Construction Law/Performance Security
I am sorry to disturb you again as there is not further follow up question, I can only copy the Q & A with you in the past for your information.
Expert: Florin NICULESCU
Subject: Performance Bond Security
Question: I append below the Q & A that we have for your convenience as I do not know how to have further follow up question:
QUESTION: In our Fidic red book contract we have a
Performance Security (Bank Guarantee) requirement as follows:
Procurement Reference No:
WHEREAS (hereinafter called “the Contractor”) has taken, pursuant to Contract No. dated to supply (hereinafter called “the Contract).
AND WHEREAS it has been stipulated by you in the aforementioned Contract that the Contractor shall furnish you with a security issued by a reputable guarantor for the sum specified therein as security for compliance with the Contractor’s performance obligations in accordance with the Contract.
AND WHEREAS the undersigned, legally domiciled in [insert complete address of Guarantor], (hereinafter called the “Guarantor”), have agreed to give the Contractor a security.
Question is what do you mean by legally domiciled in and domicile in which country, is it in the Country where the project is executed?
There is also a write up in the special conditions as follows:
A foreign Bank providing the security shall have a correspondent Bank located in the country.
What do you mean by a correspondent Bank? What will this bank's responsibility?
ANSWER: Hello Wong,
Thank you for your question.
Firstly, as per definition 126.96.36.199. "Country" means the country in which the Site (or most of it) is located, where the Permanent Works are to be executed.
Legally domiciled is where the bank of another entity is seated/ registered.
Correspondent Bank is a local bank that has a partner bank in the Country.
Hope that answer your queries.
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QUESTION: The Statement in the format
AND WHEREAS the undersigned, legally domiciled in [insert complete address of Guarantor], (hereinafter called the “Guarantor”)
did not specified the country. Do you mean legally domiciled is legally domiciled in the country of the Site (project). Can it means any other country of domicile?
Please clarify further the meaning of your statement - Legally domiciled is where the bank of another entity is seated/ registered. If I use a bank that is not in the country of the Site, is it acceptable. as per the format in the contract?
I cannot understand your statement, please explain - Correspondent Bank is a local bank that has a partner bank in the Country.
Following is the reason:
I do not understand what is not clear. The bank issuing the guarantee must be either registered in the Country, or have a partner bank in the Country.
Please read the phrases in the guarantee form, word by word and where needed, use a dictionary to ensure you understand the meaning.
If you still have doubts, you're always welcome to come back.
Expert: Florin NICULESCU.
I am sorry I cannot fully understand your explanation. What is stated in the format of the tender document is only legally domiciled in [address}. No where was it stated that it has to be legally domiciled in the Country. I do not understand why you bring up the definition of the Country 188.8.131.52. My question is can the bank providing the Security be legally domiciled in other country instead in the Country of the Site?
ANSWER: Dear Wong,
Welcome back, thank you for summarising your question.
The bank issuing the guarantee must be:
Option 1: legally registered (seated/ domiciled) in the Country. As per indicated definition, "Country" (with capital "C") means the country where the Works are executed.
Option 2: registered in another country, but must have a correspondent bank in the Country, that meaning they are having a partner bank in the Country, through which they are operating in the Country.
In respect of that, it means it is not acceptable a bond issued by no matter what bank registered in some "fiscal heavens" or other countries where there is no control, but must be a bank that has a connection in the Country and operates in the Country through a bank registered in the Country.
Again, please pay attention to the difference between "Country" and "country".
Hope now is all clear.
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QUESTION: The format of the Performance Security did not mention "in the Country". It stated only legally domiciled follow by [insert address]. I understand option 2 but in option 1 you added "in the Country", this is not written in the document why you added "in the Country".
Answer: Aside that, trust everything is clear now.
Civil Engineer, Disputes Adjudicator,
I still have this question: As per the format of the Performance Security, can we use a foreign bank? Since the format only state legally domiciled in [insert address] but did not state legally domiciled in the Country of the Site. Our foreign bank is legally domiciled in the foreign country and we just fill in the address of the foreign bank in the country that the bank is legally domiciled. What is your opinion in this case?
I must confess I am somewhat puzzled. Do you still have a question? The same question?!
IF YES, i did answer, YES YOU CAN USE A FOREIGN BANK, PROVIDING THAT FOREIGN BANK HAS A CORRESPONDENT BANK IN THE COUNTRY.
Just read my previous answers