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Uniform Rules for Demand Guarantees (URDG)


The Uniform Rules for Demand Guarantees (URDG) is a set of rules published by the International Chamber of Commerce (ICC) to govern and standardize the use of demand guarantees and counter-guarantees. These rules provide a framework for parties involved in international trade transactions, standardizing requirements and reducing risks. URDG ensures fair practice in trade, minimizing potential disputes and misunderstandings between guarantee-issuing banks, beneficiaries, and principals.


The phonetic pronunciation of “Uniform Rules for Demand Guarantees (URDG)” is as follows:Uniform: Yoo-ni-form Rules: Roolzfor: for Demand: Di-mand Guarantees: Ga-rahn-tees URDG: You-Are-Dee-Gee

Key Takeaways

<ol><li>Uniform Rules for Demand Guarantees (URDG) are a set of rules established by the International Chamber of Commerce (ICC) to govern and ensure the standardization of practice in the implementation of demand guarantees. Their current edition (URDG 758) is globally recognized and accepted by legal jurisdictions and practitioners.</li><li>URDG covers aspects such as the content and interpretation, obligations of participating parties, handling of demands, and any exemptions and reductions. It provides a clear framework to reduce the risks, and increase the trust and efficiency involved in demand guarantees, such as those related to trade finance and standby letters of credit.</li><li>URDG is designed to be flexible and adaptable to a diverse range of situations and guarantees. This makes it a practical and useful tool for both issuing and claiming parties. It ensures the fair and equitable treatment of all parties involved, while also providing mechanisms to resolve any disputes or disagreements.</li></ol>


The Uniform Rules for Demand Guarantees (URDG) is an essential term in business/finance as it provides a standardized legal framework for independent guarantees and counter-guarantees. This set of rules reduces risks associated with guarantee demands by outlining clear regulations for parties involved in trade transactions. As globally recognized guidelines, URDG ensure consistency and reduce uncertainty in cross-border business interactions, securing contractual relationships and fostering healthy international trade. By having well-defined terms and obligations, both the guarantor and the beneficiary are shielded from potential disputes, making URDG critical for global commercial transactions.


The Uniform Rules for Demand Guarantees (URDG) serve a critical purpose in the realm of international trade by providing a standardized framework within which demand guarantees and counter-guarantees are executed. This standardization greatly simplifies an otherwise complex process, offering predictability and relative security for all parties involved. The purpose of URDG is to ensure that obligations and rights are adequately safeguarded, while fostering a sense of reliability and efficiency in transactions. These rules serve to delineate responsibilities, mitigating uncertainties about what is expected in different trade situations.In its practical application, the URDG provides guidelines that underpin various guarantee aspects including its issuance, expiry date, claims, and even transfer or assignment. These rules primarily address situations where written guarantees might cause legal and linguistic issues owing to transnational trade’s nature. Such situations could arise when differing nations have contrasting provisions and standards related to demand guarantees. By offering specific, international standards, the URDG helps minimize such disputes, easing the process of global trade. Moreover, through providing a more universally accepted commercial practice and leveling the playing field, the URDG promotes equal opportunity and fairness within international business transactions.


1. International Construction Project: In an international construction contract, a Chinese construction company was hired by a U.S. business to build an office building. As part of the contract, the Chinese company was required to provide a demand guarantee under the URDG to ensure their performance. The guarantee was issued by a Chinese bank, which could be called upon by the U.S. company to pay in case of non-performance.2. Export of Goods: A Korean electronics manufacturer had a large order for televisions from a retail chain in Brazil. Given the scale of the order and the risks involved, the Brazilian company asked for a demand guarantee under the URDG. This guarantee was issued by the Korean manufacturer’s bank, agreeing to pay the Brazilian company a set amount if the electronics manufacturer failed to deliver as per the agreement.3. Infrastructure Development: An Indian infrastructure development company undertook a large road project in Nigeria. The Nigerian government required a financial assurance to protect against the risk of the project not being completed as per the agreed terms. The Indian company provided a demand guarantee under the URDG from one of its Indian banks, ensuring that the Nigerian government would receive payment in case of default.

Frequently Asked Questions(FAQ)

What are the Uniform Rules for Demand Guarantees (URDG)?

The URDG are a set of rules and regulations defined by the International Chamber of Commerce (ICC) to provide a standardized framework for handling demand guarantees and counter-guarantees in a fair, clear, and unbiased manner.

When were the URDG established?

URDG was first established in 1991 as URDG 458. However, it was revised and updated in 2010 to form the current version, referred to as URDG 758.

What is the purpose of the URDG?

The purpose of the URDG is to standardize international banking practices, to ensure all parties involved in a transaction involving a demand guarantee or counter-guarantee are treated fairly, and to minimize potential disputes or misunderstandings.

To whom does URDG apply?

URDG is applicable to all parties involved in transactions that involve demand guarantees or counter-guarantees. This can include issuers, beneficiaries, applicants, and confirmer of guarantees.

Do the URDG rules have mandatory application?

The URDG rules apply whenever they are specifically mentioned in the contract or guarantee. If not incorporated into the contract, other laws or regulations may apply.

How does the URDG handle disputes?

The URDG provides clear guidelines for dispute resolution. If there is a dispute, the parties can refer to the URDG rules to understand their rights and obligations, and to guide the resolution process.

Where can I get the full set of URDG rules?

The full set of rules can be obtained from the ICC’s official online bookstore or from other online retailers stocking legal and financial publications.

Are amendments common in URDG?

Amendments in URDG are not very common; the last amendment took place in 2010. ICC typically ensures all possible scenarios and challenges are considered while drafting these rules to mitigate the need for frequent amendments.

Has the introduction of URDG 758 replaced URDG 458 completely?

Yes, URDG 758 was introduced to replace URDG 458. However, if a guarantee specifically mentions URDG 458 as the governing rules, then those rules would apply.

Does URDG set a deadline for raising a claim under a demand guarantee?

Yes, according to URDG 758, the beneficiary must present a demand and any other documents within three years from the date of the guarantee, or one year from the date of the counter-guarantee, unless otherwise specified in the guarantee itself.

Related Finance Terms

  • Applicant: The party who requests the bank to issue a demand guarantee or counter-guarantee under URDG guidelines.
  • Beneficiary: The party, often a seller, who has the right to make a claim under the demand guarantee as per the URDG terms and conditions.
  • Instructing Party: Under URDG rules, this is typically the party that instructs the guarantor or counter-guarantor to issue a guarantee or counter-guarantee.
  • Guarantor: The financial institution, usually a bank, that issues the demand guarantee and undertakes certain obligations, as defined by the URDG.
  • URDG 758: The current version of the URDG, published by the International Chamber of Commerce (ICC) in 2010, which contains detailed rules for the issuance and handling of demand guarantees.

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