by the
3. Unless otherwise stipulated in the undertaking or elsewhere agreed by the
guarantor/issuer and the beneficiary, where any amendment has not previously
been authorized by the beneficiary, the undertaking is amended only when the
guarantor/issuer receives a notice of acceptance of the amendment by the
beneficiary in a form referred to in paragraph 2 of article 7.
4. An amendment of an undertaking has no effect on the rights and
obligations of the principal/applicant (or an instructing party) or of a
confirmer of the undertaking unless such person consents to the amendment.
Transfer of beneficiary's right to demand payment
1. The beneficiary's right to demand payment may be transferred only if
authorized in the undertaking, and only to the extent and in the manner
authorized in the undertaking.
2. If an undertaking is designated as transferable without specifying
whether or not the consent of the guarantor/issuer or another authorized
person is required for the actual transfer, neither the guarantor/issuer nor
any other authorized person is obliged to effect the transfer except to the
extent and in the manner expressly consented to by it.
Assignment of records
1. Unless otherwise stipulated in the undertaking or elsewhere agreed by the
guarantor/issuer and the beneficiary, the beneficiary may assign to another
person any proceeds to which it may be, or may become, entitled under the
2. If the guarantor/issuer or another person obliged to effect payment has
received a notice originating from the beneficiary, in a form referred to in
paragraph 2 of article 7, of the beneficiary's irrevocable assignment, payment
to the assignee discharges the obligor, to the extent of its payment, from its
liability under the undertaking.
Cessation of right to demand payment
1. The right of the beneficiary to demand payment under the undertaking
(a) The guarantor/issuer has received a statement by the beneficiary of
release from liability in a form referred to in paragraph 2 of article 7;
(b) The beneficiary and the guarantor/issuer have agreed on the
termination of the undertaking in the form stipulated in the undertaking or,
failing such stipulation, in a form referred to in paragraph 2 of article 7;
(c) The amount available under the undertaking has been paid, unless the
undertaking provides for the automatic renewal or for an automatic increase of
the amount available or otherwise provides for continuation of the
(d) The validity period of the undertaking expires in accordance with
the provisions of article 12.
2. The undertaking may stipulate, or the guarantor/issuer and the
beneficiary may agree elsewhere, that return of the document embodying the
undertaking to the guarantor/issuer, or a procedure functionally equivalent to
the return of the document in the case of the issuance of the undertaking in
non-paper form, is required for the cessation of the right to demand payment,
either alone or in conjunction with one of the events referred to in
subparagraphs (a) and (b) of paragraph 1 of this article. However, in no case
shall retention of any such document by the beneficiary after the right to
demand payment ceases in accordance with subparagraph (c) or (d) of paragraph
1 of this article preserve any rights of the beneficiary under the
The validity period of the undertaking expires:
(a) At the expiry date, which may be a specified calendar date or the
last day of a fixed period of time stipulated in the undertaking, provided
that, if the expiry date is not a business day at the place of business of the
guarantor/issuer at which the undertaking is issued, or of another person or
at another place stipulated in the undertaking for presentation of the demand
for payment, expiry occurs on the first business day which follows;
(b) If expiry depends according to the undertaking on the occurrence of
an act or event not within the guarantor/issuer's sphere of operations, when
the guarantor/issuer is advised that the act or event has occurred by
presentation of the document specified for that purpose in the undertaking or,
if no such document is specified, of a certification by the beneficiary of the
occurrence of the act or event;
(c) If the undertaking does not state an expiry date, or if the act or
event on which expiry is stated to depend has not yet been established by
presentation of the required document and an expiry date has not been stated
in addition, when six years have elapsed from the date of issuance of the
CHAPTER IV. RIGHTS, OBLIGATIONS AND DEFENCES
Determination of rights and obligations
1. The rights and obligations of the guarantor/issuer and the beneficiary
arising from the undertaking are determined by the terms and conditions set
forth in the undertaking, including any rules, general conditions or usages
specifically referred to therein, and by the provisions of this Convention.
2. In interpreting terms and conditions of the undertaking and in settling
questions that are not addressed by the terms and conditions of the
undertaking or by the provisions of this Convention, regard shall be had to
generally accepted international rules and usages of independent guarantee or
stand-by letter of credit practice.
