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ISP 98 - REFRESHERDisclaimer:These notes are intended for spaced revision and refresher purposes only. They are a condensed summary of key points and do not constitute a comprehensive substitute for the International Chamber of Commerce (ICC) publications on the relevant topic.For in-depth understanding and detailed information, please refer to the official ICC publications on the subject. These publications provide authoritative guidance and interpretations, ensuring you have the most current and accurate information available.Remember:These notes are not a replacement for professional advice or legal counsel. Always consult the official ICC publications for complex situations or critical decisions.By using these notes, you acknowledge and agree to these terms.

• RULE 1 : GENERAL PROVISIONS • SCOPE, APPLICATION, DEFINITIONS AND INTERPRETATION OF THESE RULES :• 1. Scope and Application (Rule 1.01): The ISP98 rules are intended to be applied to standby letters of credit, including various types such as performance, financial, and direct pay standbys. Any standby letter of credit, regardless of its name or description, can be subject to these rules by explicit reference. Parties involved in a standby can modify or exclude the application of these rules as needed.• 2. Relationship to Law and Other Rules (Rule 1.02): The ISP98 rules complement applicable law unless prohibited by that law. In case of conflicting provisions between ISP98 and other rules of practice related to standby letters of credit, the ISP98 rules take precedence.• 3. Interpretative Principles (Rule 1.03): The ISP98 rules are to be interpreted based on mercantile usage, focusing on the integrity of standbys as reliable payment undertakings, aligning with banking and business practices, ensuring consistency in global banking operations, and promoting uniformity in interpretation and application worldwide.• 4. Effect of the Rules (Rule 1.04): Unless expressly modified or excluded, the ISP98 rules are considered as terms and conditions incorporated into various agreements related to standbys, including issuance, confirmation, advice, nomination, amendment, transfer, and requests.Get help for CDCS

• 4. Nomination [T6]:• - This rule explains that a standby may nominate a person for various actions related to the standby. It also specifies that nomination does not obligate the nominated person to act, except to the extent that the nominated person undertakes to act.• 5. Exclusion of Matters and General Principles (Rules 1.05 and 1.06): The ISP98 rules do not address matters related to the power to issue a standby, formal requirements for execution, or defenses based on fraud or abuse. Standbys are defined as irrevocable, independent, documentary, and binding undertakings, with obligations not dependent on reimbursement rights, beneficiary payments, or knowledge of underlying transactions.• 6. Independence of Issuer-Beneficiary Relationship and Limits to Responsibilities (Rules 1.07 and 1.08): The obligations of an issuer towards the beneficiary are independent of the issuer's rights and obligations towards the applicant or any applicable agreements. The issuer is not responsible for the performance or breach of underlying transactions, accuracy of documents, actions of others, or compliance with laws beyond those specified in the standby.• These rules provide a structured framework for the interpretation and application of standby letters of credit, ensuring clarity and consistency in standby practices [T4].Get help for CDCS

• RULE 2: OBLIGATIONS • 1. Undertaking to Honour by Issuer and any Confirmer to Beneficiary [T6]:• - This rule outlines the obligations of the issuer and any confirmer to honor a presentation that complies with the terms and conditions of the standby. It specifies the methods of honor, such as payment at sight, acceptance of a draft, deferred payment, or negotiation. It also defines the timely manner of acting and the form of payment.• 2. Obligation of Different Branches, Agencies, or Other Offices [T6]:• - This rule clarifies that an issuer's branch, agency, or other office acting under a standby in a capacity other than as the issuer is obligated in that capacity only and should be treated as a different person.• 3. Conditions to Issuance [T6]:• - This rule states that a standby is considered issued when it leaves the issuer's control unless it clearly specifies that it is not then "issued" or "enforceable." It also emphasizes that statements regarding the availability, operativeness, or effectiveness of the standby do not affect its irrevocable and binding nature at the time it leaves the issuer's control.Get help for CDCS

• 5. Advice of Standby or Amendment [T1]:• - This rule outlines the significance of an advice of standby, stating that it signifies the advisor's check of the apparent authenticity of the advised message and the accurate reflection of what has been received. It also specifies the notification requirement if a person decides not to advise a standby.• 6. When an Amendment is Authorized and Binding [T1]:• - This rule addresses the effectiveness and binding nature of amendments to a standby, including provisions for automatic amendment and the requirement for beneficiary consent.• 7. Routing of Amendments [T1]:• - This rule specifies the obligation to advise all amendments to a person when an issuer uses another person to advise a standby. It also clarifies that an amendment or cancellation of a standby does not affect the issuer's obligation to a nominated person that has acted within the scope of its nomination before receipt of notice of the amendment or cancellation.• These rules provide a comprehensive framework for the issuance, nomination, advice, and routing of amendments related to standbys, ensuring clarity and consistency in standby letter of credit transactions. Get help for CDCS

