The international financial and banking guarantee process for business and investment in Algeria

1 / International bank and financial guarantees:

The international banking community has put in place two major financial instruments: documentary credit and an international bank guarantee. The purpose of the first instrument is to persuade the issuer to make sure that it is paid on the agreed date or at the end of the completion of the contract (selling goods, providing services, etc.). The second instrument aims to Reassuring the importer of compliance with the due process of the contracting supplier.

Thus, the international community implements uniform practices, the rules of which are set by the International Chamber of Commerce (ICC).

2 / Requesting bank guarantees when making the initial request:

International bank guarantees are often issued according to a very accurate chronology according to the state of the progress of the contractual project starting with the bid guarantee at the stage of the bid request and then the guarantee of redemption in advance or deposit at the beginning of the contract, that achievement when signing the interim and / or final acceptance report and finally the retention guarantee Which extends for more than one year after delivery from the market to the beneficiary.

3 / The tender guarantee (Open tender offers Guarantee):

Within the framework of contracts, companies and national institutions resort to tender invitations or judicial rulings in order to identify various international suppliers and choose the best offer to implement the market. If the bidder is chosen, he must adhere to his obligation to complete the contract according to the specifications of the specifications.

Consequently, the bid bond enters into the pre-contracting stage and works to compensate the beneficiary if the bidder withdraws his bid during the selection period of offers and / or refuses to provide other guarantees stipulated in the contract.

The value of the tender guarantee ranges from 1% to 5% of the bid value and is valid for six months from the date of opening the offers. The guarantor will be notified of bail in the following cases.

 - When the bidder is rejected, he is not chosen to implement the contract in question.

- When the bidder chooses to implement the contract and proceed with the application of other guarantees stipulated in it.

1 / Get a financial provider (on the account):

Generally, for contract performance, an advance, which does not exceed 15% of the contract amount, is expected to be paid, before the contract is executed. This advance is also called a refund guarantee and is only one of the facility granted to the owner to allow him to start completing the contract.

This guarantee comes into effect from the payment of funds in the manager's account with the bank agreed in the contract and remains valid in general, until the signing of the provisional acceptance record or it is reduced in proportion to the services provided and until full payment.

2 / Ensuring good implementation (good conclusion):

Its purpose is to ascertain who benefits from paying his money in the event of non-compliance with the terms of the contract in terms of the quality or quantity of goods and / or services stipulated in the contract.

 The performance bond is placed upon signing the contract and remains in effect until final acceptance in accordance with the contractual provisions.

 Sometimes this guarantee can be reduced by 50% upon temporary admission and by 50% upon final acceptance of the goods and / or services.

4 / The guarantee is deducted from the project guarantee amount:

This guarantee is also called a maintenance warranty or a waiver of warranty and covers construction or maintenance services during the test period, which range from temporary acceptance to final acceptance of the contract.

This guarantee intervenes to put an end to the retention of the amount that sometimes reaches 10% of the contract value.

If the performance guarantee covers the period from the completion of the contract until the temporary acceptance, it is replaced by a maintenance guarantee during the trial period of the works and loses its effect upon final acceptance.

The warranty retention guarantee is activated if the supplies and / or services provided do not meet the contractually agreed standards or the source refuses to interfere with the maintenance of the equipment during the pre-determined warranty period.

5 / Customs guarantees:

 This type of commitment is mainly for work contracts that require entry of work methods and equipment with temporary use of an economic customs system (suspension system) for customs duties and taxes.

Indeed, companies operating in markets that require the import of equipment and materials of great value are exempt from paying fees and taxes by providing a guarantee that covers the amount of the fees mentioned.

In addition, for imports of non-existent documents, the customs guarantee enters to allow importers to possess goods and prepare possession documents.

1 / provisional acceptance:

 Some foreign contractors are authorized by the Customs Department to import equipment temporarily without paying fees and taxes, provided that this equipment is re-exported once work is completed (Instruction 866/82 / Ministry of Finance). This guarantee makes it possible to guarantee a specific amount of fees and taxes due on temporary import.

 2 / Withholding guarantee:

 Foreign companies with a large volume of imports can guarantee the volume of their imports in an open account with the customs administration and collect the fees and taxes due, when the shipments arrive, from this account until they are completely exhausted. 

This formula corresponds to a credit line granted by the Customs Administration for the benefit of foreign companies required to pay any customs duties.

3 / Supply guarantee :

 This guarantee also intervenes to ensure the arrival of the goods in the absence of one or more documents in the notary, and the importer can remove his goods and complete the formalities when possessing the missing document.

4 / Guaranteed obligations:

 It is a credit granted by the Customs Department on behalf of the importer, which enables it to pay duties and taxes through 120-day money transfers, with a comprehensive counter guarantee of equal value.

 6/  Other bank guarantees upon its first request:

The bank's intervention, in terms of commitment, is not limited in practice to traditional international operations (transfer, Remdoc, Credoc, etc.) but extends to the occasional foreign trade operations.

Indeed, maritime transport represents the lion's share in the field of multimodal transport, which has strongly encouraged the bank to play His role as a more international mediator and gradually imposed himself in practice to reduce emerging problems. International transactions.

