Definition and Legal Classification of the Export Guarantee
Die Export Guarantee is a central instrument in international trade and export finance. It is a special form of guarantee, in which a guarantor, usually a bank or a specialized credit institution, assumes liability in favor of an exporter or the buyer of an export item. The aim is to safeguard the export transaction against economic or political risks. The legal structure of the export guarantee is based on the general law of guarantees under Sections 765 et seq. of the German Civil Code (BGB) and is supplemented by specific public-law regulations, in particular in connection with export credit guarantees and state support instruments.
Legal Basis of the Export Guarantee
Civil Law Foundations
The export guarantee is primarily subject to the regulations on guarantees according to Section 765 BGB. Under this legal provision, the guarantor undertakes towards the creditor of a third party to ensure the fulfillment of that third party’s obligation. The guarantee must generally be provided in writing (Section 766 BGB) and is typically accessory, meaning it is closely linked to the secured principal obligation (in this case, the export transaction).
Public and International Regulations
In the context of export transactions, special regulations additionally apply. These include in particular the guidelines for Hermes Cover (export credit guarantees of the Federal Republic of Germany), which are issued by the Federal Ministry for Economic Affairs and Climate Action in collaboration with mandataries, notably the credit insurer Euler Hermes. These regulations define the requirements, scope, and procedure for applying for and securing export guarantees.
In addition to national regulations, there are international frameworks, such as the guidelines of the OECD for export credit guarantees, which influence the terms for providing guarantees in cross-border business.
Function and Purpose of the Export Guarantee
The export guarantee serves to secure export transactions against default risks. Such risks may be economic in nature (insolvency or unwillingness of the foreign buyer to pay) or political (e.g., transfer risk, war, expropriation, payment bans). By taking over an export guarantee, the beneficiary, usually the exporter, gains the certainty of being compensated by the guarantor in the event of loss.
Contracting Parties and Contract Design
Parties Involved
The following parties are usually involved in an export guarantee:
- Guarantor: Usually a bank, insurance company, or a specialized institution.
- Creditor: Exporter or the financier of the exporter.
- Principal Debtor: Buyer of the exported goods abroad or the borrower in export financing.
Contract Contents
The guarantee agreement contains the specific collateral agreement regarding the underlying claim, the scope of liability, conditions for recourse against the guarantor, possible deadlines, as well as rules for release and return of the guarantee. In some cases, securities in favor of the guarantor are also agreed.
Structure and Types of Export Guarantees
Direct Liability Export Guarantee
The most widespread form is the direct liability guarantee according to Section 773 BGB, in which the guarantor waives the defense of prior proceedings. The creditor may thus claim directly against the guarantor without first pursuing the principal debtor.
Deficiency Guarantee
Alternatively, there is the deficiency guarantee, in which the guarantor can only be claimed upon if enforcement against the principal debtor has been unsuccessful.
Unlimited and Limited Export Guarantee
Depending on its structure, the export guarantee can be agreed with or without a time limitation. In practice, fixed terms are often chosen to match the duration of the export transaction.
Liability and Scope of the Export Guarantee
The liability of the guarantor ordinarily extends to the principal claim as well as ancillary claims such as interest, costs, and contractual penalties, if so stipulated in the guarantee agreement. Liability can be limited to a maximum amount.
Enforcement of the Export Guarantee
Triggering a guarantee event requires a breach of contract by the principal debtor, notably the default of the secured claim due to economic or political reasons. Enforcement generally requires submission of appropriate evidence and compliance with formal legal or contractual requirements.
Termination of the Export Guarantee
An export guarantee generally ends with the full settlement of the secured principal claim or upon expiry of the agreed period. It may also be terminated by returning the guarantee document or by an explicit release declaration from the creditor.
State Export Guarantees and Export Promotion
As part of export promotion, the state often assumes guarantees for export transactions as an export credit or investment guarantee. In Germany, these are handled by so-called mandataries on behalf of the federal government. State export guarantees are mainly used in large-scale projects or in politically and economically unstable foreign markets, and supplement private coverage options.
Tax and Cost Aspects
Export guarantees are subject to fees or premiums which are contractually stipulated. Tax treatment follows general principles for business expenses or classification of income. Costs are borne by the exporter unless contractually agreed otherwise.
Distinction from Other Securities in Foreign Trade
The export guarantee must be distinguished from other financing securities such as surety credit, bank guarantee, comfort letter, or letter of credit. While the letter of credit primarily secures payment processing, the export guarantee is explicitly aimed at ensuring the fulfillment of obligations under delivery and credit contracts in international business.
Summary
The export guarantee is a legally sophisticated security instrument that is essential for risk minimization in international business. It is based on the provisions of the German Civil Code but is also significantly shaped by public-law and international frameworks. Its proper structuring and handling require a differentiated consideration of civil, public, and contractual requirements. With increasing global trade integration, the instrument has grown in significance and remains a central element of export risk management.
Frequently Asked Questions
What legal requirements must be met to apply for an export guarantee?
