The Standby Guarantee is a crucial financial instrument in Saudi Arabian commercial transactions, particularly used in large-scale projects, international trade, and government contracts. It provides financial security to the beneficiary while ensuring compliance with local regulations and Islamic principles. The document is typically issued when a party requires assurance of payment or performance from another party, with a bank acting as guarantor. The guarantee amount is payable upon presentation of specified documents indicating a default or trigger event. The structure must comply with Saudi Arabian law, SAMA regulations, and Shariah principles, making it distinct from conventional guarantees used in other jurisdictions. Key considerations include the independence principle, strict compliance requirements, and the need for clear, unambiguous terms that align with Islamic banking practices.
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1. Parties: Identification of the Guarantor (typically a bank), the Beneficiary, and the Account Party (Principal)
2. Background: Context of the underlying transaction and the purpose of the standby guarantee
3. Definitions: Key terms used throughout the guarantee, including technical banking terms and relevant legal concepts
4. Guarantee Amount: Specification of the maximum amount of the guarantee and the currency
5. Duration and Expiry: The validity period of the guarantee, including effective date and expiry conditions
6. Demand Requirements: Specific conditions and documentation required for making a valid demand under the guarantee
7. Payment Terms: Timeline and process for payment upon receipt of a complying demand
8. Reduction and Release: Conditions under which the guarantee amount may be reduced or the guarantee released
9. Governing Law and Jurisdiction: Confirmation of Saudi law application and jurisdiction of Saudi courts
10. Notices: Communication procedures and contact details for all parties
11. Shariah Compliance: Declaration of compliance with Islamic principles and relevant approvals
1. Transfer and Assignment: Include when the guarantee needs to be transferable or assignable
2. Multiple Beneficiaries: Include when there is more than one beneficiary to specify their rights and relationships
3. Counter-Indemnity: Include when specific counter-indemnity arrangements are required from the Account Party
4. Foreign Law Interface: Include when the guarantee relates to international transactions requiring consideration of foreign laws
5. Electronic Presentation: Include when electronic presentation of documents is permitted
6. Force Majeure: Include when specific force majeure provisions are required beyond standard terms
7. Language: Include when dual language versions are required, specifying the prevailing version
1. Form of Demand: Template for making a compliant demand under the guarantee
2. Required Documents: List and samples of supporting documents required for demands
3. Fee Schedule: Details of applicable fees, charges, and commission
4. Authorized Signatories: List of authorized signatories and specimen signatures
5. SAMA Compliance Checklist: Checklist ensuring compliance with Saudi Central Bank requirements
6. Communication Details: Detailed contact information and communication protocols for all parties
7. Underlying Transaction Details: Summary of the primary transaction being guaranteed
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction
International Trade
Energy and Utilities
Manufacturing
Real Estate Development
Infrastructure Projects
Government and Public Sector
Telecommunications
Defense Contracting
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Compliance
Risk Management
Corporate Banking
Shariah Advisory
Project Finance
Commercial Operations
Relevant Roles
Chief Financial Officer
Treasury Manager
Trade Finance Manager
Legal Counsel
Compliance Officer
Risk Manager
Project Finance Director
Corporate Banking Manager
Shariah Compliance Officer
Documentary Credits Manager
Contract Administrator
Finance Director
Commercial Director
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