Why CAP Funding uses well-proven URDG ICC 758

Uniform Rules for Demand Guarantees (URDG), International Chamber of Commerce (ICC) publication number 758, is now widely accepted as the definitive standard for bank-involved, financial guarantees.  This article explores the less widely understood use of demand guarantees (DGs) for project finance, such as is available at advantageous terms & conditions through In3’s Completion Assurance Program™ (CAP funding).   

URDG can be used for many other types of transactions, as can ICC 590 or 600 (alternative legal venues we can also accept with the right wording), but URDG’s popularity is due to the fact that it is well proven in the courts, offering mutual protection (the authors say it “balances the legitimate interests of both parties”) for ensuring that project funding is used per the developer’s disclosures to complete and commission the project to begin commercial operations.  URDG’s emphasis on Demand Guarantee undertakings sets it apart from the other ICC standards and thus clarifies intent.

For more on URDG from the ICC’s “academy” visit icc.academy/urdg-758.

For a comparison of these various ICC legal venues, and how DGs compare to the most widely used instrument, a “standby” Letter of Credit (SbLC), a type of bank-issued guarantee, visit the ICC’s SBLC Guide.

The overarching purpose of such instruments is to “balance the legitimate interests of all parties,” which implies that they also filter out fraud and malfeasance, also known as “illegitimate” interests.

Instrument issuers or endorsers are guided by these well-established rules, making it easier for the parties engaged in developing and building the project to work together and resolve any issues that crop up.  The only circumstances that could be seen as fraud as if one party stops, gives up, or drags its feet beyond a reasonable date.  Demand guarantee rules make it quite clear if one party turns out to be fraudulent, and how the other party would be made whole, effectively eliminating the option of simply walking away (stealing or embezzling) the underlying funds. 

With regard to In3 CAP funding, URDG puts case law to work to offset the risk of project non-completion due to fraud.

But that said, the issuer and related parties (a third party guarantor, endorser, confirming bank, etc.) are well protected against any arbitrary or unjust claims or abuse of the instrument because the burden of proof of a contractual breach is always on us — the Beneficiary (our Family Office capital partners) — in order to make any claim.  This structure encourages and allows for negotiation and cooperation, with contracts that provide an extended “cure” period if there are problems.  This always works to get back on track so as long as the development team is still at the table, operating in good faith, in which case there is no concern about the guarantee instrument being abused, arbitrarily or unjustly called.  

Translation:  through In3 CAP funding, project developers/owners enjoy better terms than would be otherwise available, decreasing the overall cost of capital, leaving room for others to get paid well, and funding qualifying mid-market projects at any stage of readiness using a process our clients say is much faster, easier and better than the traditional route.

More details, including independent legal review and case law examples via this fulsome Practitioner Series article: