FAQ: Guarantees

Under a guarantee payable on demand, the bank will typically pay against a declaration of breach of contract or default, whereas under a conditional guarantee, the bank will wait for confirmation that the condition has been satisfied before paying.

Bid or tender bonds are issued by the bank on behalf of an exporter to protect the importer in cases where the exporter's bid is accepted under a tender process but the exporter fails to sign the contract.

A performance bond is also issued by the exporter's bank and will reimburse the importer if the exporter fails to fulfil its obligations under the contract.

The direct guarantee is issued by the bank and sent direct to the beneficiary or sent via his bank. In contrast, if the bank asks a foreign bank to issue a guarantee on our behalf, the bank issues a counter guarantee as security.

If the bank issues a counter guarantee, it means as a rule that there are more expenses entailed in the issue of the guarantee than in an issue of a direct guarantee, as we are actually dealing with two guarantees. Furthermore, the guarantee will not be subject to the laws of your country, which for example can mean that an expiry date might not be respected.

If a guarantee is issued with an expiry date, it means that the guarantee is no longer valid after this date, provided the guarantee is subject to the laws of your country. If subject to foreign law, the beneficiary's country may fail to recognise this and hold the guarantee valid for claims after the expiry date.

If there is no expiry date in the guarantee, the guarantee can be cancelled only when either the original guarantee is returned to the bank or when we receive notice that we are released from our obligations.

Yes, as long as the issuing bank requests that we do so and that we are able to approve the bank as well as the content of the guarantee.