To apply for an export guarantee, the applicant’s legal capacity must first be demonstrated, as legal transactions under guarantee law can only be concluded by persons with full legal capacity (§ 104 ff. BGB). Additionally, there must generally be a specific, legally binding export transaction, which must be documented by the appropriate paperwork – for example, export contracts or order confirmations. Furthermore, the applicant must demonstrate that the foreign transaction in question is subject to German law or another jurisdiction accepted for the guarantee, and that there are no legal obstacles such as embargoes or sanctions lists. Compliance with foreign trade regulations – e.g., under Sections 4 and 5 of the AWG (Foreign Trade and Payments Act) – must be proven where applicable. Finally, the applicant is obliged to fully disclose all information relevant to the assessment of the legal situation and creditworthiness, as there is a fault-independent duty to inform the guarantor.
To what extent are the guarantor and debtor each legally liable under the export guarantee?
In the context of export guarantees, the general principles of civil liability in German law apply, especially Sections 765 et seq. BGB. The guarantor is generally liable on a subsidiary basis; this means that only in the event of non-performance by the principal debtor may the beneficiary (exporter, bank, state) invoke the guarantee (the so-called defense of prior action, unless contractually excluded). The guarantor’s liability is generally limited to the amount specified in the guarantee declaration. Under Section 767 BGB, the guarantor may rely on all defenses available to the principal debtor against the creditor, unless these defenses have been expressly excluded by contract. The principal debtor remains primarily liable alongside the guarantor. Furthermore, in the context of international business, differing agreements may be made, for example for “first demand” guarantees, which provide for liability of the guarantor upon first demand and independently of the existence of the principal obligation.
What forms and contents of export guarantees are legally binding?
According to Section 766 BGB, export guarantees are subject to the legal requirement of written form, i.e., the guarantor’s statement must be made in writing. An electronic or oral declaration of guarantee is generally invalid, unless commercial practice or international custom allows a different form in special cases — for example, in the case of certain banking guarantees (see Art. 2 URDG 758). In terms of content, the guarantee declaration must clearly specify the guarantee amount, the guarantor, the creditor, the principal claim, and in an international context, possibly also details of the underlying purchase contract or delivery terms. The duration as well as any conditions for recourse (e.g., submission of certain documents, deadlines) should also be clearly regulated. Unclear or incomplete guarantee declarations may lead to the nullity or invalidity of the guarantee agreement in the event of a dispute.
What are the legal consequences of breaches of assumption or notification obligations in the context of an export guarantee?
If the guarantor or principal debtor breaches legal obligations to assume or notify in connection with the export guarantee — for example, concealing material deteriorations in creditworthiness or failing to report contract amendments in the export transaction — various legal consequences may arise. According to general principles (Sections 280, 241, 311 BGB), such a breach can result in claims for damages. In cases of intentional or grossly negligent breaches, the guarantor may also be entitled to refuse the assumption of the guarantee or, if already declared, to terminate the guarantee for cause. In severe cases, contesting the guarantee on grounds of fraudulent misrepresentation (Section 123 BGB) may be considered. In the context of state export guarantees, breaches of specific notification or cooperation obligations can result in the withdrawal or subsequent recovery of the guarantee by the public guarantee authority.
How is the export guarantee to be treated legally in the event of insolvency of the principal debtor?
In case of insolvency of the principal debtor, the export guarantee remains in force as an accessory security instrument. According to Section 774 BGB and in the context of Sections 37 and 38 of the German Insolvency Code (InsO), the guarantor assumes the position of the creditor as soon as compensation has been paid (automatic subrogation). The guarantor may then file its claim in the insolvency proceedings of the principal debtor and will be satisfied proportionally from the estate. In special circumstances, such as global supply and performance commitments abroad, country-specific insolvency regulations of the relevant jurisdiction may also apply. Under German law, the guarantor is generally not obliged to make payment under the guarantee prior to distribution of the insolvency quota, unless this is expressly agreed in the guarantee agreement or stipulated by international guarantee regulations.
What limitation periods apply to claims arising from export guarantees?
The limitation period for claims arising from export guarantees is generally determined by Section 195 BGB and is usually three years, beginning at the end of the year in which the claim arose and the creditor became aware of the circumstances giving rise to the claim (Section 199 BGB). In the case of government export credit guarantees or special situations (e.g., under the Hermes cover), different periods may apply, either contractually agreed or required by law. Furthermore, international limitation rules applicable to the principal obligation, as well as the exact contractual terms of the guarantee, must be observed (e.g. maturity on “first demand” or at the time of default by the principal debtor). If the export guarantee is provided as an abstract promise of debt, agreed deviations from standard limitation periods may apply, provided these are individually stipulated.
Under what legal conditions is the return or release of the export guarantee possible?
An export guarantee must be released legally when the secured claim has been fully satisfied or when the guarantor has been effectively discharged from liability. This can occur through fulfillment of the principal debt, waiver of the claim, set-off, or the extinction of the secured claim (§§ 364 ff. BGB, §§ 114, 115 InsO). The return is usually effected by handing over the guarantee document to the guarantor and an explicit release declaration by the creditor. Furthermore, there is a right to return if the guarantee obligation was limited in time and the agreed period has expired without the guarantee event occurring. In international business, it is important to determine whether the law governing the release requires specific formalities, such as notarial certification, or if registration of the release is necessary. In case of a dispute over the right to return, a declaratory action (§ 256 ZPO) can provide relief.
