We know that before graduating from college, we will face one thing, which is to write a graduation thesis! If you don’t write it well, you can’t graduate! This troubles many college students. How to write a graduation thesis? Okay, so on. Without further ado, I will go directly to the sample essay, so hurry up and take a look!

[Abstract] Against the backdrop of Shanghai’s efforts to build itself into a world shipping center, ship financing has been raised to unprecedented heights , and the various businesses covered in the ship financing process have attracted more and more attention. Among them, the repayment guarantee business has won the favor of many financial institutions because of its relatively long cycle, large amount involved, and relatively high return-to-risk rate. Although more and more banks have begun to engage in this business, the legal risks in repayment guarantees have not attracted enough attention, resulting in many disputes. Therefore, how banks face these disputes and the potential risks that may exist. The article believes that it is necessary to strengthen the investigation work before the issuance of the letter of guarantee, effectively respond to the unreasonable claims of shipowners, implement counter-guarantee measures, improve the internal management of banks, and improve the professional level of bank ship business personnel. We should take seriously the legal risks of repayment guarantees in ship financing, actively carry out preventive measures, reduce disputes over repayment guarantees, and do a good job in strengthening the repayment guarantee business.

[Keywords] Ship; repayment guarantee; risk; prevention

In recent years, with the rapid development of my country’s shipping industry and the deepening of foreign exchanges, more and more Financial institutions are optimistic about the attractive and huge market of ship financing, and many banks have begun to vigorously develop ship financing business. Among them, the export ship repayment guarantee business has won the favor of many financial institutions because of its relatively long cycle, large amount involved, and relatively high return-to-risk rate. Although more and more banks are beginning to use repayment guarantees as a banking credit tool, due to insufficient awareness of its risk awareness, commercial banks are not performing this business smoothly. Therefore, it is necessary to clarify repayment guarantees. The legal risks involved and their relative prevention methods provide some help for my country to expand and strengthen the high-quality repayment guarantee business.

First, let’s look at a classic case of a repayment guarantee dispute: I.E. Construction Company v. Lloyds Bank and Lafitne Bank. In this case, the plaintiff, IE Construction, entered into a contract with an Iraqi employer, the shipowner. The contract stipulated that the agreed ships would be built at three locations: Kobala, Qadasia and Duhuk. The format of these letters of guarantee is based on the format developed by Rafideen Company itself, which is beneficial to Iraqi shipowners. Later, the Iraqi shipowners required the shipyard to repay the loan in advance for some reason. This behavior of the shipowners at that time is generally considered to be due to the drop in ship prices and the shipowners' reluctance to accept the ship. At the same time, the shipowner went one step further and used some minor problems as an excuse to claim that the shipyard had breached the contract. He also issued a non-factual certificate to accuse the shipyard, the plaintiff, of breach of contract, and then asked the bank for a repayment guarantee. At this time, the bank was in a dilemma, whether to repay the ship owner. Here we leave aside the possibility of fraud by the employer. We just want to emphasize that since the bank issued an independent letter of guarantee in this case (usually a repayment guarantee is an independent letter of guarantee), generally speaking, the requirements for an independent letter of guarantee only need to be seen Corresponding consideration should be paid when the relevant supporting documents are obtained, and it has to be paid. Therefore, if the bank is not prepared for relevant risks in advance, the bank will bear great risks when issuing an independent letter of guarantee, which will most likely cause the bank to bear a great deal of responsibility for problems that arise in the future.

In fact, there are still many risk issues arising from repayment guarantees. Below we will analyze the various risks that banks may face with repayment guarantees and the measures to deal with them.

1. Risks faced by bank repayment guarantees

(1) Shipyard reputation risk. To analyze the risks of the repayment guarantee issued by the bank, it is necessary to conduct a detailed investigation into the creditworthiness of the shipyard. The reputation of a shipyard mainly refers to: whether the shipyard has had any major breach of contract, whether it has a record of being punished for delayed ship delivery, whether it has been involved in domestic or foreign arbitration or litigation due to substandard or defective shipbuilding quality, and whether it has had bad loan repayments. historical records and financial disputes, whether major safety accidents have occurred, etc. If the above risk events have not happened before, it means that the shipyard has a good reputation and therefore the bank risk is low; if not, the bank may have a relatively high risk when issuing a repayment guarantee and needs to remain cautious.

