URDG

URDG stands for Uniform Rules for Demand Guarantees, a set of rules published by the International Chamber of Commerce (ICC) that governs demand guarantees and standby bank guarantees. The rules provide a harmonized framework for the relationships among the involved parties: the applicant (the party requesting the guarantee), the beneficiary (the party in whose favor the guarantee is issued), and the issuer (the bank or financial institution that issues the guarantee). They may also cover advising or confirming banks as part of the process.

URDG applies to guarantees that are payable on first demand, meaning the issuer is obligated to pay the stated amount to the beneficiary upon a properly presented demand, without the beneficiary needing to prove breach of an underlying contract. The rules emphasize the independence of the guarantee from the underlying transaction, so disputes over performance generally do not affect the issuer’s payment obligation under the guarantee.

Key provisions address what constitutes a proper demand, the documents required for presentation, and the process by which a demand is examined. A demand must adhere to the form and content specified by the guarantee and should typically include a clear statement of non-payment or breach. If a demand is in order, the issuer is expected to honor within the period defined by URDG, subject to any conditions stated in the guarantee; if not, the issuer may refuse with stated reasons.

URDG complements other ICC instruments such as UCP 600 (for documentary credits) but governs different payment guarantees. The rules aim to standardize practices, reduce disputes, and facilitate cross-border guarantees in international trade.