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Irrevocable Standby Letter Of Credit for Saudi Arabia

Irrevocable Standby Letter Of Credit Template for Saudi Arabia

An Irrevocable Standby Letter of Credit (SBLC) under Saudi Arabian law is a formal financial instrument issued by a bank that provides a payment guarantee in accordance with both international banking practices and Islamic finance principles. The document, governed by Saudi Arabian law and overseen by the Saudi Arabian Monetary Authority (SAMA), serves as a secondary payment mechanism that can only be modified or cancelled with the agreement of all parties involved. It must comply with Shariah principles while incorporating international banking standards, making it a unique hybrid of global banking practices and Islamic finance requirements.

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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 crucial financial instrument in Saudi Arabian commercial transactions, providing payment security while ensuring compliance with both international banking practices and Islamic finance principles. It serves as a contingent obligation where the issuing bank commits to pay the beneficiary upon presentation of compliant documents, typically triggered by the applicant's failure to fulfill specific obligations. This document type is particularly important in Saudi Arabia's business environment, where it must adhere to the Kingdom's banking regulations, SAMA guidelines, and Shariah principles while maintaining international banking standards. The SBLC can only be modified or terminated with all parties' consent, providing robust security for complex commercial transactions, international trade, and large-scale projects.

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

1. Letter Reference Number and Date: Unique identifier for the SBLC and issuance date

2. Issuing Bank Details: Complete name, address, and contact information of the issuing bank

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

4. Applicant Information: Full name and address of the party requesting the SBLC

5. Credit Amount: The maximum amount available under the SBLC, stated in both numbers and words

6. Expiry Details: Clear statement of expiry date and place

7. Form of Presentation: Specified format and location for presentation of documents

8. Drawing Terms: Conditions and required documents for drawing under the SBLC

9. Partial Drawings Statement: Whether partial drawings are allowed or prohibited

10. Transferability Statement: Whether the SBLC is transferable or not

11. Governing Law Declaration: Clear statement that Saudi Arabian law governs the SBLC

12. Shariah Compliance Statement: Declaration of compliance with Islamic banking principles

13. Authentication/Signature: Official bank signatures and authentication details

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

1. Confirmation Instructions: Include when confirmation by another bank is requested

2. Multiple Currency Provisions: Include when the SBLC allows for drawings in multiple currencies

3. Assignment Provisions: Include when proceeds of the SBLC are assignable

4. Automatic Extension Clause: Include when the SBLC has an automatic extension feature

5. Special Commission Statement: Include when specific commission arrangements exist (must be Shariah-compliant)

6. Counter-Guarantee Reference: Include when the SBLC is issued under a counter-guarantee structure

7. Force Majeure Provisions: Include when specific force majeure terms are required beyond standard provisions

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

1. Schedule A - Required Documents: Detailed list and format of all documents required for drawing under the SBLC

2. Schedule B - Form of Demand: Prescribed format for beneficiary's demand under the SBLC

3. Schedule C - Special Conditions: Any additional conditions or requirements specific to this SBLC

4. Appendix 1 - Underlying Transaction Details: Reference to the underlying commercial transaction or obligation

5. Appendix 2 - Bank Authorization Documents: Copies of relevant bank authorizations and powers of attorney

6. Appendix 3 - Communication Procedures: Detailed procedures for communications between parties

7. Appendix 4 - Fee Schedule: Schedule of all applicable fees and charges (structured in Shariah-compliant manner)

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

Jurisdiction

Saudi Arabia

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
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