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Andrea Hauptmann, after five years of experience with RZB Vienna (formerly GZB) in import and export L/Cs, took over responsibility for the foreign guarantees and became Head of the Guarantees Department in 1999. She became Assistant Vice President in 1997 and Vice President in 2000. She has been a member of the ICC Task Force on Guarantees since 2003 and in April 2007 was appointed to the URDG Drafting Group.

DCI: The last few years have seen a considerable increase in the use of ICC's Uniform Rules for Demand Guarantees (URDG). To what do you attribute this increase?

Hauptmann: The most important development was the increasing number of guarantees to and from the southern and eastern European countries. There is still a lack of legislative regulation for products like guarantees in these countries, and therefore they were looking for applicable international rules. The URDG were in the right place at the right time, and as such, the natural choice.

DCI: What role did the World Bank's incorporation of the rules in its unconditional guarantee forms play?

Hauptmann: It was very important, because beneficiaries that were still reluctant to use the URDG were convinced to use the rules when the World Bank chose the rules for its standard guarantees. This had a psychological impact. For some time, most lawyers were not fond of the URDG and advised their clients to stick to local law, because there were no court decisions based on the URDG and they had no real experience with them. After the World Bank acted, the attitude of many lawyers changed significantly.

DCI: How do you explain the growing acceptance of the rules by the so-called beneficiary countries, many of which, such as Iran, are in the Middle East where government rules on guarantees prevail?

Hauptmann: The breakthrough in Iran was achieved by one of the members of the URDG Drafting Group, Farideh Tazhibi, who, along with ICC Iran, was the driving force behind the Central Bank of Iran's legal analysis that "nothing in the URDG is against the Iranian law." After this decision was published in April 2004, Iranian banks started to use the URDG, and this set an example for other countries/banks in this region.

DCI: If the URDG are now being more widely used, why has ICC chosen this time to start revising them?

Hauptmann: There were various reasons for this decision. First, the rules were drafted/negotiated in the late 80s, and the world economy has changed significantly since that time. It has been ICC's consistent policy that its rules should reflect the actual state of market practice.

Second, because of the increasing use of the URDG in daily guarantee business, we have to provide clearer answers when the current rules give rise to ambiguity or misinterpretation.

DCI: At this point, after one meeting of the URDG Drafting Group, do you see the revision as being just a technical one or a major overhaul of the rules?

Hauptmann: The only thing I can say at this time is that we are discussing everything without any taboos, and at the present stage no one knows what will be the result of our efforts. If we recall the discussion when beginning the revision of the UCP, many people were talking about a "technical" revision of the rules. And what was the final result after three years of work? It was a major revision.

DCI: The Chair of the URDG Drafting Group has said that one aim of the revision would be to bring the style and the drafting of the URDG closer to that of the new UCP. Are these two sets of rules really comparable and should they resemble each other?

Hauptmann: Yes and no. On the one hand, L/Cs and guarantees are totally different products. On the other hand, they are both ICC rules and it makes no sense, for example, to use the same expressions with a different meaning in two sets of rules. Yes, they are different products, but nevertheless we are talking about trade, we are talking about payment, expiry, documents, etc. In many respects, the UCP and the URDG are very close to each other.

DCI: What about the rules for International Standby Practices (ISP98)? These were endorsed by ICC and many say that it would be unwise to have two sets of rules dealing with similar issues. Do you agree?

Hauptmann: No. The URDG cover guarantees while ISP98 cover standby L/Cs. These products are and will always be different products, so it is completely reasonable to use two different sets of rules. Nevertheless, we are looking very carefully at the ISP98 when discussing new wording for the URDG and might seek inspiration from certain ideas which were included in the ISP98.

DCI: In your view, what are the two or three main sections in the present URDG most in need of revision?

Hauptmann: When considering the use of the URDG in daily business, we have to admit that amendments to guarantees have not been dealt with carefully enough. Also, we have no regulations concerning how to handle documents presented under a guarantee (besides the "demand" itself). And finally, there is a lot of misunderstanding/misinterpretation with regard to counter-guarantees. With regard to the latter, we absolutely need to have some clarification. When the URDG were drafted in the late 80s, only a few guarantees had been issued by SWIFT. Now most international guarantees are issued this way, and with the SWIFT new formats now in place, the market has to decide whether the whole transaction is covered by the URDG or whether only the guarantee or the counter-guarantee is covered, as otherwise the reference to URDG might be inconsistent.

DCI: Article 2 of the present URDG has a series of definitions, including ones for "demand guarantee", "counter guarantee", "writing and written", etc. In your view, should all of the definitions be in one article as they are in the UCP?

Hauptmann: Absolutely, everybody is very satisfied with this new "style" of the UCP, and we will take this up with the URDG.

DCI: What about including new definitions in the rules, for example words such as "expiry event" "presentation", "applicant" etc.?

Hauptmann: Yes, there will be a number of new definitions in the URDG to make the rules more precise and also to avoid long explanations in following articles. It is an open topic at the moment as to which new terms should be defined, but there will surely be some.

DCI: The major point of contention in the URDG has been article 20, with its requirement that in the event of a breach there must be only a statement that the Principal is in breach and the respect in which he is in breach. At this early stage, can you visualize how that might be changed?

Hauptmann: Of course, article 20 will take us a long time to discuss. We all are aware of the discussion this article has caused. In the Drafting Group, there is an open discussion on how to deal with this article in the future, and at the moment everything is possible, (cancelling this rule, keeping it the same as it is now and every possible option between these two positions).

DCI: You will admit that article 20 has been the main reason why the URDG have not been more widely used?

Hauptmann: No, I do not think so. There have been some countries that really had problems with this article, but I also have the impression that article 20 was often the pretext and not the real reason for refusing to use the URDG.

DCI: Some of the Drafting Group members have expressed the hope, if not the belief, that one day the URDG will be used as widely as the UCP. Is this a reasonable expectation?

Hauptmann: I am absolutely sure that one day we will see the URDG as THE standard for guarantee practice as the UCP are now for L/Cs. But we must not forget that the UCP have been developed over decades with a number of revisions, and the URDG still have their initial wording. We are not talking about the next 3-5 years to achieve universal use of the URDG. It will take a longer period, but I am convinced that one day the rules will be as widely accepted as the UCP.