United Nations

A/RES/50/48


General Assembly

Distr. GENERAL  
50th session
26 January 1996


Fiftieth session
Agenda item 143


           RESOLUTION ADOPTED BY THE GENERAL ASSEMBLY

  [on the report of the Sixth Committee (A/50/640 and Corr.1)]


          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
instruments,

     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  1/ to submit the draft Convention to the
General Assembly for its consideration,

     Taking note of the draft Convention adopted by the Commission, 2/

     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
Convention.

                                             87th plenary meeting
                                                 11 December 1995


                              ANNEX

       United Nations Convention on Independent Guarantees
                 and Stand-by Letters of Credit


                CHAPTER I.  SCOPE OF APPLICATION

                            Article 1

                      Scope of application

1.   This Convention applies to an international undertaking referred
to in article 2:

     (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 Convention.

3.   The provisions of articles 21 and 22 apply to international
undertakings referred to in article 2 independently of paragraph 1 of
this article.


                            Article 2

                           Undertaking

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, including:

     (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.


                            Article 3

                   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 relate); or

     (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.


                            Article 4

                 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 party, confirmer.

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

                            Article 5

                  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.


                            Article 6

                           Definitions

     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 undertaking";

     (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
undertaking;

     (g)  "Document" means a communication made in a form that
provides a complete record thereof.


          CHAPTER III.  FORM AND CONTENT OF UNDERTAKING

                            Article 7

        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 is revocable.


                            Article 8

                            Amendment

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 beneficiary.

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.


                            Article 9

        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.


                           Article 10

                      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 undertaking.

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.


                           Article 11

              Cessation of right to demand payment

1.   The right of the beneficiary to demand payment under the
undertaking ceases when:

     (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 undertaking;

     (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 undertaking.


                           Article 12

                             Expiry

     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 undertaking.


          CHAPTER IV.  RIGHTS, OBLIGATIONS AND DEFENCES

                           Article 13

             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.


                           Article 14

      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.


                           Article 15

                             Demand

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.


                           Article 16

        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
beneficiary.

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.


                           Article 17

                             Payment

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
principal/applicant.


                           Article 18

                             Set-off

     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 instructing
party.


                           Article 19

                 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 undertaking;

     (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

                           Article 20

                   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 evidence, may:

     (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

                           Article 21

                    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.


                           Article 22

                 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

                           Article 23

                           Depositary

     The Secretary-General of the United Nations is the depositary of
this Convention.


                           Article 24

    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 ... [the date two
years from the date of adoption].

2.   This Convention is subject to ratification, acceptance or
approval by the signatory States.

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.


                           Article 25

                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.


                           Article 26

                      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 the depositary.


                           Article 27

                          Reservations

     No reservations may be made to this Convention.


                           Article 28

                        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.


                           Article 29

                          Denunciation

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
Convention.


                              Notes

1/        Official Records of the General Assembly, Fiftieth Session,
Supplement No. 17 (A/50/17), para. 201.

2/        Ibid., annex I.

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