Adopted at the 1688th meeting of the Judicial Committee of the Supreme People’s Court on July 11, 2016, promulgated on November 18, 2016, and effective as of December 1, 2016.

In order to properly try cases of disputes over independent guarantees, effectively safeguard the legitimate rights and interests of parties, serve and support the development of the Belt and Road Initiative, and promote opening‑up, these Provisions are formulated in accordance with the General Principles of the Civil Law of the People’s Republic of China, the Contract Law of the People’s Republic of China, the Guarantee Law of the People’s Republic of China, the Law of the People’s Republic of China on Application of Law to Foreign‑related Civil Relations, the Civil Procedure Law of the People’s Republic of China and other laws, in light of judicial practice.

Article 1 For the purposes of these Provisions, an independent guarantee means a written undertaking issued by a bank or non‑bank financial institution as the issuer to a beneficiary, whereby the issuer agrees to pay a specific sum of money to the beneficiary or make payment up to the maximum amount specified in the guarantee upon the beneficiary’s request for payment and presentation of documents complying with the requirements of the guarantee.

The term “documents” in the preceding paragraph means written instruments specified in the independent guarantee to be submitted by the beneficiary to evidence the occurrence of a payment‑triggering event, including payment demand, statement of default, documents issued by third parties, court judgments, arbitral awards, bills of exchange, invoices, etc.

An independent guarantee may be issued upon the application of an applicant for the guarantee, or upon the instruction of another financial institution. Where an issuer issues an independent guarantee upon instruction, it may require the instructing party to issue an independent guarantee to secure its right of recourse.

Article 2 Disputes over independent guarantees as used herein refer to disputes arising out of the issuance, revocation, amendment, transfer, payment, recourse and other links of an independent guarantee.

Article 3 Where a guarantee falls under any of the following circumstances, the people’s court shall uphold a party’s claim that the guarantee constitutes an independent guarantee, save where the guarantee fails to specify documents for payment and the maximum amount payable thereunder:

(1) The guarantee states that payment shall be made upon demand;

(2) The guarantee specifies application of model transaction rules for independent guarantees such as the Uniform Rules for Demand Guarantees formulated by the International Chamber of Commerce;

(3) Based on the text of the guarantee, the issuer’s payment obligation is independent of the underlying transaction relationship and the guarantee application relationship, and the issuer is only obligated to make payment against complying presentation of documents.

Where a party contends that a guarantee is a general guarantee or joint and several guarantee merely because the independent guarantee refers to the corresponding underlying transaction, the people’s court shall not support such contention.

Where a party claims that an independent guarantee shall be governed by provisions of the Guarantee Law on general guarantee or joint and several guarantee, the people’s court shall not support such claim.

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

An independent guarantee takes effect upon issuance, unless an effective date or triggering event is specified therein.

Where an independent guarantee does not specify that it is revocable, the people’s court shall uphold a party’s assertion that the independent guarantee is irrevocable upon issuance.

Article 5 Where an independent guarantee specifies application of model transaction rules such as the Uniform Rules for Demand Guarantees, or the issuer and the beneficiary jointly invoke such rules before the close of oral argument of first‑instance proceedings, the people’s court shall hold that the content of such model transaction rules forms part of the terms of the independent guarantee.

In the absence of circumstances set forth in the preceding paragraph, the people’s court shall not uphold a party’s claim that such model transaction rules apply to the independent guarantee.

Article 6 Where documents presented by the beneficiary are prima facie compliant with the terms of the independent guarantee and among themselves, the people’s court shall uphold the beneficiary’s claim against the issuer for payment under the independent guarantee.

Where the issuer raises a defence to its payment obligation based on the underlying transaction relationship or the guarantee application relationship, the people’s court shall not uphold such defence, except under circumstances specified in Article 12 of these Provisions.

Article 7 When determining whether prima‑facie compliance exists, the people’s court shall conduct review in accordance with the document‑examination standard specified in the independent guarantee; if no such standard is specified, relevant document‑examination standards established by the International Chamber of Commerce may be applied by reference.