(2) Shipyard experience risks. Analyze the risks of the repayment guarantee issued by the bank and investigate whether the shipyard has experience in building similar ships. If there is similar experience in building this kind of ship, then the ship quality, safety, finance, etc. will be guaranteed. If there is no experience in building similar ships, the bank may increase the level of risk guarantee or refuse to issue a repayment guarantee when deciding to issue a repayment guarantee. Of course, if some shipyards aim for high profits but have no shipbuilding experience in related ships, then whether to issue a repayment guarantee requires an in-depth understanding of the relevant management experience and background of the shipyard’s main management and senior technical personnel, as well as the qualifications of the technical consultants hired. level, the integrity of the shipyard's quality control system and safety production system and other safety management capabilities; if the shipyard is still under infrastructure construction, then the bank should be very cautious and need to investigate all aspects of the shipyard's strength.

It is necessary to investigate the overall strength of the shipyard investors, the availability of construction funds of the investors, the management level of the shipyard operators, etc. The results of these investigations will provide certain help in whether the bank provides a repayment guarantee.

(3) Shipyard equipment risks. To analyze the risks of the repayment guarantee issued by the bank, check the import status of key supporting equipment. In our country, ship supporting products mainly rely on imports, so banks must pay close attention to the market situation of supporting products and the cooperation between shipyards and major marine equipment suppliers. Precisely because key supporting equipment relies on imports, if the supply of relevant equipment is tight, it is very likely that shipbuilding companies will not be able to deliver ships on time, thus incurring repayment obligations on banks. Therefore, this aspect is also something that banks must consider when issuing a repayment guarantee.

(4) Risks in the text of the guarantee contract. When signing a repayment guarantee contract, pay great attention to the text and description of the guarantee contract. When a repayment guarantee contains some clauses that are unclear, contradictory, illogical and contrary to common sense, the guarantor bank that issued the repayment guarantee will be at risk of being unreasonably required to pay. Therefore, when writing a letter of guarantee contract, both parties must be clear in their expressions of intention and text, the structural framework must be rigorous, and there must be no contradictions between the provisions. In addition, when signing a guarantee contract, attention should be paid to the writing and specification of some special clauses so that these clauses can play a role in ensuring that the risks under the advance payment guarantee are reasonably controllable. The most commonly used special clauses in practice mainly include the following three types: dispute arbitration or litigation clauses; payment transfer clauses ①; guarantee validity and increase or decrease amount clauses ②. The standardized expression of these clauses can play a certain role in effectively diversifying risks for banks.

(5) Ship type risks. Different ship types carry different levels of risk. Relatively speaking, complex ship shapes have higher technical requirements and thus higher ship financing risks. However, bulk carriers (such as Panamax bulk carriers, Capesize bulk carriers, handy bulk carriers, and lake-size bulk carriers) have relatively mature ship shapes. Less risky. Depending on the type of ship, the guarantee for the repayment guarantee issued by the bank will be different. In addition, the bank also needs to examine whether the overall design of the ship type under the guarantee is mature, how smoothly the shipyard has built this type of ship in the past, whether this ship type is a familiar product of the shipyard, and whether the relevant management and key technical personnel are If there are any changes, whether the main shipbuilding facilities such as the door crane (or dock) are safe and reliable without major hidden dangers and defects, etc.

