Dr. David Saive, LL.M. - Lawyer and Member of the Advisory Board, Trade Technologies

1. The Quiet Revolution in Guarantees and SBLCs

For decades, guarantees have lived in a paper-based world. Even as international trade moved online - from electronic bills of lading to blockchain-enabled supply chains - guarantees often remained stubbornly analog, printed, stamped, and couriered across borders. To stay on top of a transaction portfolio that mainly consists of paper and to manage it appropriately is a difficult and error-prone task for Corporate Treasurers. But the tide is turning.

With the emergence of digital guarantee management platforms we are witnessing a shift from document logistics to data-driven, legally secure, and standardized workflows. And behind this transformation lies not only technology — but law.

2. Legal Foundations: From Suretyships to Guarantees

In international Trade, two terms often come across those working with guarantees, suretyships and demand guarantees.

2.1. The German distinction — Suretyship vs. Guarantee

German law distinguishes sharply between sureties (Bürgschaften) and guarantees (Garantien). Understanding this distinction is key to understanding how far digitalization can go.

2.2. Digital Suretyships (Bürgschaften)

Under § 765 (1) German Commercial Code (§ 765 BGB), a surety is a contract by which a surety undertakes to satisfy a creditor if the principal debtor fails. Its defining feature is accessoriness — the suretyships “lives and dies” with the main obligation.

Section 766 BGB traditionally imposes a written form requirement and explicitly excludes the electronic form - but only in consumer transactions. For businesses, § 350 HGB modifies this rule, removing the form barrier for merchants.

2.3. Digital Guarantees (Garantien)

Guarantees are independent of the underlying obligation - a stand-alone promise to pay. They may be triggered by presentation of a conforming demand, not proof of default. These demand guarantees are not governed by any specific German regulation. The parties freedom of contract prevails. Thus, guarantees and demand guarantees may even be issued in digital form. 

Internationally, the Uniform Rules for Demand Guarantees (URDG 758) issued by the ICC provide the legal backbone for these instruments. The URDG 758 allow electronic issuance and electronic presentation. Article 2 defines 'signed' as including electronic signatures, and Article 14(c) allows presentation of documents by electronic means, provided the format is agreed.

3. From Legal Theory to Practical Application

Guarantees are about trust, speed, and traceability. Paper guarantees are slow, costly, and risky. Digital ecosystems enable instant issuance, centralized tracking, and secure storage:

• Real-time availability provides for efficient handling of the guarantee,
• APIs enable fast and secure data exchange without change of media,
• Verified digital identities, electronic signatures, and audit trails ensure authentication and integrity of the electronic record,

In addition, other technical requirements must be taken into account:

• The standardization of data formats is an essential aspect of ensuring that digital guarantees can be processed smoothly by different systems and that inconsistencies can be avoided.
• To ensure the smooth and seamless exchange of data between different systems, interoperability of systems must be achieved.

Considering all this, data is far superior to paper.

4. The Human Factor: Lawyers, Bankers, Treasurers

However, we must not forget that we are in a phase of global transition. Our generation stands somewhere between a purely paper-based world and a fully digitalized one. Our solutions must therefore serve as an interface between paper and data. For as long as machines do not communicate solely with other machines, all data and processes must remain human-readable.

For lawyers, digital guarantees mean understanding data-based documents and advising on electronic presentation formats. For bankers, it means moving from paper custodians to trust custodians. For treasurers, it means full portfolio transparency and control. 

In the end, trade is a matter of trust. Trust of all market players involved and acceptance of paperless trade is one of the main factors that can make digital guarantees and letters of credit the standard. In particular, broad acceptance of the processes, the systems used and the security mechanisms is required on the part of applicants, beneficiaries and banks.

It is precisely digital tools such as the tools offered by Trade Technologies that help to bridge the gap between paper and data.

About the Author

Dr. David Saive, LL.M., is a lawyer specializing in the digitalization of trade, transport, and trade finance. He serves as Legal Product Owner of the Open Logistics Foundation and as a member of the Advisory Board of TradeTechnologies.