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UNIFORM RULES FOR DEMAND GUARANTEES (URDG) EXPLAINED


By
Will Kenton

Full Bio
 * 

Will Kenton is an expert on the economy and investing laws and regulations. He
previously held senior editorial roles at Investopedia and Kapitall Wire and
holds a MA in Economics from The New School for Social Research and Doctor of
Philosophy in English literature from NYU.
Learn about our editorial policies
Updated July 31, 2024
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WHAT ARE THE UNIFORM RULES FOR DEMAND GUARANTEES (URDG)?

The Uniform Rules for Demand Guarantees (URDG) refers to a set of international
guidelines produced by the International Chamber of Commerce (ICC) and adopted
in 1991. These guidelines set forth generally agreed-upon rules governing
securing payments and meeting performance guarantees in contracts among global
trading partners.



In general, the URDG guidelines outline the rights and obligations of parties
under demand guarantees. A demand guarantee is a type of protection that one
party in a transaction can impose on another party in the event that the second
party does not perform according to predefined specifications.



According to the ICC, many bankers, traders, and industry associations recognize
and accept the URDG because it attempts to balance the interests of all parties
involved in various types of international contracts.1




KEY TAKEAWAYS

 * The Uniform Rules For Demand Guarantees (URDG) refers to a set of
   international guidelines produced by the International Chamber of Commerce
   (ICC) and adopted in 1991.
 * These guidelines set forth generally agreed-upon rules governing securing
   payments and meeting performance guarantees in contracts among global trading
   partners.
 * Bankers, traders, and industry associations recognize and accept the URDG
   because it attempts to balance the interests of all parties involved in
   various types of international contracts.

Both the World Bank and the United Nations Commission on International Trade Law
(UNCITRAL) each have adopted the URDG standard.2




UNDERSTANDING THE UNIFORM RULES FOR DEMAND GUARANTEES (URDG)

The URDG covers billions of dollars of contract guarantees in a number of
industries, including banking and construction. 



Most commonly, the URDG covers so-called demand guarantees, which are specific
rights or countermeasures one party can impose on another party if the second
party does not perform according to contract specifications. 



However, the UDRG also applies to agreements requiring the decision of an
arbitrator, as well as some contracts that involve slightly more complex
agreements, such as situations dealing with the default of one of the parties.



The URDG works in concert with other ICC rules, such as the so-called Uniform
Customs and Practice for Documentary Credits (UCP 600). Voluntarily abiding by
the URDG and its related rules is meant to improve the speed and volume of
trade, and avoid disputes without having to go to court.34



The publication "ICC Uniform Rules for Demand Guarantees Including Model Forms"
is considered to be the comprehensive guide for understanding the URDG
guidelines. It includes a series of ready-to-use templates and forms, rules for
handling extended payments, and various checklists and best practices.



The most significant URDG update since its adoption in 1991 occurred in 2010,
with the update referred to as URDG 758. This update to the original URDG rules
attempted to clarify several common issues, such as those involving payment
contingencies. It also provided guidance regarding the handling of specific
electronic documents and fund transfers, and provided additional model forms.5



The ICC worked on writing URDG 758 for more than two years prior to its release,
taking into account feedback from various groups of constituents (as well as
roughly 600 individual comments).6 The new rules attempt to reduce conflicts and
contract rejections. According to the ICC, the rules included in URDG 758 are
intended to bring financial stability to international markets, add new
definitions and rules interpretations, and provide guidance for the treatment of
“contentious practices.”1

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Article Sources

Investopedia requires writers to use primary sources to support their work.
These include white papers, government data, original reporting, and interviews
with industry experts. We also reference original research from other reputable
publishers where appropriate. You can learn more about the standards we follow
in producing accurate, unbiased content in our editorial policy.

 1. International Chamber of Commerce. "Uniform Rules for Demand Guarantees URDG
    - 2010 Revision."

 2. International Chamber of Commerce. "ICC Unveils Guide to the Uniform Rules
    for Demand Guarantees."

 3. DeutscheBank, Global Transaction Banking. "Understanding the URDG 758." Page
    1.

 4. Trade Finance Global. "What Are URDG 758 Rules and How Do They Impact Demand
    Guarantees?"

 5. International Chamber of Commerce. "New Rules for Demand Guarantees
    Effective 1 July."

 6. International Chamber of Commerce. "Revised Uniform Rules for Demand
    Guarantees Available From ICC Bookstore."

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Related Terms
Demand Guarantee: Meaning, Implementation, Economics
A demand guarantee is a form of protection for a contract that provides payment
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An irrevocable letter of credit is a bank guarantee for payment by the party
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A letter of credit is a letter from a bank guaranteeing that a buyer’s payment
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Related Articles

Demand Guarantee: Meaning, Implementation, Economics



Certificate of Origin (CO): Definition, Types, and How to Get One



Delivered Duty Unpaid (DDU): What It Is and How It Works



Irrevocable Letter of Credit (ILOC): Definition, Uses, Types



How Revenue Sharing Works in Practice



Letter of Credit: What It Is, Examples, and How One Is Used

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