• RULE 3: PRESENTATION • 1. Complying Presentation under a Standby (Rule 3.01): A complying presentation must adhere to the time, place, person, and medium specified in the standby. If the standby does not provide such details, the presentation must follow the rules outlined in ISP98 to be considered compliant.• 2. What Constitutes a Presentation (Rule 3.02): Any document required by and presented under a standby is considered a presentation, even if not all required documents are submitted. These presentations must be examined for compliance with the standby terms.• 3. Identification of Standby (Rule 3.03): Presentations must clearly identify the standby under which they are made. This can be done by stating the complete reference number of the standby, the issuer's name and location, or by attaching a copy of the standby. If the issuer cannot identify the standby from the document received, the presentation is deemed to have been made on the date of identification.•Get help for CDCS

• 4. Where and to Whom Complying Presentation Made (Rule 3.04): Presentations must be made at the specified place indicated in the standby. If no location is provided, presentations to the issuer or confirmer must be made at their respective places of business. If no specific location is indicated, presentations can be made to the general postal address, designated delivery locations, or authorized personnel.• 5. Timely Presentation (Rule 3.05): Presentations are considered timely if made after issuance and before the expiry date. Presentations made after the close of business are deemed to have been made on the next business day.• 6. Complying Medium of Presentation (Rule 3.06): Documents must be presented in the medium specified in the standby. If no medium is indicated, paper documents are generally accepted unless the issuer allows other means. Electronic presentations must be capable of authentication by the recipient.• These rules ensure that presentations under a standby are made correctly and in compliance with the terms of the standby, providing clarity and consistency in the presentation process [T6]Get help for CDCS

• RULE 4 EXAMINATION OF DOCUMENTS• 1. Examination for Compliance (Rule 4.01): Demands for the honor of a standby must adhere to the terms and conditions specified in the standby. The examination of a presentation's compliance is based on reviewing the presented documents against the terms of the standby, supplemented by the rules of ISP98 and standard standby practices.• 2. Non-examination of Extraneous Documents (Rule 4.02): Documents that are not required by the standby do not need to be examined and should be disregarded when determining compliance. These extraneous documents can be returned to the presenter or included with the other presented documents without any responsibility.• 3. Examination for Inconsistency (Rule 4.03): The issuer or nominated person is only required to examine documents for inconsistencies with each other to the extent specified in the standby.• 4. Language of Documents (Rule 4.04): All documents issued by the beneficiary must be in the language specified in the standby.• 5. Date of Documents (Rule 4.06): The issuance date of a required document can be earlier but not later than the date of its presentation.Get help for CDCS

• 6. Required Signature on a Document (Rule 4.07): Whether a document needs to be signed depends on the standby's requirements. Signatures should correspond to the medium in which the document is presented, and specific guidelines are provided for different types of signatories.• 7. Demand Document Implied (Rule 4.08): If a standby does not specify any required document, it is still considered to require a documentary demand for payment.• 8. Identical Wording and Quotation Marks (Rule 4.09): The wording in presented documents must match the requirements of the standby, with provisions for specified wording, quotation marks, and exact duplication as necessary.• These rules ensure that the examination process of documents presented under a standby is conducted accurately and in accordance with the terms of the standby, promoting consistency and reliability in standby transactions.Get help for CDCS

• RULE 5: NOTICE, PRECLUSION AND DISPOSITION OF DOCUMENTS :• 1. Timely Notice of Dishonour:• - Notice of dishonour must be given within a reasonable time after the presentation of documents. Notice within three business days is considered reasonable, while beyond seven business days is deemed unreasonable. The calculation of the time for giving notice starts on the business day following the presentation.• - The means of giving notice of dishonour should be by telecommunication if available, or by another prompt means. Notice must be given to the person from whom the documents were received unless otherwise requested by the presenter.• 2. Statement of Grounds for Dishonour:• - A notice of dishonour must specify all discrepancies on which the dishonour is based.• 3. Failure to Give Timely Notice of Dishonour:• - Failure to give notice of a discrepancy within the specified time and means precludes the assertion of that discrepancy in any retained or re-presented document. However, it does not preclude the assertion of the discrepancy in a different presentation under the same or a separate standby.Get help for CDCS

