The Open Bank Guarantee is a crucial financial instrument in Indonesian business transactions, particularly utilized when one party requires financial security from another. This document is commonly required in various scenarios including bid submissions, performance securities, advance payment guarantees, and trade finance transactions. The guarantee, governed by Indonesian law and banking regulations, provides the beneficiary with the assurance of payment from a bank up to a specified amount, typically upon presentation of compliant documents or satisfaction of stated conditions. The Open Bank Guarantee must comply with Indonesian Banking Law and relevant OJK regulations, while often incorporating international banking practices where appropriate. It serves as a risk mitigation tool, providing security to the beneficiary while facilitating business transactions across various sectors of the Indonesian economy.
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1. Parties: Identifies the three key parties: (1) the Bank as guarantor, (2) the Principal/Applicant, and (3) the Beneficiary
2. Background: Describes the underlying transaction or relationship between the Principal and Beneficiary necessitating the bank guarantee
3. Definitions: Defines key terms used throughout the guarantee, including specific banking and technical terms
4. Guarantee Amount: Specifies the maximum amount of the guarantee and the currency
5. Scope of Guarantee: Details the specific obligations or performance being guaranteed
6. Duration and Validity: Specifies the effective date, expiry date, and any conditions affecting the guarantee period
7. Demand Requirements: Sets out the process and conditions for making a claim under the guarantee
8. Payment Terms: Specifies how and when payment will be made following a valid demand
9. Bank's Rights and Obligations: Details the extent and limitations of the bank's obligations under the guarantee
10. Governing Law and Jurisdiction: Specifies Indonesian law as governing law and the relevant jurisdiction for disputes
11. Notices: Details how formal communications between parties should be made and addressed
1. Counter-Indemnity: Required when the Principal provides specific indemnity to the bank; commonly used in larger transactions
2. Assignment Restrictions: Include when transfer or assignment of guarantee rights needs to be restricted
3. Force Majeure: Include for longer-term guarantees or when specific risk events need to be addressed
4. Language Requirements: Include when the guarantee needs to be bilingual (Indonesian/English)
5. Reduction Clauses: Include when the guarantee amount may be reduced over time or upon certain events
6. Anti-Money Laundering Provisions: Include for high-value guarantees or when required by bank policy
7. URDG 758 Incorporation: Include when the guarantee needs to comply with international standards
1. Form of Demand: Standard format for making a claim under the guarantee
2. Underlying Contract Details: Summary or extract of the principal contract being guaranteed
3. Special Conditions: Any specific conditions or requirements particular to this guarantee
4. Fee Schedule: Details of bank fees, charges, and payment arrangements
5. Authorized Signatories: List of persons authorized to make demands or act for each party
6. Supporting Documents: List and copies of required supporting documentation
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