Standard of conduct and liability of guarantor/issuer
1. In discharging its obligations under the undertaking and this Convention,
the guarantor/issuer shall act in good faith and exercise reasonable care
having due regard to generally accepted standards of international practice of
independent guarantees or stand-by letters of credit.
2. A guarantor/issuer may not be exempted from liability for its failure to
act in good faith or for any grossly negligent conduct.
1. Any demand for payment under the undertaking shall be made in a form
referred to in paragraph 2 of article 7 and in conformity with the terms and
conditions of the undertaking.
2. Unless otherwise stipulated in the undertaking, the demand and any
certification or other document required by the undertaking shall be
presented, within the time that a demand for payment may be made, to the
guarantor/issuer at the place where the undertaking was issued.
3. The beneficiary, when demanding payment, is deemed to certify that the
demand is not in bad faith and that none of the elements referred to in
subparagraphs (a), (b) and (c) of paragraph 1 of article 19 are present.
Examination of demand and accompanying documents
1. The guarantor/issuer shall examine the demand and any accompanying
documents in accordance with the standard of conduct referred to in paragraph
1 of article 14. In determining whether documents are in facial conformity
with the terms and conditions of the undertaking, and are consistent with one
another, the guarantor/issuer shall have due regard to the applicable
international standard of independent guarantee or stand-by letter of credit.
2. Unless otherwise stipulated in the undertaking or elsewhere agreed by the
guarantor/issuer and the beneficiary, the guarantor/issuer shall have
reasonable time, but not more than seven business days following the day of
receipt of the demand and any accompanying documents, in which to:
(a) Examine the demand and any accompanying documents;
(b) Decide whether or not to pay;
(c) If the decision is not to pay, issue notice thereof to the
The notice referred to in subparagraph (c) above shall, unless otherwise
stipulated in the undertaking or elsewhere agreed by the guarantor/issuer and
the beneficiary, be made by teletransmission or, if that is not possible, by
other expeditious means and indicate the reason for the decision not to pay.
1. Subject to article 19, the guarantor/issuer shall pay against a demand
made in accordance with the provisions of article 15. Following a
determination that a demand for payment so conforms, payment shall be made
promptly, unless the undertaking stipulates payment on a deferred basis, in
which case payment shall be made at the stipulated time.
2. Any payment against a demand that is not in accordance with the
provisions of article 15 does not prejudice the rights of the
Unless otherwise stipulated in the undertaking or elsewhere agreed by the
guarantor/issuer and the beneficiary, the guarantor/issuer may discharge the
payment obligation under the undertaking by availing itself of a right of set-
off, except with any claim assigned to it by the principal/applicant or the
Exception to payment obligation
1. If it is manifest and clear that:
(a) Any document is not genuine or has been falsified;
(b) No payment is due on the basis asserted in the demand and the
supporting documents; or
(c) Judging by the type and purpose of the undertaking, the demand has
no conceivable basis,
the guarantor/issuer, acting in good faith, has a right, as against the
beneficiary, to withhold payment.
2. For the purposes of subparagraph (c) of paragraph 1 of this article, the
following are types of situations in which a demand has no conceivable basis:
(a) The contingency or risk against which the undertaking was designed
to secure the beneficiary has undoubtedly not materialized;
(b) The underlying obligation of the principal/applicant has been
declared invalid by a court or arbitral tribunal, unless the undertaking
indicates that such contingency falls within the risk to be covered by the
(c) The underlying obligation has undoubtedly been fulfilled to the
satisfaction of the beneficiary;
(d) Fulfilment of the underlying obligation has clearly been prevented
by wilful misconduct of the beneficiary;
(e) In the case of a demand under a counter-guarantee, the beneficiary
of the counter-guarantee has made payment in bad faith as guarantor/issuer of
the undertaking to which the counter-guarantee relates.
3. In the circumstances set out in subparagraphs (a), (b) and (c) of
paragraph 1 of this article, the principal/applicant is entitled to
provisional court measures in accordance with article 20.
CHAPTER V. PROVISIONAL COURT MEASURES
Provisional court measures
1. Where, on an application by the principal/applicant or the instructing
party, it is shown that there is a high probability that, with regard to a
demand made, or expected to be made, by the beneficiary, one of the
circumstances referred in subparagraphs (a), (b) and (c) of paragraph 1 of
article 19 is present, the court, on the basis of immediately available strong
(a) Issue a provisional order to the effect that the beneficiary does
not receive payment, including an order that the guarantor/issuer hold the
amount of the undertaking, or
(b) Issue a provisional order to the effect that the proceeds of the
undertaking paid to the beneficiary are blocked, taking into account whether
in the absence of such an order the principal/applicant would be likely to
suffer serious harm.
