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Irrevocable Standby Letter Of Credit for United Arab Emirates

Irrevocable Standby Letter Of Credit Template for United Arab Emirates

An Irrevocable Standby Letter of Credit (SBLC) under UAE law is a formal banking instrument that provides a financial guarantee of payment from a bank to a beneficiary, typically used as a security instrument in commercial transactions. The document, governed by UAE Federal Laws and recognized international banking practices (UCP 600 and ISP98), represents an irrevocable undertaking by the issuing bank to honor a payment obligation upon presentation of compliant documents. It serves as a risk mitigation tool, particularly valuable in cross-border transactions where UAE entities are involved, and provides a secure, internationally recognized form of financial backing.

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Irrevocable Standby Letter Of Credit

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What is a Irrevocable Standby Letter Of Credit?

The Irrevocable Standby Letter of Credit is a fundamental banking instrument utilized in the United Arab Emirates and international commerce as a robust form of financial security. It is particularly relevant when parties seek a reliable payment guarantee mechanism in commercial transactions. The document, governed by UAE law and international banking practices, provides an unconditional commitment from a bank to pay a specified sum to a beneficiary upon presentation of compliant documents. This instrument is commonly used in various scenarios including performance security, tender security, advance payment guarantee, and financial obligations backing. The irrevocable nature means it cannot be amended or cancelled without the agreement of all parties involved, providing strong security for beneficiaries. Under UAE jurisdiction, these instruments are regulated by federal laws and Central Bank regulations, ensuring alignment with both local legal requirements and international banking standards.

What sections should be included in a Irrevocable Standby Letter Of Credit?

1. Letter Reference Number: Unique identification number of the SBLC

2. Date of Issuance: The date when the SBLC is issued

3. Issuing Bank Details: Complete name and address of the bank issuing the SBLC

4. Beneficiary Details: Full name and address of the party in whose favor the SBLC is issued

5. Applicant Details: Full name and address of the party requesting the SBLC

6. Currency and Amount: The currency and maximum amount available under the SBLC, in both figures and words

7. Expiry Date: The date and place of expiry of the SBLC

8. Drawing Terms: Specific conditions and documentation required for drawing under the SBLC

9. Purpose of SBLC: Clear statement of the underlying transaction or obligation being secured

10. Governing Law and Jurisdiction: Specification of UAE law as governing law and relevant jurisdiction

11. Applicable Rules: Reference to ISP98 or UCP 600 as applicable rules

What sections are optional to include in a Irrevocable Standby Letter Of Credit?

1. Transferability Clause: Include when the SBLC needs to be transferable to other beneficiaries

2. Partial Drawings: Include when multiple partial drawings are to be permitted

3. Automatic Extension Clause: Include when the SBLC should automatically extend beyond its initial expiry date

4. Multiple Banking Confirmations: Include when confirmation from multiple banks is required

5. Special Payment Conditions: Include when specific payment timing or methods are required

6. Force Majeure Provisions: Include when specific force majeure events need to be addressed

7. Assignment Provisions: Include when rights under the SBLC may be assigned

What schedules should be included in a Irrevocable Standby Letter Of Credit?

1. Drawing Certificate Format: Template of the certificate to be presented when making a demand under the SBLC

2. Required Documents List: Detailed list of all documents required for drawing under the SBLC

3. Payment Schedule: If applicable, schedule of permitted drawing amounts and dates

4. Form of Demand: Standard format for making a demand under the SBLC

5. Authentication Procedures: Specific procedures for authenticating demands and documents

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
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