Comments to URDG Revision Draft 1

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6 March 2008

To: The Chair and Members
Canadian Working Party (CWP) on the
ICC Commission on Banking Technique and Practice

Dear Members of ICC Canada,
Below are my own comments to URDG Draft 1.

Words like "unless specially stated otherwise" appearing in line 52 and other lines throughout the text are not necessary since any special conditions in the guarantee or counter-guarantee would modify the default rules in URDG anyway. In drafting the UCP 600, similar words have been removed from equivalent articles in UCP 500 to achieve simplicity.
The "Explanatory Note" in general is written in legalized English, which is difficult to understand, particularly for bankers and traders, for whom the URDG is prepared. The Explanatory Note should be in simple English, avoiding long sentences and legal jargons. Otherwise it is more difficult to understand than the rules themselves. The URDG is to be used in countries where English is not the mother tongue.
I have one private case in Hong Kong (settled amicably outside the court room) where the applicant bank refuses to pay the issuing bank after a trade fraud when both the applicant and beneficiary disappeared. I highlighted this dispute to a member of the drafting group of ISP98. As a result, in ISP98, they add the role of "applicant bank" in rule No. 1.09 (a). In the definition of an applicant, it states": "Applicant is a person who applies for issuance of a standby or for whose account it is issued, and includes (i) a person applying in its own name but for the account of another person or (ii) an issuer acting for its own account".
Instead of calling a party as "instructing party" (that bears no linkage to an applicant), it may be re-named as "applicant party" so that this term would be linked more to an applicant. Both parties have the obligation to pay the guarantor or counter-guarantor.
It is also advisable to follow the definition of an applicant in ISP98 rule 1.09 (a) in URDG. ISP98 and URDG should share the same concept and terminology whenever possible. The trading community is already complaining that there are too many rules to care about nowadays, UCP 600, eUCP 1.1, ISBP 681, URR 525, URC 522, ISP98, URDG, ICC Official Opinions, ICC Banking Commission Statements, so on and so forth.
Line 159: "affecting" should be changed to "related to" to have a wider scope of coverage because some communications may not affect the guarantee.
Lines 214 & 312: Please define "index".
Line 265: Add "by telecommunication" after "without delay".
The Explanatory Note for article 18 (b) is not very clear.
The last paragraph of Explanatory Note for article 20 is not very clear.

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