On Legal Risks Of Commercial Banks Under Independent Guarantees

Legal risks of commercial banks under independent guarantees mean adverse legal liabilities or consequences that are assumed or may be assumed by commercial banks arising from or out of shortages of legal systems relating to independent guarantees or actions of parties under independent guarantees inconsistent with the said legal systems.From the macro analysis, on the one hand, legal risks on shortages of Chinese legal systems relating to independent guarantees mainly stem from the following three aspects: lackness of express recognition of independent guarantees in the level of basic law, inconsistency between international practices and department regulations with the nature of the public law, and absence of secondary and supporting legal systems with the nature of private law; on the other hand, the legal risks on actions of parties under independent guarantees mainly arise from applicants, beneficiaries and guarantor banks.From the micro analysis, the validity risk of independent guarantees is the primary risk, and the risk on the application of law is the common risk. In respect of the validity risk, theoretically, it mainly springs from the independence principle of independent guarantees; practically, it mainly derives from the criteria by which to discern the international or domestic economic activities since in Chinese judicial practice the independent guarantees only applied in the international economic activities are valid. In respect of the risk on the application of law in the event the Chinese law as the governing law, it is revealed by a case relating to the guarantee contract. For the purpose of solving the issue in the said case, the first step is to research and analyze the applicable law rules under Chinese law; and they are stipulated that international practices could be applied in absence of relevant Chinese laws, but they are silent on how to choose the suitable international practice; further, based on the legislative stipulation, a comparative study is made on the scope of application of the relevant international practices, and based on Chinese judicial practice, an investigation is made of the existing circumstances on the application of the relevant international practices in China. Focusing on legal risks of independent guarantees under Chinese law, the core of this article is to provide legal opinions for commercial banks to conduct the independent guarantee business in China, from both the legislative and the judicial perspectives, not only based on the textual analysis of the law but also based on Chinese case study.