(6) Shipowner’s strength and reputation risk. The risk of a bank issuing a repayment guarantee not only depends on the strength of the shipyard, but also the strength and reputation of the shipowner are also important guarantees for the performance of the repayment guarantee. If the shipowner is strong, reputable, has a long history of shipping, has a large fleet, and is operating in good condition, then the bank can feel more confident when issuing a repayment guarantee, and can actively expand business if the relevant conditions are met. Repayment guarantee business. If the shipowner is weak, has poor credit, and has a small fleet, then the bank needs to comprehensively consider the financial status of the beneficiary (shipowner) to decide whether to intervene in the relevant business. Because in this case, the shipowner is likely to make unreasonable claims to the bank and ask for high compensation, the shipowner has a greater possibility of fraud, causing damage to the bank's interests. We know that most repayment guarantees are independent guarantees. The so-called independent guarantee means that when the beneficiary provides the required documents, the bank can assume the responsibility, regardless of the basic contract behind the guarantee. Therefore, in order to prevent malicious fraud by shipowners, banks need to evaluate the strength and credibility of shipowners. Therefore, the shipowner’s strength and reputation are also one of the risks in issuing a repayment guarantee.

(7) Bank regulatory risks. Bank supervision risks are mainly reflected in the bank's supervision of the use of funds by shipyards. If a repayment guarantee is issued and the shipowner remits the advance payment to the shipyard, the bank's management and control of the advance payment at this time is whether the shipyard will use the advance payment for a specific ship as agreed, and the bank will also decide whether to issue a repayment guarantee. An important consideration is the security required. In accordance with due operating procedures, shipyards should implement special account management for advance payments, and review the use and whereabouts of advance payments one by one based on ship construction, production, and purchase and sale arrangements, so as to realize dedicated funds and reduce risks for banks. However, from a practical perspective, it is difficult for banks to supervise advances, and many regulatory measures for shipyards are only implemented on paper. How to effectively eliminate the hidden operational risks of funds after the letter of guarantee is issued and effectively prevent business risks are issues worthy of our consideration.

(8) Classification society ③Qualification and reputation risks. The qualifications and reputation of the classification society are also among the risks that banks must consider when issuing a repayment guarantee. The main role of a classification society is to organize regular inspections of ships during and after construction. The purpose is to set and maintain construction and maintenance standards for ships and their equipment. If a classification society with poor qualifications and bad reputation may They will partner with shipowners with bad intentions to defraud the shipyard and require them to refund the advance payment. If the shipyard cannot perform, it will affect the interests of the bank and cause difficulties in the performance of the repayment guarantee. Therefore, in order to ensure the soundness of the repayment guarantee, the bank should investigate the qualifications and credibility of the classification society through reputable institutions such as Dun & Bradstreet to prevent various possible fraud incidents.

(9) Counter-guarantee risk.

Under normal circumstances, banks will require applicants to provide a counter-guarantee letter issued by a third party to guarantee the bank's own interests before issuing a letter of guarantee. However, if the content of the counter-guarantee is not substantial enough and the funds are not strong enough, the bank that issued the repayment guarantee will face the possibility that if the shipyard is unable to refund the money, the bank will suffer heavy losses, that is, the bank's external payments will not be compensated.

(10) Industry market risks. The shipbuilding industry has its own cyclical nature, 2004. In 2007, the shipbuilding market situation was excellent, orders continued, and ship-related business was booming. Now, due to the impact of the financial crisis, the entire shipping industry market is in a downturn, ship prices have fallen, orders have decreased, and the proportion of advance payments has declined. To a certain extent, market risk is force majeure. We cannot predict when market risk will come, nor can we predict its magnitude. In today's sluggish market, advances are smaller and shipowners are more likely to find fault with abandoning ships. As a result, shipyards' risks have increased sharply. The shipowner at this time is likely to be nitpicking during the construction process and delay the progress. Such an approach by shipowners will result in a significant reduction in orders, which may in turn make the shipyard unable to make ends meet, resulting in huge losses and ultimately bankruptcy due to the inability to sustain it. At this time, the bank's risk increased dramatically. The advance payment guarantee issued by the bank had to bear the repayment liability because it was unable to perform the contract, and the risk level increased. This practice of shipowners abandoning ships has brought huge risks to shipyards and banks. This risk is largely due to market risks, and it is difficult to predict the occurrence of this risk at the moment it is about to occur. It is estimated that all we can do now is try to minimize this risk. The risks in the industry market are difficult to estimate, but we should try our best to compensate.

