ISP98 Rules

The International Standby Practices 1998 (ISP98) are rules designed to facilitate the domestic and international use of standby letters of credit. ISP98 reflects generally accepted practice, custom, and usage of standby letters of credit. ISP98 is intended to be the standard reference for standby letters of credit. It provides separate rules for standby letters of credit that are more specialized than those outlined in the Uniform Customs and Practice for Documentary Credits (UCP600).

International Standby Practices ("ISP 98") is a publication by the International Chamber of Commerce and adopted by the International Financial Services Association (IFSA).  The 89 rules of the ISP98 are now being used by banks throughout the world.  ISP98 will streamline the process of preparing and negotiating Standby Letters of Credit. ISP98 simplifies the drafting of standby Letter of Credit and provides answers to common problems.

ISP98 simplifies, standardizes, and streamlines the drafting of standby L/Cs, and provides clear answers to common problems. In contrast, the UCP 600 is primarily designed for application to documentary letters of credit.  In many ways, it is not well suited for standby credits. In fact, ISP98 is designed to address the inadequacies of UCP 600 with respect to standby Letters of Credit.

There are basic similarities between the UCP 600 and the ISP98 because standby and commercial practices as they relate to Letters of Credit are fundamentally similar. Even where the rules overlap, the ISP98 is more precise. The choice of which set of rules to select is left to the parties, and this is perhaps the most fundamental issue facing letter of credit users who must choose to have standby letters of credit governed either by the ISP98 or alternatively by the UCP 600.

The ISP98 provides neutral rules acceptable in the most situations, and a starting point for negotiations in other situations. It is designed to be compatible with the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit and also with local law, whether statutory or judicial, and to embody standby letter of credit practice under that law.  Copies of the rules are available through ICC Publishing (www.iccwbo.org) and through the Institute of International Banking Law and Practice (www.isp98.com or www.iiblp.org).

Edited by Michael Dennis, author of "Credit and Collection Manager's Handbook."   Mr. Dennis can be reached by email at mcdennis13@yahoo.com with questions, comments or business inquiries.