The International Chamber of Commerce (ICC Qatar) commends the Qatar Central Bank (QCB) for issuing a standard format for the demand guarantee letter. The newly adopted standard text aligns with the ICC Uniform Rules for Demand Guarantees (URDG) rules, published by the International Chamber of Commerce (ICC), and was circulated for banks and Q companies to use in the trade finance sector.
The ICC URDG rules No. 758 (URDG) is a set of voluntary contractual rules created to regularise and establish a new set of international standards on demand guarantees, a common banking practice.
ICC Qatar stated that the standard text aims to reduce the disparity in terms and conditions governing letters of guarantee of all types issued by the banks.
This standard format for demand guarantee letters would reduce risks and minimize the banking risks for this type of banking transaction.
The ICC Qatar Banking Commission drafted and advocated for the uniform template for the demand guarantee letter to create a unified system that is consistent with the international regulatory standards. The standard text was finalized following several consultations with the banking sector.
“The form is a result of enormous effort made by the Banking Commission in collaboration with QCB, all banks in Qatar and concerned companies. The form is anticipated to positively impact Qatar’s investment climate and attract more foreign investments,” ICC Qatar revealed in a statement.
The circular issued by Qatar Central Bank calls on banks to adopt and comply with the form when issuing demand guarantee letters as of the date the circular was issued.
The circular also noted that, with respect to the existing letters of demand guarantee at the time of such circular, compliance with the agreed terms should be observed.
ICC Qatar has recently hosted several seminars, during which the banks’ views on this form were explored. The seminars also witnessed the banks’ approval on the form that sets out the general conditions and rules governing the relationship between the bank and other parties associated with the letter of guarantee and defining each party’s duties and rights.