• 4. Notice of Expiry:• - Failure to give notice that a presentation was made after the expiration date does not prevent dishonour for that reason.• 5. Issuer Request for Applicant Waiver:• - The issuer, at its discretion, may request the applicant to waive non-compliance if a presentation does not comply. Obtaining the applicant's waiver does not obligate the issuer to waive non-compliance.• 6. Disposition of Documents:• - Dishonoured documents must be handled as reasonably instructed by the presenter. Failure to notify the disposition of documents in the notice of dishonour does not prevent the issuer from asserting any available defense against honour.• 7. Applicant Notice of Objection:• - The applicant must promptly object to a noncomplying presentation by giving timely notice. Failure to object promptly precludes the applicant from asserting discrepancies apparent on the face of the documents received.• These rules ensure clarity and fairness in the handling of documents and discrepancies in standby letters of credit transactions [T3].Get help for CDCS

• RULE 6: TRANSFER, ASSIGNMENT AND TRANSFER BY OPERATION OF LAW TRANSFER OF DRAWING RIGHTS• 1. Transfer of Drawing Rights (Rule 6.01): When a beneficiary requests that an issuer or nominated person honor a drawing from another person as if that person were the beneficiary, the rules on transfer of drawing rights apply. This allows for the transfer of drawing rights from one party to another.• 2. Conditions for Transfer (Rule 6.03): For a transfer to take place, certain conditions must be met. These include ensuring the existence and authenticity of the original standby, submission of a request in an acceptable form, verification of signatures and authority, payment of transfer fees, and fulfilling any other reasonable requirements.•• 3. Effect of Transfer on Documents (Rule 6.04): When drawing rights are transferred entirely to another party, the draft or demand must be signed by the new beneficiary. The name of the new beneficiary can be used in required documents in place of the original beneficiary.• 4. Reimbursement for Payment based on Transfer (Rule 6.05): If an issuer or nominated person makes a payment under a transfer, they are entitled to reimbursement as if the payment was made to the original beneficiary.Get help for CDCS

• 5. Acknowledgement of Assignment of Proceeds (Rule 6.06): When a beneficiary requests that an assignee receive proceeds from a drawing under the standby, rules on the acknowledgment of assignment of proceeds apply, subject to applicable law requirements.• 6. Conditions for Acknowledgement of Assignment (Rule 6.08): The issuer or nominated person may impose conditions for acknowledging the assignment of proceeds, such as verification of signatures and authority, submission of an irrevocable request, payment of fees, and other reasonable requirements.• 7. Conflicting Claims to Proceeds (Rule 6.09): In cases of conflicting claims to proceeds, payment to an acknowledged assignee may be suspended until the conflict is resolved.• 8. Transfer by Operation of Law (Rule 6.11): In situations where a person claims to succeed to the interests of a beneficiary by operation of law, specific rules apply for the transfer in such cases.• These rules ensure clarity and standardization in the transfer and assignment of drawing rights under standby letters of credit, providing a framework for parties involved to follow in such transactions.Get help for CDCS

• RULE 7: CANCELLATION :• 1. Beneficiary's Consent to Cancellation (Rule 7.01): The rule states that the rights of a beneficiary under a standby cannot be canceled without the beneficiary's consent. This consent can be demonstrated either in writing or through actions that imply the beneficiary's agreement, such as returning the original standby. Once the beneficiary communicates consent to the issuer, it becomes irrevocable.• 2. Issuer's Discretion in Cancelling (Rule 7.02): Before agreeing to a beneficiary's request to cancel the standby and treating it as canceled for all purposes, the issuer has the discretion to request certain documents and assurances to ensure the validity of the cancellation. These may include:• - Providing the original standby document.• - Verifying the signature and authorization of the person requesting the cancellation.• - Obtaining a legal opinion.• - Receiving an irrevocable authority signed by the beneficiary for cancellation, containing necessary provisions.• - Ensuring the cancellation of any obligations of a confirmer.• - Confirming that there has been no transfer or payment by any nominated person.• - Any other reasonable measures deemed necessary by the issuer.Get help for CDCS