2. The court, when issuing a provisional order referred to in paragraph 1 of
this article, may require the person applying therefor to furnish such form of
security as the court deems appropriate.
3. The court may not issue a provisional order of the kind referred to in
paragraph 1 of this article based on any objection to payment other than those
referred to in subparagraphs (a), (b) and (c) of paragraph 1 of article 19, or
use of the undertaking for a criminal purpose.
CHAPTER VI. CONFLICT OF LAWS
Choice of applicable law
The undertaking is governed by the law the choice of which is:
(a) Stipulated in the undertaking or demonstrated by the terms and
conditions of the undertaking; or
(b) Agreed elsewhere by the guarantor/issuer and the beneficiary.
Determination of applicable law
Failing a choice of law in accordance with article 21, the undertaking is
governed by the law of the State where the guarantor/issuer has that place of
business at which the undertaking was issued.
CHAPTER VII. FINAL CLAUSES
The Secretary-General of the United Nations is the depositary of this
Signature, ratification, acceptance, approval, accession
1. This Convention is open for signature by all States at the Headquarters
of the United Nations, New York, until ... .
2. This Convention is subject to ratification, acceptance or approval by the
3. This Convention is open to accession by all States which are not
signatory States as from the date it is open for signature.
4. Instruments of ratification, acceptance, approval and accession are to be
deposited with the Secretary-General of the United Nations.
Application to territorial units
1. If a State has two or more territorial units in which different systems
of law are applicable in relation to the matters dealt with in this
Convention, it may, at the time of signature, ratification, acceptance,
approval or accession, declare that this Convention is to extend to all its
territorial units or only one or more of them, and may at any time substitute
another declaration for its earlier declaration.
2. These declarations are to state expressly the territorial units to which
the Convention extends.
3. If, by virtue of a declaration under this article, this Convention does
not extend to all territorial units of a State and the place of business of
the guarantor/issuer or of the beneficiary is located in a territorial unit to
which the Convention does not extend, this place of business is considered not
to be in a Contracting State.
4. If a State makes no declaration under paragraph 1 of this article, the
Convention is to extend to all territorial units of that State.
Effect of declaration
1. Declarations made under article 25 at the time of signature are subject
to confirmation upon ratification, acceptance or approval.
2. Declarations and confirmations of declarations are to be in writing and
to be formally notified to the depositary.
3. A declaration takes effect simultaneously with the entry into force of
this Convention in respect of the State concerned. However, a declaration of
which the depositary receives formal notification after such entry into force
takes effect on the first day of the month following the expiration of six
months after the date of its receipt by the depositary.
4. Any State which makes a declaration under article 25 may withdraw it at
any time by a formal notification in writing addressed to the depositary.
Such withdrawal takes effect on the first day of the month following the
expiration of six months after the date of the receipt of the notification of
No reservations may be made to this Convention.
Entry into force
1. This Convention enters into force on the first day of the month following
the expiration of one year from the date of the deposit of the fifth
instrument of ratification, acceptance, approval or accession.
2. For each State which becomes a Contracting State to this Convention after
the date of the deposit of the fifth instrument of ratification, acceptance,
approval or accession, this Convention enters into force on the first day of
the month following the expiration of one year after the date of the deposit
of the appropriate instrument on behalf of that State.
3. This Convention applies only to undertakings issued on or after the date
when the Convention enters into force in respect of the Contracting State
referred to in subparagraph (a) or the Contracting State referred to in
subparagraph (b) of paragraph 1 of article 1.
1. A Contracting State may denounce this Convention at any time by means of
a notification in writing addressed to the depositary.
2. The denunciation takes effect on the first day of the month following the
expiration of one year after the notification is received by the depositary.
Where a longer period is specified in the notification, the denunciation takes
effect upon the expiration of such longer period after the notification is
received by the depositary.
DONE at ..., this ... day of ... one thousand nine hundred and
ninety-..., in a single original, of which the Arabic, Chinese, English,
French, Russian and Spanish texts are equally authentic.
IN WITNESS WHEREOF the undersigned plenipotentiaries, being duly
authorized by their respective Governments, have signed the present