2. Relevant measures for banks to deal with risks in the repayment guarantee business

(1) Strengthen the investigation before the issuance of a letter of guarantee. Since most repayment guarantees are independent guarantee contracts, once issued, the shipowner can request an advance payment from the bank as long as the shipowner provides the documents required by the guarantee. Therefore, you must carefully investigate the relevant units before issuing an issue. The bank's investigation work before issuance is mainly aimed at the following relevant persons or units: first, investigate the credit status of the shipyard, then investigate the strength and credibility of the ship owner, secondly investigate the status of the classification society, and finally conduct a careful review of the counter-guarantee. Review to ensure the counter-guarantee is true and sufficient. After careful investigation of these aspects, a repayment guarantee will be issued based on the risk level of the guarantee itself, the length of the guarantee period, the country of the shipowner and the specific conditions of ship construction. What needs to be noted here is that when requesting a counter-guarantee, the validity period of the counter-guarantee should be slightly longer than the period of validity of the repayment guarantee, or the counter-guarantor can be asked to give the guarantor bank a certain period of time to claim after the counter-guarantee expires, thereby preventing It may happen that the shipowner makes a claim before the expiration of the validity period stipulated in the repayment guarantee, but the guarantor bank has no time to recover from the counter-guarantor. Pre-investigation of external guarantees is very important. Banks should have a good idea of ??the credit standing of all parties so that they can provide repayment guarantees with greater peace of mind.

(2) Effectively respond to shipowners’ unreasonable claims. Repayment guarantees are mostly independent guarantees payable on demand. The occurrence of payment under the independent guarantee does not depend on the performance of the underlying contract, but only on compliance with the provisions of the repayment guarantee. As long as the shipowner submits the documents required for the repayment guarantee, he can obtain a claim for the advance payment from the bank. As for whether the reasons for the claim are sufficient and reasonable and whether the cause of the claim has actually occurred, the guarantee bank does not care, except for fraud. Therefore, the "documentary" feature of the independent guarantee makes the shipowner's claim potentially unreasonable, which brings risks to the guarantee bank and the shipyard. Therefore, it is necessary to take the following measures to prevent and reduce unreasonable claims from shipowners: (1) Try to use a direct letter of guarantee. The so-called direct guarantee, in the repayment guarantee, refers to the act in which the guarantee bank issues a guarantee to the shipowner as the beneficiary at the request of the shipyard, and based on this repayment guarantee, the bank directly assumes the payment guarantee liability to the shipowner. . The corresponding forwarding guarantee means that under the forwarding guarantee, as long as the transferring bank declares to the instructing bank that it has received the shipowner's claim, the instructing bank must pay. In addition to the fact that the shipowner’s claim is very quick and convenient from the definition of the reissued letter of guarantee, the validity period of the instructing bank’s counter-guarantee letter is inconsistent with the validity period of the letter of guarantee issued by the reissued bank, which increases the possibility of the shipowner’s overdue claim. By directly issuing a guarantee, the guarantee bank can review whether the shipowner's claim complies with the requirements of the guarantee and whether the claim is overdue, without having to rely on others to do so. (2) In the terms of the repayment guarantee, consciously set up some documentary clauses that can be used to limit the shipowner's unreasonable claims, and use the factual conditions determined in the contract that the shipowner has the right to make a claim once they occur. The text is concrete and clear to protect the legitimate rights and interests of the shipyard from infringement and at the same time meet the reasonable requirements of foreign shipowners. (3) If the shipowner commits fraud, the shipyard can apply to the court for an injunction ① to prevent the beneficiary (the shipowner under the shipbuilding contract) from abusing his rights. The only legal way is to immediately apply for an injunction from the court. An injunction is also called a stop-payment order or a preliminary injunction, which is a legal remedy in equity. An injunction can be imposed either against the bank that issued the injunction guarantee or against the beneficiary. The former prohibits banks from making direct payments, while the latter prohibits beneficiaries from making payment requirements. However, countries have different attitudes towards bans.

