Independent Guarantee System Study

As a popular international commercial mechanism, the Independent Guarantee regime possesses various advantages which has widely advocated by commercial subjects since it existed, compared with material guarantee and dependent guarantee. However, because of the insecurity of beneficiary, the domestic regulations and international conventions treat it in a cautious way. According to international commercial practice in the long-term perspective, advantages of the Independent Guarantee outweigh its drawbacks. Nowadays, the broadly application of the Independent Guarantee worldwide seems to be a perfect example.Be that as it may, since the Independent Guarantee mechanism is influenced by the rigid exchange control policy and foreign trade administration in China, it develops in a relatively lower level. Meanwhile, there are no explicit attitudes in Chinese legislation, administrative regulations as well as judicial practice and there is no exaggeration to say that the legal status and effectiveness of the Independent Guarantee tends to be vague. The legislation hysteresis of China restricts the development of the Independent Guarantee mechanism and even makes it difficult to accelerate the market-oriented economy in China. Therefore, how to improve the Independent Guarantee mechanism becomes extremely urgent at present. This dissertation studies the connotation and denotation of the Independent Guarantee mechanism, deeply analysis the legal relationship of the Independent Guarantee, explore the operation of the Independent Guarantee mechanism, compares with several foreign Independent Guarantee mechanisms, figures out the problems of independent guarantee mechanism and proposes the advices of improvement in China.Chapter One:the Connotation and Denotation of the Independent Guarantee MechanismThe Chapter One illustrates the connotation and denotation of the Independent Guarantee mechanism and divides in four aspects. Initially, the author elaborates the origin of the Independent Guarantee which stems from international commercial practice. The Independent Guarantee originated from traditional dependent guarantee and based on the principle of autonomy of private law.Secondly, through analyzing the difference of the definition of the Independent Guarantee among domestic foreign theories, the author makes a definition in his own perspective and discusses the scope of the Independent Guarantee in general theory and special theory. Then, the author concludes that the Independent Guarantee contains two means, namely the demand guarantee and the stand-by letter of credit, and in addition, compares the difference in terms of open modes, effective conditions, payment modes, financing functions, required documents, payment basis and complied regulations.Thirdly, the author concludes the legal status, creditor's right, personal reliability, independency, irrevocability and relative unconditionality of the Independent Guarantee. The author indicates several functions of the Independent Guarantee, such as guarantee?deposit and financing?pay off the debts?risk prevention and transformation?credit assessment and witness.Then, the author confirms its substantial values, such as balancing the conflicts of interests, guaranteeing social fairness, constructing rational orders, maintain business security, saving social cost, enhancing economic effectiveness, respecting and guaranteeing parties' autonomy.Chapter Two:Thorough Analysis of the Legal Relationship of the Independent GuaranteeIn the Chapter Two, the author, firstly, categorizes the Independent Guarantee into direct independent guarantee and indirect independent guarantee which could be classified into underlying contract relationship, principal-agent relationship and guaranty contract. In addition, the author indicates rights and obligations among the applicant, guarantor, beneficiary and so forth. Lastly, the author illustrates his own reflections on some significant issues in terms of the applicant provides counter guarantee obligations and pay duty?the right of revocation of the guarantor and subrogation?the nature of the guarantors obligation to stop paying?The beneficiary withdrawal rights transfer.Chapter Three:the Operation of the Independent Guarantee MechanismIn Chapter Three, the author holds some opinions on the operation of the Independent Guarantee mechanism which develops in the course of international commercial practice and highlights on the practical rules.Additionally, the author illustrates the specific operation rules of the Independent Guarantee flow including ppen, delivery, modification and transfer, confirming and claim to the end. Furthermore, the author analyzes some issues in depth, such as the difference betweenOpen and effective, don't agree with the claim, the guarantor of discrepancies notifications, and to give up, beneficiary withdrawal rights and independent guarantee income assignment contains of legal theory and risk?the applicable law and jurisdiction, etc.The author focuses on one of the most substantial issues, namely the argument of the improper demand. The improper demand stems from the absoluteness, unconditionality and documentary