Council Directive of 1 February 1971 on harmonisation of the basic provisions in respect of guarantees for short-term transactions (political risks) with public buyers or with private buyers (71/86/EEC)

ANNEX HARMONISED PROVISIONS CONCERNING GUARANTEES FOR SHORT-TERM TRANSACTIONS (POLITICAL RISKS) WITH PUBLIC BUYERS OR WITH PRIVATE BUYERS

Article 1 Definition of the credit risk

The definition to be included in policies must not provide for a qualifying period for claims shorter than six months.

Article 2 List of events constituting a cause of loss

The basic list shall comprise events C to H inclusive as set out in Article 3 of the Common Policies for Medium- and Long-Term Transactions with Public Buyers and with Private Buyers, and, in the case of public buyers, includes also event B of Article 3 of the Common Policy for Medium- and Long-Term Transactions with Public Buyers.

The basic list may, however, be amended by the credit insurance organisation provided such amendment does not involve an extension of the cover beyond that afforded under the above-mentioned list.

Article 3 Extent of the guarantee

The guarantee shall apply to the amount owed to the insured in principal and interest, excluding interest on arrears, penalties and damages payable by the debtor.

Article 4 Percentage guaranteed

The insured himself shall retain exclusively for his own account responsibility for the portion not guaranteed by the credit insurance organisation.

Article 5 General principles of indemnification

The following principles must be observed:

(a)

The insured shall be required as regards the conclusion and performance of the guaranteed transaction to exercise all reasonable and usual care, skill and forethought; this requirement shall apply equally to the conduct of his agents, co-contractors or sub-contractors;

(b)

The insured shall be responsible for obtaining the necessary authorisations and for completing the legal formalities (including those which are incumbent upon the debtor until the entry into force of the contract);

(c)

Invalid debts shall not be indemnified.

Article 6 General principles for the appropriation of payments received and of proceeds from the realisation of securities

Policies shall include such rules for appropriation as will ensure that any payments or recoveries whatsoever received by the insured will not be appropriated to unguaranteed debts in priority to guaranteed debts.

Article 7 General principles for recoveries

Policies shall observe the principle that recoveries are shared between the credit insurance organisation and the insured.