Professional Documents
Culture Documents
1 International Sureties General Introduction
1 International Sureties General Introduction
1 International Sureties General Introduction
The scene is located in an exchange of capital, goods, and services across international
borders or territories. The context is international trade, globalization, pushing the
geographical frontiers.
In simple words, doing business with transnational companies is not the same, and much
more difficult in terms of safety- as doing business with national companies.
Unlike most domestic transactions, in a transaction across national borders, the parties (for
example- exporter- and importer) may not have previously dealt with one another, or each
may not know nothing about the other, or the other’s national legal system. For instance,
the seller- exporter does not know- whether the buyer – importer- is creditworthy or
trustworthy –whether exchange controls will hinder movement of the payment funds
(especially if payment is in « hard currency » from a « soft currency » country) –problems of
exchange risks…
Throughout, this transnational perspective, there is naturally a strong need to reduce the
risks of all parties. The purpose there is to protect business against loss, uncertain events or
market conditions.
-Surety – international surety – can be a kind of protectress and preventive answer to these
uncertainties.
-An international surety can be seen as a way of answering that a business – an international
business- in that point of case- or its trading partner receives – a compensation- in the event
of breach of contract. – This is the structure of the surety. – An undertaking, generally a
promise to pay a certain amount of money and conditions precedent – nothing else.
In the most general terms, suretyship involves three parties : the principal obligor, the
creditor to which the principal obligor owes some contractual duty, and the surety which
promises the creditor it will perform the underlying duty, in the event the principal does
not.
What are the instruments in that context and increasing sophistication of international
transactions ?
-In its explanatory note, the United Nations Convention on Independent Guarantees and
Stand by Letters of Credit stated these instruments « are used in a variety of situations ».
For example, they are used to secure performance of contractual obligations including
construction, supply and commercial payment obligations, to secure repayment of an
advance payment in the event that such repayment is required… ».
-Otherwise, more than any legal device, these instruments, give us a tool of supranational
character subject to widely accepted rules and usages (lex mercatoria).