character of the Independent Guarantee and the author classifies the improper demand into two means, namely the unqualified documents provided by the beneficiary and the violation against public policy of the underlying contract, the fraud and abusing laws and regulations, etc. Under this circumstance, the author summarizes foreign courts' reflections and treatments on the improper demand, such as the requirement of proof, defense mechanism, the consideration regarding issuing injunction and the formation of the injunction.Chapter Four:the Evaluation on Foreign Independent Guarantee MechanismIn Chapter Four, the author evaluates some foreign Independent Guarantee mechanisms. Compared to domestic under-developed mechanism, the foreign counterparts have experienced for a long decade which could be adapted by our improvement accordingly.Through evaluating the Uniform Rules for Demand Guarantees ICC Publication No.458, URDG758, Uniform Rules for Contract Guarantees, URCG325, UCP500, UCP600, ISP98, United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, international customs, international conventions, legislation background of countries from continental legal system and the common law system, application subjects, specific rules and characteristics, historical development,, the author would indicates the drawbacks of the domestic one and provides some advices on improving for China.Chapter Five:the Improvement of the Independent Guarantee system in ChinaThis chapter discusses the status quo of the Independent Guarantee Mechanism in Chinese laws, administrative regulations and judicial practice, and then provides some advices on improving the Independent Guarantee mechanism in three aspects.First of all, the legal status of the Independent Guarantee seems to be vague in Chinese legislations. For examples, the recent laws and judicial interpretations could not give clear opinions on the Independent Guarantee mechanism, such as General Principles of the Civil Law of the People's Republic of China, Opinions of the Supreme People's Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People's Republic of China, Security Law of the People's Republic of China, Judicial Interpretation of the Supreme People's Court on Some Issues Regarding the Application of Security Law of the People's Republic of China, Provisions of the Supreme People's Court on Some Issues in the Adjudication of Letter-of-Credit-related Cases, Provisions on Some Issues of Independent Guarantee Disputes (Draft).In this part, the author evaluates each article of the Provisions on Some Issues of Independent Guarantee Disputes (Draft), especially in whether the Independent Guarantee is applicable for domestic trade, period of validity of the Independent Guarantee, Independent guarantee apply for guarantee, the beneficiary of the fraud rule to stop payment to stop the condition, the effectiveness of the reconsideration of the ruling, the ruling to stop serving time limit,binding judgment. Then, the author analyzes the characteristics of the Independent Guarantee and indicates the fraud independent guarantee subjects and court injunction issues. In addition, the author evaluates the Provisional Regulations for the Foreign Exchange Control of the People's Republic of China, Administrative Measures of Foreign Exchange Guarantee, etc issuing by the People's Bank of China and State Administration of Foreign Exchange. And the author analyzes the judicial practice and concludes the negative attitudes of judicial departments.Secondly, the author holds that it is necessary to improve the Independent Guarantee mechanism in China. There some drawbacks of domestic Independent Guarantee mechanism, such as vague of recent legislative and judicial attitudes towards the Independent Guarantee, limitations of relevant administrative regulations and bank rules, vacancy legislations of demand guarantees and Stand-by Letter of Credit. Then, the author indicates the necessity and importance of the Independent Guarantee and advocates the improvement of the Independent Guarantee mechanism in terms of the efficiency and convenience.Thirdly, the author gives his own perspectives on improving the Independent Guarantee mechanism in some specific ways. In this part, the author states the possibility of the co-existence of the Independent Guarantee mechanism and the dependent guarantee mechanism and the recent regimes should be upgraded and improved. Additionally, the legislation of the Independent Guarantee mechanism should be highlight on the theoretical criticism and judicial practice. At last, the author provides some specific advices according to international commercial trends, such as enhancing the functions of URDG758, ISP98, UCP600 and United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, interpreting the Article 5 of the Security Law of the People's Republic of China by relevant authority and guaranteeing the legal status of the Independent Guarantee by legislation and administrative regulations, accelerating the improvement of bank industry's rules, developing the industrial risk-controlling systems, establishing and improving the restriction regimes against the fraud in the Independent Guarantee mechanism.