1 / Letter of guarantee for lack of certainty:

Under the Brussels Agreement of 1924, the carrier is responsible for damages and losses incurred by the goods from receipt to delivery in exchange for delivery of the original bill of lading, and the non-delivery status on the bill of lading. The bank interferes with instructions from the requesting party, in general the recipient of the goods or its agent, to issue a pledge in favor of The carrier or the consignee (the agent), to allow him to possess the goods against delivery of the original bill of lading or payment of the value of the goods in the event that violations of delivery are observed without the bill of lading.

However, any confusion must be removed between ensuring that there is no original bill of lading for the carrier and the controversial delivery of goods that are permitted in the absence of one or more formalities in favor of the customs administration.

2 / Payment guarantee:

Sometimes, the importer may face financial difficulties to settle his export related fees, and the guarantor bank intervenes to issue guarantees in favor of the exporter within the framework of certain credits (buyers or financial).

This guarantee may also be issued in favor of a court empowered to rule in a case in order to ensure payment of costs and fees incurred in legal proceedings.

The guarantee of payment covering external credits is effective as soon as it is issued until the date of full payment of the credit subject to the guarantee, while the guarantee issued for the benefit of the court is issued once it is issued and canceled by an award issued by a competent judicial authority.

7 / Preparing and managing bank guarantees:

Algerian regimes excluded the practice of direct guarantee. Indeed, any bank guarantee, created by an Algerian bank in favor of a resident economic worker, must necessarily be in exchange for a guarantee from a first-class foreign bank (note MoF No. 171 / F / DCA of 21/01/01).

 / Warranty Preparation:

Counter-guarantee reception:

   According to the instructions of the foreign source, the foreign bank issues the counter-guarantee in favor of the Algerian bank, which covers the guarantee that the latter will issue in favor of the Algerian buyer.

  The counter-guarantee is examined by the Algerian bank at the level of its international administration by assessing the solvency of the issuing bank and its compatibility with the text of the counter-guarantee in relation to the standard text developed by the Ministry of Finance (Note 532 SG. 06/25/1985).

   If the counter-guarantee is accepted by the guarantor bank, the latter informs the beneficiary, for approval, of the terms of the guarantee that will be implemented. The beneficiary is granted ten (10) days to make his reservations, after this period the conditions are accepted implicitly and the guarantor moves to the issuance of the guarantee law (Algerian Education Bank No. 05/94 Article 07).

According to the bond of guarantee, the Algerian bank has an official obligation to pay the amount of the guarantee to the Algerian beneficiary at the request of the latter.

08 / Mandatory information related to the guarantee of the first application:

1 / Appointment of the parties:

 The president, the beneficiary, and the guarantor bank are the main parties to the security law.However, the appointment of the beneficiary is of particular importance in order to preserve the personal nature of the security law, unlike the claim of what the guarantee represents and what can be allocated or transferred.

2 / The subject of the guarantee law:

 The security bond can only cover the market for which the security was issued, in other words, this obligation covers the potential risks associated with non-compliance with the terms of the underlying contract between the buyer and the supplier.

3 / The amount of the guarantee:

A review of the contract amount can automatically modify the amount of the collateral, and for this reason the ratio representing the collateral amount compared to the base contract must be clearly and explicitly stated in the escrow procedure, especially for performance contracts according to the segment under which the collateral amount is amortized according to the amount of work performed.

4 / Termination of the guarantee document:

Articles 18 and 24 of the RUGD state that the failure of a security reaction does not affect the veracity of the act, on the contrary, the reaction irreversibly assumes the expiration of the guarantee act.

Also, the date of the calendar and / or event causes the beneficiary to release the guarantee (issuance) under conditions conducive to the completion of the contract. However, nothing prevents the occurrence of unfavorable factors to prevent the smooth operation of the contract and consequently implies the application of the guarantee, according to the principle of the first request, to a simple request made by the beneficiary (Article 20. (RUGD).

09/ Applicable law in the event of a dispute over the implementation of bank guarantees :

Disputes arising from the implementation of bank guarantees, CCI through Article 27 of the RUGD encourages guarantors and counter-guarantors to provide obligations to the law of the bank providing the service, unless otherwise agreed between the parties, namely;

-  Guarantee of the state law that issued the guarantee.

- The counter-guarantee of the law of the headquarters of the issuing counter-guarantee.

1-9 / Bank Guarantee Administration:

Amendment:

The beneficiary must be notified of any modification before its implementation; these modifications are generally related to the value of the contract, its price and / or the nature of the contract.

Extension:

 The beneficiary often interferes with the guarantor bank to request the extension of the date referred to previously in the guarantee document, and this intervention is explained by a failure noted during the completion of the contract.

2-9 / Warranty Disclaimer:

 The warranty ends if one of the following conditions is met;

 (1) Raise the hand:

 This formula reflects the respect of the contractual obligations of the participating contractors and the consensual release of the guarantee by the beneficiary. In the absence of this measure, the originator will be supported by additional committees, sometimes reaching the amount of the guarantee.

(2) The latest developments:

In case the foreign supplier fails in its contractual obligations towards its Algerian partner, the latter will ask the guarantor bank to enter the amount of the guarantee.