Where there are minor discrepancies between documents and the terms of the independent guarantee, or among documents themselves, which do not give rise to ambiguity, prima‑facie compliance shall be deemed to exist.

Article 8 The issuer has the right and obligation to examine documents independently, and may determine on its own whether documents are prima‑facie compliant with the terms of the independent guarantee and among themselves, and decide whether to accept or reject discrepancies.

Where the issuer has explicitly notified the beneficiary of its acceptance of discrepancies, the people’s court shall uphold the beneficiary’s claim for payment against the issuer.

Where the issuer rejects discrepancies, the people’s court shall not uphold the beneficiary’s claim for payment against the issuer merely on the ground that the guarantee applicant has accepted such discrepancies.

Article 9 Where an issuer makes payment under an independent guarantee and seeks recourse against the guarantee applicant, the people’s court shall uphold such claim, save where documents presented by the beneficiary contain discrepancies.

Article 10 Where an independent guarantee does not specify both its transferability and documents for identifying the new beneficiary, the people’s court shall uphold the issuer’s contention that any purported transfer of the beneficiary’s right to demand payment has no binding effect on it. If the independent guarantee contains special provisions on transfer of the beneficiary’s right to demand payment, such provisions shall prevail.

Article 11 Where an independent guarantee falls under any of the following circumstances, the people’s court shall uphold a party’s claim that rights and obligations under the independent guarantee are terminated:

(1) The expiry date or expiry event specified in the independent guarantee has occurred, yet the beneficiary fails to present documents complying with the requirements of the independent guarantee;

(2) All sums payable under the independent guarantee have been paid;

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

(4) The issuer receives a written instrument from the beneficiary releasing the payment obligations under the independent guarantee;

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

Where rights and obligations under an independent guarantee have been terminated under the preceding paragraph, the people’s court shall not uphold the beneficiary’s claim to the right of payment merely on the ground that it holds the physical text of the guarantee.

Article 12 Any of the following circumstances shall constitute fraud under an independent guarantee:

(1) The beneficiary colludes with the guarantee applicant or any other person to fabricate the underlying transaction;

(2) Third‑party documents presented by the beneficiary are forged or contain false content;

(3) A court judgment or arbitral award confirms that the debtor under the underlying transaction has no payment or compensation liability;

(4) The beneficiary acknowledges that obligations under the underlying transaction have been fully performed or that the payment‑triggering event specified in the independent guarantee has not occurred;

(5) Other circumstances where the beneficiary knowingly abuses its right to demand payment despite having no such right.

Article 13 Where an applicant, issuer or instructing party of an independent guarantee identifies circumstances specified in Article 12 hereof, it may, prior to instituting litigation or applying for arbitration, apply to the people’s court at the place of the issuer’s domicile or any other competent people’s court for cases of independent guarantee‑related fraud to suspend payment of sums under the independent guarantee; such application may also be filed during litigation or arbitration proceedings.

Article 14 A people’s court may rule to suspend payment under an independent guarantee only if all of the following conditions are met concurrently:

(1) The applicant for suspension submits evidence showing that circumstances specified in Article 12 are highly probable;

(2) The situation is urgent, and failure to adopt immediate suspension measures will cause irreparable harm to the legitimate interests of the applicant for suspension;

(3) The applicant for suspension provides security sufficient to cover potential losses that the respondent may suffer as a result of the suspension.

Where an applicant for suspension applies for suspension merely on the ground that the beneficiary is in breach under the underlying transaction, the people’s court shall not grant such application.

Where an issuer has made payment in good faith under an independent guarantee issued upon its instruction, no ruling of suspension may be rendered against the independent guarantee securing such issuer’s right of recourse.

Article 15 Where losses are caused by a wrongful application for suspension of payment, the people’s court shall uphold a party’s claim for compensation against the applicant for suspension.

Article 16 Upon acceptance of an application for suspension, the people’s court shall issue a written ruling within forty‑eight hours. The ruling shall specify the applicant, respondent and any third party, as well as preliminary facts found and reasons for granting or rejecting the application for suspension.

