The claimant, a bank incorporated under the laws of Austria, entered into a credit agreement with three companies. The respondent, a Swiss company, issued a guarantee in favour of the claimant, as required under the credit agreement. The guarantee was governed by Austrian substantive law. The claimant called the guarantee, and at the same time presented the documents that it considered necessary to meet the requirements laid down in the guarantee. The respondent failed to pay and the claimant thus brought arbitration proceedings to obtain the sum alleged to be due to it. The arbitral tribunal was required to determine the legal nature of the guarantee, over which the parties differed.

'The Guarantee is entitled "joint and several guarantee of [Respondent] in favour of [Claimant]" and reads in its relevant parts as follows:

"Referring to the Credit Agreement signed on . . . between [Company X], the "Debtor", and [Claimant], the "Bank",

1. [Respondent] hereby jointly and severally guarantees towards the Bank, payment of any amount up to 25% of the financial obligations of the Debtor towards the Bank as per maturity date with a maximum of USD 2,000,000 (US Dollars two million).

. . . . . . . . .

3. [Respondent] undertakes to pay unconditionally to the Bank up to the maximum amount stipulated in article 1 above:

1) at maturity date if the Debtor fails to fulfil its payment obligations.

2) earlier and within 3 (three) Austrian banking days from Bank's request in case of early termination of the Credit Agreement.

Against presentation of following documents:

a) a copy of your documented claim to the Debtor requesting the payment of the outstanding amount

b) your written statement confirming that the Debtor has not fulfilled their payment obligations towards your bank

c) original signed by both parties of the assignment on a pari passu basis from the Bank in favour of [Respondent] of 25% of all its rights against the Debtor up to the amount disbursable by [Respondent] under the letter of guarantee, such assignment to be acknowledged by the Debtor

d) original signed by both parties of the assignment on a pari passu basis from the Bank in favour of [Respondent] of 25% of the proceeds of the collateral securities granted by the Debtor in favour of the Bank under the Credit Agreement (inter alia promissory notes, legally valid mortgages over the fixed and current assets, insurance policies...) up to the amount disbursable by [Respondent] under the letter of guarantee, such assignment to be acknowledged by the Debtor . . ."

. . . . . . . .

Legal nature of the Guarantee

A guarantee to pay a certain sum of money is an independent undertaking as described in the "UN Convention on Independent Guarantees and Stand-by Letters of Credit" adopted on December 11, 1995 [UN General Assembly Resolution 50/48], "where the guarantor/issuer's obligation to the beneficiary is not:

(a) dependent upon the existence or validity of an underlying transaction, or upon any other undertaking (including stand-by letters of credit or independent guarantees to which confirmations or counter-guarantees relate); or

(b) subject to any term or condition not appearing in the undertaking, or to any future, uncertain act or event except presentation of documents or another such act or event falling within the guarantor/issuer's sphere of operations" (Art. 3).

This Convention is only cited here as a witness for a common international understanding of the term independent guarantee, and not as a source of law directly applicable in the present case.

A suretyship (Bürgschaft), in contrast, as found in many national laws including Austrian law, is dependant on the secured claim. If this secured claim does not exist, the surety cannot be used. Speaking in the terms of Austrian law and continental legal language, the suretyship is an "accessory" (akzessorisch). In case of a suretyship, the court or arbitral tribunal must check every reasonable legal defence put forward by the surety against the validity of the secured claim (Hauptschuld). In case of a guarantee, defences must be taken into account only to the extent that they are expressly named in the guarantee as a condition precedent for payment, or if the guarantor puts forward strong evidence against the validity of the underlying claim to prove an abuse of the guarantee.

Under Austrian law the question of whether the parties intended an independent bank guarantee or an accessory surety is submitted to the general rules of interpretation contained in Art. 914 et seq. ABGB. The starting point for the interpretation is the wording used which is, however, not conclusive where a different intent of the parties can be established (OGH, 7 OB 653/85, 21.11.1985; Koziol, Der Garantievertrag, Wien 1981, p. 9 et seq.).

