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ISP98 rules not to be revised

14/12/2015 As reported at the Institute of International Banking Law & Practice (IIBLP) Standby & Guarantee Forum, the ISP98 rules will not be revised, but efforts are underway to revise the ISP98 Official Commentary.

The IIBLP also reported that the Council on the International Standby Practices will also be issuing official interpretations of questions regarding ISP practice.

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Latest Question

In a forfaiting agreement subject to URF 800, a forfaiter takes the firm commitment in day (T1) to purchase a bill of exchange avalised by bank A (the banker of the buyer in the underlying transaction). The forfaiting agreement indicates that the exporter is supposed to provide to the forfaiter, the original bill of exchange with all the other necessary documents at the latest on day (T2). The forfaiting agreement indicates: “bill of exchange accepted by buyer and avalised by bank A” without any other restrictive conditions concerning the standing of bank A We are going to suppose that at T1, a bill of exchange avalized by bank A is in every point “satisfactory” (this term is mentioned in URF 800). What will happen if, in the meantime, the financial situation of bank A has changed radically and presents a great risk for the forfaiter? (we can suppose that bank A went bankrupt). Will the forfaiter be obliged to purchase the bill of exchange at the agreed price indicated on the forfaiting agreement, or will the forfaiter be in a position to invoke the fact that the bill of exchange is no longer satisfactory and refuse to purchase the bill of exchange?