Provisions of the Supreme People's Court on Several Issues concerning the Trial of Independent Guarantee Dispute Cases

(Adopted at the 1688th Session of the Judicial Committee of the Supreme People's Court on July 11, 2021 and amended by The Decision of the Supreme People's Court on Amending 29 Judicial Interpretations to Commercial Issues Including the Official Reply of the Supreme People's Court on Whether the Right to Use of Allotted State-Owned Land of a Bankrupt Enterprise Shall Be Grouped as Inslovent Property, as adopted at the 1823rd Session of the Judicial Committee of the Supreme People's Court on December 23, 2020.)

In order to properly handle independent guarantees dispute cases, effectively protect the lawful rights and interests of the parties, serve and safeguard the construction of the "Belt and Road Initiative", and promote the policy of opening-up, these Provisions are developed in accordance with the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relationships, the Civil Procedure Law of the People's Republic of China and other laws, in light of the trial practices.

Article 1 For the purpose of these Provisions, an "independent guarantee" means any undertaking given in writing by a bank or a non-banking institution as the issuer to the beneficiary, and that the issuer agrees to pay for the payment of a certain amount or an amount within the maximum guaranteed amount at the request of the beneficiary and by submitting documents in conformity with the guarantee.

The "documents" as mentioned in the preceding paragraph means written documents listed out in an independent guarantee that the beneficiary should present to prove that the payment is due, including written demands for payment, statements of default, documents issued by a third party, court judgments, arbitral awards, drafts, and invoices.

An independent guarantee may be issued at the request of the applicant of the guarantee or at the instruction of any other financial institutions. Where an issuer provides an independent guarantee at the instruction of the applicant, the issuer may request the instructing party to issue an independent guarantee to ensure its right of recourse.

Article 2 For the purpose of these Provisions, "independent guarantee disputes" means disputes arising from the issuance, cancellation, amendment, transfer, payment, claim for recovery, or any other aspects concerning an independent guarantee.

Article 3 Where a guarantee falls under any of the following circumstances, a party's claim that the guarantee is by its nature an independent guarantee shall be supported by the People's Court, except for the circumstances that the guarantee fails to specify the documents required for the payment and the maximum amount payable under it.

(1)The guarantee specifies that it is a demand guarantee.

(2)The guarantee specifies that the International Chamber of Commerce (ICC) Uniform Rules for Demand Guarantees and other model rules for independent guarantee transactions should apply.

(3)In accordance with the content of the guarantee, the payment obligation of the issuer is independent of the underlying transaction relation or the legal relation arising from the guarantee application, and the issuer only assumes payment obligation for a compliant presentation.

Where a party claims that the independent guarantee is by its nature a general undertaking or joint and several undertaking as it records the corresponding underlying transaction, the People's Court shall not support such claims.

Where a party claims that the provisions of the Civil Code of People's Republic of China on general undertakings or joint and several undertakings should apply to the independent guarantee, the People's Court shall not support such claims.

Article 4 The date of issuance of an independent guarantee is the date when the issuer issues the guarantee.

An independent guarantee shall become valid upon its issuance, unless it specifies the effective date or the effective event.

Where a party claims that an independent guarantee is irrevocable upon its issuance when it fails to specify that it is revocable, the People's Court shall support such claims.

Article 5 Where an independent guarantee specifies that the ICC Uniform Rules for Demand Guarantees and other model rules for independent guarantee transactions shall apply, or both the issuer and the beneficiary have cited these rules before the end of court debate in the court of first instance, the people's court shall hold that the content of such model rules is an integral part of the terms of the independent guarantee.

Where the independent guarantee does not fall under any of the circumstances prescribed in the preceding paragraph, the party's claim that relevant model rules should apply to the independent guarantee shall not be supported by the people's court.

Article 6 Where the documents presented by the beneficiary in appearance conform to the terms of the independent guarantee and be consistent with one another, the beneficiary's demand for payment by the issuer under the independent guarantee shall be supported by the people's court.

Where the issuer raises defenses against its obligation for payment based on the relation arising from the underlying transaction or the independent guarantee application, such defenses shall not be supported by the people's court, except for the circumstances prescribed in Article 12 hereof.

Article 7 When determining the facial conformity, the people's court shall conduct examination in accordance with the standards for examination of documents as specified in the independent guarantee; and if there are no such standards, the relevant standards for the examination of documents determined by the ICC shall apply mutatis mutandis.

