In order to ensure that the ISP98 remain current with standards in international standby and guarantee law and practice, the Council on International Standby Practices (CISP) has issued Official Interpretations on ISP98 Rules. These Official Interpretations will address questions that face practitioners preparing to undertake a standby or demand guarantee subject to ISP98.
This Interpretation answers whether the term "standby" also includes "confirmation" if subject to ISP98, and should be cited: ISP98 Official Interpretation 1.01:01 (10 July 2017) (ISP98 serves as a model rule for independent guarantees) ".
Question:
Does the term “standby”[[1]] also include “confirmation” when used in ISP98?
Text:
ISP98 Rule 1.11(c)(i) (Interpretation of these Rules) states “Unless the context otherwise requires: i.“Issuer” includes a “confirmer” as if the confirmer were a separate issuer and its confirmation were a separate standby issued for the account of the issuer”.
Example:
ISP98 Rule 2.06(a) (When an Amendment is Authorised and Binding) provides rules for a “standby” that expressly provides for automatic extension. Would the same rule apply to a confirmation of the standby that also provided for automatic extension?
Response:
Yes. Unless the context of the Rule requires otherwise, references to “standby” in ISP98 include any confirmation issued with respect to the standby.
Explanation:
ISP98 Rule 1.11(c)(i) provides: “Unless the context otherwise requires: i. “Issuer” includes a “confirmer” as if the confirmer were a separate issuer and its confirmation were a separate standby issued for the account of the issuer”.
When drafting the ISP98 it was decided to avoid repeating the phrase “and any confirmer” every time the word “issuer” appears in order to achieve shorter and more concise Rules. Therefore, the word “issuer” in ISP98 includes a “confirmer” without stating the word, unless the context otherwise requires.
The same approach applies not only to “issuer” and “confirmer” which are in bold print in Rule 1.11(c)(i), but also to “confirmation” and “standby” which appear in the Rule text but not in bold print. The failure to bold the terms “confirmation” and “standby” in Rule 1.11(c)(i) is a printing error in the Official Version of ISP98 which should not alter the meaning of the text. It should read: “Unless the context otherwise requires: i. “Issuer” includes a “confirmer” as if the confirmer were a separate issuer and its confirmation were a separate standby issued for the account of the issuer”.
The qualification “unless the context otherwise requires” recognises that some ISP98 Rules distinguish issuers from confirmers of confirmed standbys (e.g., ISP98 Rules 2.01 and 8.01). In such cases, the term “standby” would not include “confirmation”.
[[1]]: As provided in ISP98 Rule 1.11(b) (Interpretation of these Rules) the term “standby” as used in ISP98 includes any undertaking issued subject to ISP98 which would include independent guarantees. As noted in ISP98 Official Interpretation 1.01:01 (10 July 2017) (ISP98 serves as a model rule for independent guarantees), it is appropriate and not unusual for independent guarantees to be issued subject to ISP98. See, e.g., TTI Team Telecom International Ltd. v Hutchison 3G UK Ltd. [2003] EWHC 762 (TCC) [England], abstracted in 2004 Annual Survey of Letter of Credit Law & Practice 335.
Professor James E. BYRNE was the Founder and Director of the Institute of International Banking Law & Practice, Inc. and taught at George Mason University School of Law.
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