Bank guarantees (bonds) are widely used in international trade. The most common types are bid bonds, advance payment bonds and performance bonds.
Sometimes you will also see payment bonds, but very often letters of credit (or stand-by letters of credit) are used instead. There are many reasons for this, but the main one is that letters of credit are governed by an internationally recognized set of rules.
There is an international set of rules for guarantees as well, but it is not as widely applied and recognized as that for letters of credit. Hence, national legislation is often decisive for resolution of disputes regarding guarantees – whether or not the international rules have been applied.
The use of national legislation – and sometimes even the legislation of two different countries for one single guarantee – calls for vigilance on content as well as on method of issue when a guarantee is to be issued – no matter whether you are the applicant or the beneficiary of the guarantee.
With many years of experience dealing with cross-border bank guarantees, we are well positioned to advise on drafting and issuing of guarantees. Likewise we can represent you in negotiations with banks and customers and/or suppliers. And, finally, we can negotiate guarantee facilities with banks to ensure you the best possible terms and prices.