Where the documents appear on their face not to be fully consistent with the terms of the independent guarantee or with one another, but there is no ambiguity between each other, the people's court shall hold that they constitute a facial conformity.

Article 8 The issuer shall have the right and obligation to independently examine the documents as well as the right to decide by itself whether the documents appear on their face to conform to the terms of the independent guarantee and to be consistent with one another, and may decide by itself to accept or refuse to accept all inconsistences.

Where the issuer has expressly indicated to the beneficiary that it will accept the inconsistences, the beneficiary's demand for payment by the issuer shall be supported by the people's court.

Where the issuer refuses to accept the inconsistences, the beneficiary's demand for payment by the issuer as the applicant has accepted the inconsistences shall not be supported by the people's court.

Article 9 Where the issuer claim compensation from the applicant after the payment under the independent guarantee, such claim shall be supported by the people's court, except that there is any inconsistency in the documents presented by the beneficiary.

Article 10 Where an independent guarantee fails to specify that it is transferable and specify the documents used to determine the new beneficiary, the issuer's claim that the transfer of the beneficiary's right to demand payment is not binding on it shall be supported by the people's court, except that the transfer of the beneficiary's right to demand payment is otherwise provided by the independent guarantee.

Article 11 Where an independent guarantee is under any of the following circumstances, a party's claim for the termination of the rights and obligations under the independent guarantee shall be supported by the people's court:

(1) The beneficiary fails to present the documents in conformity with the terms of the independent guarantee until the expiry date or the expiry event as specified in the independent guarantee.

(2) All the amount payable under the independent guarantee has been paid off.

(3) The amount of the independent guarantee has been reduced to zero.

(4) The issuer has received a document issued by the beneficiary to be exempted from the payment obligation under the independent guarantee.

(5) Other termination circumstances as provided by the law or agreed upon by the parties.

Where the independent guarantee is under any of the circumstances set out in the preceding paragraph where the rights and obligations thereunder should be terminated, the beneficiary's claim for the right to demand payment as it holds the text of the independent guarantee shall not be supported by the people's court.

Article 12 The people's court shall determine that an independent guarantee fraud is committed under any of the following circumstances:

(1) The beneficiary makes a false underlying transaction in collusion with the applicant or any other person.

(2) The third party's documents presented by the beneficiary are forged or contain false information.

(3) It is held in the court judgment or the arbitral award that the debtor under the underlying transaction has no obligation for payment or compensation.

(4) The beneficiary confirms that its debt obligation under the underlying transaction has been fulfilled or that the expiry event as specified in the independent guarantee has not yet occurred.

(5) Other circumstances where the beneficiary knowing that it has no right to demand payment still abuses such right.

Article 13 Upon finding any of the circumstances as specified in Article 12 hereof, the applicant, the issuer or the instructing party to the independent guarantee may, before filing an action or applying for arbitration or during the litigation or arbitration process, apply for suspending payment under the independent guarantee to the people's court at the place of the issuer's domicile or any other people court with jurisdiction over cases involving disputes over independent guarantee fraud.

Article 14 The people's court may rule to suspend payment under the independent guarantee, provided that all the following conditions are met:

(1) The evidential materials presented by the person applying for suspension of payment proves that it is highly likely to be under any of the circumstances as specified in Article 12 hereof.

(2) It is in an emergency and failure to suspend payment immediately would cause irreparable damage to the lawful rights and interests of the person applying for the suspension of payment.

(3) The person applying for suspension of payment has provided a security sufficient to compensate the respondent for the possible loss.

Where the person applying for suspension of payment requests the suspension of payment as the beneficiary has breached a contract under the underlying transaction, such request shall not be supported by the people's court.

Where the issuer has made payment in good faith under the independent guarantee issued on the instructions, the people's court shall not rule to suspend payment under the independent guarantee which maintains the issuer's right of recourse.

Article 15 Where a party requests the person applying for suspension of payment to compensate because the loss caused any error in the application for suspension of payment, such request shall be supported by the people's court.

Article 16 The people's court shall render a written ruling within 48 hours after accepting the application for suspension of payment. The ruling shall specify the person applying for suspension of payment, the respondent and the third party, and include the facts found preliminarily and the reasons for granting or denial of the application for suspension of payment.

