ASSIGNMENT UNDER URDG

QUERY FROM DOAN THU

Pls help me on an issue out of your interest

I am working on the guarantee proceduree. URDG states that The beneficiary s right to make a demand under a Guarantee is not assignable unless expressly stated in the Guarantee or in an amendment thereto.

The Guide to URDG explains that the ben can make a demand personally or through his authorized bank or other agent, but he cannot, unless the guarantee so provides, assign that right to another so as to enable the other to make the demand on his own behalf.

I wonder if it is understood that the ben himself must issue the demand with his signature and letterhead. His bank only has to send this demand instead of the ben doing it himself.
Or he can issue an authorization to his bank, then his bank can issue the demand with its signature and letterhead, which states that the bank is claiming on behalf of of the ben?

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MR. OLD MAN’S REPLY

Hi Doan Thu

Frankly speaking, I am not much familiar with URDG. However, I wish to share with you what I understand from URDG 458 Article 4 as well as my experience in this matter as follows:
The beneficiary can assign the proceeds of a guarantee. But this assignment does not assign the rights of the beneficiary as “drawer” on the guarantee, and only the beneficiary may exercise the “drawer” rights and present the demand for payment under the terms of the guarantee unless the terms of the guarantee provide otherwise.

For a guarantee where the beneficiary and the guarantor are in the same domicile, the beneficiary is normally requested to make a demand personally, i.e., he himself has to make and forward his demand for payment together with other required documents (if any) directly to the guarantor.

For a guarantee where the beneficiary and the guarantor are not in the same domicile, the beneficiary is normally requested to make his demand through his bank, i.e., the beneficiary’s bank confirms the authenticity of the demand (which has been made and signed by the beneficiary) and forward. that authenticated demand and other required documents (if any) to the guarantor.

In both cases, the beneficiary himself makes a demand in his name.

URDG Article 4 also refers to the phrase “unless otherwise provided in the guarantee”. This means that the beneficiary’s right to make a demand is assignable if allowed by the guarantee. In this case if the beneficiary wishes to assign his right to make a demand to his bank and his bank accepts this assignment, the bank can issue the demand in his own name as the assigned under the guarantee. This is quite like LC where the negotiating bank is assigned by the beneficiary the right to claim for payment from the issuing bank. (The beneficiary would draw drafts payable to the order of the negotiating bank)

Best regards,
Mr. Old Man (Nguyen Huu Duc) …