• RULE 8: REIMBURSEMENT OBLIGATIONS :• 1. Right to Reimbursement (Rule 8.01):• - When a payment is made in compliance with the presentation requirements specified in the rules, reimbursement must be provided by:• - The applicant to the issuer who issued the standby.• - The issuer to a person nominated to honor or provide value under the standby.• - The rule also stipulates that the applicant must indemnify the issuer against various claims, obligations, and responsibilities arising from specific situations, such as the imposition of laws or practices different from those specified in the standby, fraud, forgery, or the issuer's performance of a confirmer's obligations that wrongfully dishonors a confirmation.• - Additionally, Rule 8.01 clarifies that it supplements any existing agreements or practices related to reimbursement or indemnification.• 2. Charges for Fees and Costs (Rule 8.02):• - The rule specifies that the applicant is responsible for paying the issuer's charges and reimbursing the issuer for any charges that the issuer is obligated to pay to nominated persons with the applicant's consent for various services related to the standby.Get help for CDCS

• - Conversely, the issuer is obligated to pay the charges of other persons if they are in accordance with the standby terms or if they are reasonable and customary fees and expenses incurred by a person requested by the issuer for specific services, and these charges are unrecovered from the beneficiary or presenter due to no demand under the standby.• 3. Refund of Reimbursement (Rule 8.03):• - If a nominated person receives reimbursement before the issuer dishonors the presentation in a timely manner, the nominated person must refund the reimbursement with interest if the issuer ultimately dishonors the presentation. This provision ensures that the nominated person's wrongful dishonor claims are not affected by the refund.• 4. Bank-to-Bank Reimbursement (Rule 8.04):• - Any instructions or authorizations for obtaining reimbursement from another bank are subject to the International Chamber of Commerce standard rules for bank-to-bank reimbursements. This ensures that such transactions follow established international guidelines for bank-to-bank dealings.Get help for CDCS

• RULE 9: TIMING :• 1. Duration of Standby (Rule 9.01):• - A standby letter of credit must either have an expiry date specified or allow the issuer to terminate the standby upon reasonable prior notice or payment. This ensures that there is clarity regarding the duration of the standby and the conditions under which it can be terminated.• 2. Effect of Expiration on Nominated Person (Rule 9.02):• - The rule states that the rights of a nominated person, who acts within the scope of their nomination, are not affected by the subsequent expiry of the standby. This provision safeguards the rights of the nominated person even after the standby has expired.• 3. Calculation of Time (Rule 9.03):• - The rule outlines how time is calculated for actions under the ISP98 rules:• - The period within which an action must be taken starts on the first business day following the day when the action could have been undertaken at the relevant location.• - An extension period begins on the day following the stated expiry date, even if that day falls on a non-business day for the issuer.Get help for CDCS

• 4. Time of Day of Expiration (Rule 9.04):• - If the standby letter of credit does not specify a time of day for expiration, it is considered to expire at the close of business at the place of presentation. This standardizes the expiration time in the absence of a specific designation.• 5. Retention of Standby (Rule 9.05):• - Retaining the original standby letter of credit does not maintain any rights under the standby after the right to demand payment ceases. This emphasizes that the standby's validity is tied to the specified terms and conditions, and holding onto the original document does not extend its enforceability beyond the agreed-upon period.Get help for CDCS

• RULE 10: SYNDICATION / PARTICIPATION• 1. Syndication (Rule 10.01):• - In cases where a standby letter of credit involves more than one issuer and does not specify to whom the presentation should be made, the rule allows the presentation to be made to any issuer involved, and this presentation will have a binding effect on all issuers. This provision ensures that the presentation can be directed to any of the multiple issuers, and the decision made by one issuer will be binding on all parties involved.• 2. Participation (Rule 10.02):• - Sale of Participations:• - The rule allows an issuer to sell participations in the issuer's rights against the applicant and any presenter unless there is a specific agreement between the applicant and the issuer prohibiting such sales. This means that the issuer can involve other parties in sharing the rights and obligations under the standby letter of credit.• - Disclosure of Information:• - The issuer is permitted to disclose relevant applicant information in confidence to potential participants. This disclosure allows potential participants to make informed decisions about participating in the standby letter of credit transaction.Get help for CDCS

• - Effect on Obligations:• - Importantly, the sale of participations by the issuer does not alter the obligations of the issuer under the standby letter of credit nor does it create any direct rights or obligations between the beneficiary and any participant. This ensures that while additional parties may be involved in the transaction, the core obligations and responsibilities remain unchanged between the original parties.Get help for CDCS