Where a ruling is rendered to suspend payment, the ruling shall be enforced immediately.

Where the person applying for suspension of payment fails to file an action or apply for arbitration in respect of disputes over independent guarantee fraud within 30 days after the ruling is rendered, the people's court shall remove the ruling.

Article 17 Where a party raises any objection to the ruling rendered by the people's court on suspension of payment, it may apply for reconsideration to that people's court within 10 days from the date when the ruling is served. The implementation of the ruling shall not be suspended during the process of reconsideration.

The people's court shall conduct an examination within ten days after the receipt of the application for reconsideration and question the party.

Article 18 In the trial of the disputes over independent guarantee fraud or handling the application for suspension of payment, the people's court may examine and determine the facts related to the underlying transaction under the specific circumstances set out in Article 12 hereof in the party's claim.

Article 19 Where the applicant files an action only against the beneficiary in the disputes over independent guarantee fraud, the issuer and the instructing party may apply for participation as a third party or be advised by the people's court to participate.

Article 20 Where, after trying a case involving disputes over independent guarantee fraud, the people's court can determine beyond a reasonable doubt that an independent guarantee fraud is committed and there is no circumstance specified in paragraph 3 of Article 14 hereof, the people's court shall render a judgment that the issuer should suspend payment under the independent guarantee.

Article 21 A case involving disputes between the beneficiary and the issuer over the independent guarantee shall be under the jurisdiction of the people's court at the place of the domicile of the issuer or the defendant, unless the independent guarantee specifies that any other people's court has jurisdiction over the case or the case should be settled through arbitration. Where a party claims that the court having jurisdiction is determined or the case is settled through arbitration in accordance with the dispute resolution clause of the underlying transaction contract, such claim shall not be supported by the people's court.

A case involving disputes over independent guarantee fraud shall be within the jurisdiction of the people's court at the place of the domicile of the issuer of the independent guarantee under which the application for suspension of payment is filed or the domicile of the defendant, unless the parties has agreed in writing that any other court has jurisdiction over it or it is settled through arbitration. Where a party claims that the court having jurisdiction over the case is determined or the case is settled through arbitration in accordance with the dispute resolution clause of the underlying transaction contract, such claim shall not be supported by the people's court.

Article 22 Where a foreign-related independent guarantee fails to specify the applicable law, and the issuer fails to reach a consensus with the beneficiary on the applicable law before the end of the court debate in the court of first instance, the disputes between the issuer and the beneficiary over the foreign-related independent guarantee shall be governed by the law of the place of the issuer's habitual residence. Where an independent guarantee is issued by a legally registered and formed branch of a financial institution, the law of the place where the branch is registered shall apply.

For disputes over foreign-related independent guarantee fraud, if the parties fail to reach a consensus on the applicable law, the law of the place of the habitual residence of the issuer of the independent guarantee under which the application for suspension of payment is filed shall apply; where the independent guarantee is issued by a legally registered and formed branch of a financial institution, the law of the place where the branch is registered shall apply; where the parties have a common habitual residence, the law of the place of the mutual habitual residence shall apply.

The preservation procedure for suspension of payment under foreign-related independent guarantees shall be governed by the law of the People's Republic of China.

Article 23 Where the parties agree that the independent guarantee applies to domestic transactions but a party claims that the agreement on the independence of the guarantee is invalid as the independent guarantee is not foreign related, such claim shall not be supported by the people's court.

Article 24 Where the deposit for the issuance of the independent guarantee is managed under a special account and transferred to the issuer for possession, the people's court may take measures to freeze the deposit but not transfer it. When the funds in the special account fail to serve as the deposit for the issuance of the guarantee, the people's court may take measures to transfer such funds in accordance with the law.

Where the issuer has fulfilled its obligation for foreign payment, the people's court shall, at the request of the issuer, remove the measures for freezing the corresponding portion of the deposit for the issuance of the guarantee.

Article 25 For a case for which no final judgment has been rendered after these Provisions come into force, these Provisions shall apply; for a case for which a final judgment has been rendered before these Provisions come into force, if a party files a petition for retrial of, or a decision is rendered under the trial supervision procedure to retry it, these Provisions shall not apply.

Article 26 These Provisions shall come into force on December 1, 2016.

（本英文版本由上海政法學院提供。）

(Provided by Shanghai University of Political Science and Law)