Finance and Accounting Seminars

Legal Aspects of International Trade Finance


With the arrival of the new barriers to trade, the course is more than ever a pre-requisite for all involved in the use of guarantees in international trade and project finance structures. The use of international guarantees, bonds and standbys has proliferated in recent years yet documentation errors, fraud and unfair calling have made guarantees a legal minefield and subject to more court proceedings than any other financial instrument.

This course will highlight the areas of potential risk and teach effective documentation techniques. You will analyse the legal issues in bonds and guarantees, explaining the products and their uses.

You will learn:

  • The responsibilities and legal relationships of the various parties
  • The comparative merits and drawbacks of standby and demand guarantees
  • When courts will intervene to prevent payment of guarantees
  • How to avoid operational problems
  • How to avoid problems of applicable law
  • How big-ticket guarantees are syndicated
  • The benefits and drawbacks of using the new uniform rules for demand guarantees (URDG 758).

The content:
Typical financing structures in use in the trade finance market:

  • pre-export financing
  • borrowing base
  • advance payment (with and without risk-sharing)
  • reserve base lending
  • receivables sale
  • participations (funded and risk)
  • warehouse receipts finance
  • securitisation.

Conflicts of law issues in trade finance:

which are the different legal systems which govern or can affect the different parts of a trade finance transaction
choice of governing law and jurisdiction
how can these legal risks be managed: legal due diligence; legal opinions.

Consideration of the different types of security assets and security devices which are commonly used in trade finance transactions:

  • goods in warehouses
  • goods being transported
  • assignment of contract rights
  • receivables
  • bank accounts

Consideration of different forms of financing and security documentation used in the trade finance market:

  • mandate letter
  • term sheet
  • facility agreement
  • security documents
  • collateral management agreement
  • intercreditor arrangements.

The role of guarantees in international trade. This session will consider different types of third party credit support for international trade finance transactions, including:

  • indemnities
  • corporate guarantees
  • insurance
  • comfort letters
  • standby letters of credit.

The legal analysis:

  • the distinction between primary and secondary liabilities
  • the legal requirements for guarantees.

Bankers’ autonomous undertakings:

letters of credit and demand guarantees. This session will consider the basic legal structures for these types of instrument and the respective legal rights and obligations of the various parties which are involved.
It will also cover the different types of bonding structures:

  • bid/tender bonds
  • advance payment guarantees
  • retention money bonds
  • performance bonds.

Consideration of:

  • payment letters of credit contrasted with standby letters of credit
  • applicable international codes: UCP contrasted with International Standby Practices 1998 (ISP 98)
  • demand guarantees
  • Uniform Rules for Demand Guarantees (URDG).
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