The International Standby Practices
The International Standby Practices was developed under the auspices of the Institute of International Banking Law & Practice, Inc. The current version, abbreviated as "ISP" or “ISP98”, has been endorsed by the International Chamber of Commerce (designated as ICC Publication No. 590) and the United Nations Commission on International Trade Law, which commended its “use by the parties … in international trade and financing transactions.” ISP98 articulates standard international standby letter of credit practice.
ISP98 became effective on 1 January 1999. Its official language is English, but ISP98 has been translated into Bulgarian, Chinese, Chinese (Taiwan), French, Greek, Hebrew, Italian, Japanese, Korean, Portugese, Russian, Spanish, and Turkish (as of February 2015).
ISP98 provides standby users with rules designed for standbys, as opposed to the UCP, which was not. Because the UCP was designed for commercial LCs, considerable care has to be exercised to avoid difficulties and traps when using it for standbys. ISP98 avoids these problems and anticipates issues that commonly arise under standby practice. ISP98 can also be used for independent demand guarantees.
ISP98 was designed not only for bankers who already knew the practices being articulated, but also for lawyers and corporate users who may not be intimately familiar with them, and ultimately judges who must decide disputes.
ISP98 Rule 1.01(c) provides that undertakings subject to it may modify or exclude its provisions and ISP98 Rule 1.06 and 1.07 provide that a standby is an irrevocable, independent, documentary, and binding undertaking. In addition to functional definitions, ISP98 addresses obligations, presentation, examination of documents, notice and preclusion, transfer, assignment, and transfer by operation of law, reimbursement obligations, and timing.
To assist in the interpretation of ISP98, the Institute has published The Official Commentary on the International Standby Practices and has established the Council on International Standby Practices that issues official interpretations. The Institute has also released the ISP98 Model Forms. ISP98 has been addressed in judicial decisions, indicating its drafting success in avoiding problems of interpretation, and received favorable treatment by the courts that have considered it. In addition, the Certified Standby and Guarantee Professional certification programme provides comprehensive training and tests mastery of ISP98 as well as the other practice rules.