International Construction Law Review
CORRESPONDENT’S REPORT FINLAND DEMAND GUARANTEES IN CONSTRUCTION CONTRACTS: THE FINNISH PERSPECTIVE
DR TUOMAS LEHTINEN1
Partner, Castrén & Snellman Attorneys, Helsinki
I. INTRODUCTION
“Is it really so that the bank will pay after receiving the demand although our business partner in this project is really a crook and criminal? We are still client of the guarantor bank and we have to be able to say something, stop the payment or terminate the guarantee! Do something!”
These are the words that a contractor and counter-guarantor in an international demand guarantee arrangement presented to its counsel. The contractor was more than upset about the fact that a foreign bank had actually already paid a relatively large sum under a demand guarantee to a foreign employer. The contractor has currently in its books millions of Euros’ worth of guarantees applied and issued by third parties in its projects. And still, after years of practice in international trade, the contractor was most upset by the fact that a demand was presented by the employer in this particular project.
One could ask: why are the demands presented under demand guarantees still upsetting companies and banks all over the world? First, the answer might be that the calling of a demand guarantee or presenting a demand is still rather a rare event. Secondly, one could say that the legal basics of a demand guarantee are sadly enough, quite often forgotten. Hopefully, the following article shall at least in some respects cover these basic rules of the harsh but functional nature of demand guarantees.
Demand guarantees are a commonly used form of sureties in international financing and trade, and in particular in construction projects.
The International Construction Law Review [2010
512