British law clearly adopts a hands-off approach and does not issue arbitrary bans. The reason is for commercial certainty, so that the beneficiary of the repayment guarantee (often the shipowner) knows that he or she will be fully protected; Singapore's attitude towards the issuance of bans is more relaxed than that of the UK, because Singapore's law seems to be The party that provides the restraint guarantee may be the bank with the best guarantee, so it is relatively disadvantageous for the beneficiary of the repayment guarantee. Although the practical operations of various countries are somewhat different, and in theory, there is no unified international standard for judging fraud or abuse of rights, the academic theories, jurisprudence of various countries, and relevant international conventions, such as the "See Law" formulated by the International Chamber of Commerce, "Uniform Rules for Demand Guarantees", "International Standby Letters of Credit Practice", "United Nations Convention on Independent Guarantees and Standby Letters of Credit" formulated by the United Nations Commission on International Trade Law, etc. By analyzing and studying it, we can also draw some conclusions from it, that is, the court will not issue an injunction very easily. The stability of trade has its important place. Secondly, it is possible that courts in most countries are considering balance and convenience by not granting injunctions easily. For example, while the UK requires an injunction when fraud is committed, Singapore can grant an injunction when it is excessive and unreasonable. It seems that the courts in Singapore are more lenient in issuing injunctions, but this is only compared to the UK. Generally speaking, countries will not easily issue bans in order to protect the good development of trade.

(3) Implement counter-guarantee measures. In order to further reduce their own risks, banks often require shipyards to provide counter-guarantee measures for repayment guarantees. These measures mainly include collecting deposits, credit counter-guarantees, property mortgages, etc. Generally speaking, if all the margin is provided, the bank's risk is relatively small; if the bank only delivers part of the margin, the risk is greater. At this time, the bank should increase the guarantee and reduce the risk through other methods. If the bank wants to further ensure its own rights and interests, it can notarize the counter-guarantee contract. In short, the counter-guarantee under the enhanced repayment guarantee will enable the bank to reasonably obtain all or a substantial part of the compensation from the counter-guarantor in the event of a claim. Therefore, in any case, perfecting the implementation of counter-guarantee plays an extremely important role in controlling the various risks arising from the repayment guarantee.

(4) Improving the internal management of banks. In addition to the need to implement effective risk prevention measures for shipowners, shipyards and other stakeholders, improving the internal management of banks is also an important aspect of dealing with risks. For banks, they must first establish and improve business operating systems to ensure possible operational risks from a institutional perspective, and then set up a special team for the ship advance payment guarantee business to be responsible for matters related to the ship advance payment guarantee business, so that the operation of the entire project can be divided It is clear, smoothly implemented and highly efficient in operation. It strengthens communication among relevant stakeholders, ensures the interests of the bank and reduces risks. Secondly, business personnel with strong professional qualities and a high sense of responsibility should be selected to go to the shipyard to understand the relevant ship construction processes, including being responsible for strengthening the supervision of advance payments, implementing special account supervision for ship advances, earmarking funds for special purposes, and third-party guarantors The production and operation conditions minimize the risk of the advance payment guarantee to the bank. Finally, banks should supervise and archive various fund transactions, correspondence and telegraph transactions under the repayment guarantee to ensure that bank debts are clear. During supervision, if any events that are detrimental to the bank are discovered, countermeasures should be taken promptly to resolve the possible risks. Regardless of whether the capital risk is large or small, the bank should pay considerable attention to ensure the bank's interests.

(5) Improve the professional level of bank shipping business personnel. Bank clerks who handle ship advance payment guarantees should strengthen their study of the guarantee business, foreign exchange management, and laws related to guarantees and mortgages to avoid mistakes caused by unfamiliarity with the business and neglect of certain links. It is necessary to have a clear understanding of the framework and content of the letter of guarantee, master the inherent meaning of the relevant clauses and their practical significance in preventing risks, so that these clauses can be correctly and skillfully applied in the issuance of the advance payment guarantee.