A ruling to suspend payment shall take effect immediately upon issuance.

If the applicant for suspension fails to institute litigation or apply for arbitration in respect of the independent guarantee fraud dispute within thirty days after the ruling of suspension is issued, the people’s court shall rescind the ruling of suspension.

Article 17 Where a party objects to a ruling on an application for suspension rendered by a people’s court, it may apply for reconsideration to the ruling‑issuing people’s court within ten days upon service of the ruling. Execution of the ruling shall not be stayed during the reconsideration period.

The people’s court shall review the application for reconsideration within ten days of receipt and hear the parties.

Article 18 When hearing cases of independent guarantee fraud or disposing of applications for suspension, the people’s court may examine and ascertain facts related to the underlying transaction with respect to circumstances specified in Article 12 alleged by parties.

Article 19 Where in an action for independent guarantee fraud, the guarantee applicant sues only the beneficiary, the issuer and instructing party of the independent guarantee may participate as third‑party interveners upon application or upon notification by the people’s court.

Article 20 Where, upon hearing an independent guarantee fraud case, the people’s court finds, beyond reasonable doubt, that fraud under the independent guarantee is established and that circumstances set forth in Paragraph 3 of Article 14 are absent, it shall render a judgment ordering the issuer to terminate payment of the sum demanded under the independent guarantee.

Article 21 Disputes arising between a beneficiary and an issuer from an independent guarantee shall fall under the jurisdiction of the people’s court at the domicile of the issuer or the domicile of the respondent, unless the independent guarantee specifies jurisdiction of another court or submission to arbitration. The people’s court shall not uphold a party’s contention that jurisdiction or arbitration shall be determined pursuant to the dispute‑resolution clause of the underlying contract.

Disputes over independent guarantee fraud shall fall under the jurisdiction of the people’s court at the domicile of the issuer of the independent guarantee for which suspension is sought or the domicile of the respondent, unless the parties have agreed in writing on jurisdiction of another court or submission to arbitration. The people’s court shall not uphold a party’s contention that jurisdiction or arbitration shall be determined pursuant to dispute‑resolution clauses of the underlying contract or the independent guarantee.

Article 22 Where the applicable law for a foreign‑related independent guarantee is not specified, and the issuer and the beneficiary fail to reach an agreement on applicable law before the close of oral argument of first‑instance proceedings, disputes arising between the issuer and the beneficiary from the foreign‑related independent guarantee shall be governed by the law of the issuer’s habitual residence; if the independent guarantee is issued by a branch duly registered by a financial institution, the law of the place of registration of such branch shall apply.

For disputes over fraud in a foreign‑related independent guarantee, if the parties fail to reach an agreement on applicable law, the law of the habitual residence of the issuer of the independent guarantee for which suspension is sought shall apply; if the guarantee is issued by a duly registered branch of a financial institution, the law of the place of registration of such branch shall apply; if the parties share a common habitual residence, the law of such common habitual residence shall apply.

PRC law shall apply to preservation procedures for suspension of payment in respect of foreign‑related independent guarantees.

Article 23 Where parties agree to adopt an independent guarantee in a domestic transaction, the people’s court shall not uphold a party’s claim that the clause on independence of the guarantee is invalid merely on the ground that the independent guarantee lacks foreign‑related elements.

Article 24 In respect of security deposits for the issuance of an independent guarantee held in a special‑purpose account and placed under the possession of the issuer, people’s courts may impose freeze measures, but shall not make any deduction. Where monies in the deposit account cease to function as security deposits for the independent guarantee, people’s courts may lawfully adopt deduction measures.

Where an issuer has performed its external payment obligations, the people’s court shall, upon application by such issuer, lift the freeze on the corresponding portion of the security deposit.

Article 25 These Provisions shall apply to cases not yet finally adjudicated upon their entry into force. These Provisions shall not apply to cases that have been finally adjudicated prior to their entry into force, when parties apply for retrial or when people’s courts conduct retrial pursuant to judicial supervision procedures.

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