In the case before us, the term "guarantee" used by Respondent, in English law, can mean either a suretyship or an independent undertaking (guarantee, indemnity). Under Austrian law, which is the law applicable to the guarantee, the term denotes an independent obligation (Garantie; cf. Koziol, Der Garantievertrag, Wien 1981, p. 5 et seq.) as in most continental laws including Swiss law, the law of the residence of Respondent (Dohm, Bankgarantien im internationalen Handel, Bern 1985, p. 1 et seq.). Moreover, we are in presence of an international business transaction with participants in different European countries. In international commercial practice, a guarantee is generally understood as being an independent obligation as defined by the UN Convention cited above (for a discussion on this phenomenon, see N. Horn and E. Wymeersch, Bank Guarantees, Stand-by Letters of Credit and Performance Bonds in International Trade, Deventer 1990). Finally, Respondent promised in the guarantee "to pay unconditionally to the bank (i.e., Claimant)". This is a strong indication that the obligation of Respondent was meant to be independent, i.e. not undertaken under the condition of the validity of the underlying agreement.

This interpretation is not excluded by the fact that, in No. 3 (2) of the guarantee, the payment claim is made dependent on the presentation of a number of documents described in subparagraph a-d. The independence of an undertaking is only excluded if the undertaking is made subject to any term or condition not appearing in the undertaking, or to any future, uncertain act or event except presentation of documents etc., as described in Art. 3 UN Convention (cited above). Quite to the contrary, the specific listing of requirements to be fulfilled when calling the guarantee is an indication of its independent character. The requirements all relate to the presentation of documents. In particular Art. 3 (b) which requires a written statement that the debtor has not fulfilled the underlying obligation, is a clear indication that the submission of documents should be sufficient and no proof of the correctness of the statement is required. If the parties had intended a surety, no such listing would be necessary since the obligation to pay would only arise when the underlying obligation is valid (see also Koziol, Der Garantievertrag, Wien 1981, p. 13 et seq.).

Nothing different follows from the obligation to inform the guarantor about the financial status of the debtor, which is considered by Respondent as an indication that the guarantee was not meant to be abstract. The mere fact that the guarantor had to be informed does not warrant the conclusion that the calling of the guarantee was dependent on the existence and the status of the underlying claim. The Guarantee is very specific in relation to what is required for calling the Guarantee and in this respect does not mention the information requirement.

The independence of the Guarantee is not excluded either by the fact that, in an earlier draft of the Guarantee made by Respondent, the obligation was to pay "on first written demand", which formulation was withdrawn after an internal discussion among the representatives and advisers of Respondent, as described by witness Mr [N]. The guarantee to pay on first written demand is only a subspecies of an independent guarantee. Furthermore, the use of the word "unconditional" has the same effect, that defences arising from the underlying relationship cannot be brought.

The reference to Austrian law, as well as the fact that the guarantee was not issued by a bank, are not arguments in favour of an interpretation as a surety. Though Austrian law like most other laws does not have detailed codified rules, bank guarantees are well known in Austrian law. Unlike documentary credits which are generally governed by the UCP 500, guarantees are frequently only submitted to a national law and not to one of the existing ICC rules relevant for guarantees. Therefore the lack of any reference to rules for guarantees is in itself not an argument against the interpretation of the agreement as a guarantee. Since the reference in the agreement does not specifically refer to the provisions applying to sureties, the mere choice of Austrian law does not lead to any conclusion as to the parties' intent. The same applies to the argument that the guarantee was not issued by a bank but by a company. In a commercial environment, independent guarantees are not only issued by banks but also by companies.

In the light of the clear wording, the prior involvement of the parties in the . . . Project is of little relevance. Though the interest of the beneficiary and the guarantor in the underlying transaction may be a relevant factor in deciding whether a surety or an independent guarantee is issued (see Koziol, Der Garantievertrag, Wien 1981, p. 14), it does not change the legal position in the present case. The interest of the parties is one of the factors to be taken into account when the wording of the guarantee leaves doubts as to what was intended by the parties. It does not, however, override clear wording.

The same result would follow from an application of Art. 915 ABGB, which would be applicable if there were actually doubts about the intention of the parties. Since it was Respondent who provided the last draft of the guarantee, any ambiguity as to whether a guarantee or a surety was intended would be interpreted in favour of Claimant, which means in favour of an independent guarantee. In this respect Respondent cannot argue that its draft only summarized the results of a common understanding. The changes inserted in the last draft in comparison to the draft of December 7, which was also drafted by Respondent, are material insofar that the documentary requirements for calling the guarantee were inserted. It was upon an explicit request of Respondent in a fax of December 16, that the terms were changed last minute and the guarantee was brought in line with [A]'s guarantee . . .

The independent nature of the guarantee before us has the legal consequence that Claimant does not bear the full burden of proof that the secured claim was validly agreed and not fulfilled.'