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20 March 2013
In Norsk Tillitsmann ASA v Silvercoin Industries AS(1) the Supreme Court dealt with the distinction between an ordinary guarantee triggered by the principal debtor's default (selvskyldnergaranti) and an on-demand guarantee (påkravsgaranti). In Wuhan Guoyu Logistics Group v Emporiki Bank the English Court of Appeal also recently dealt with a similar distinction under English law – that between guarantees and on-demand bonds (for further details please see "Guarantees: further guidance on cutting a Gordian knot").
In the case at hand, the Supreme Court confirmed the long-held view that the main rule under Norwegian law is that the guarantor's liability is triggered by the principal debtor's default, unless there is a reasonably clear basis for a different interpretation. (Another important distinction under Norwegian law not a point of dispute in Norsk Tillitsmann ASA v Silvercoin Industries AS and hence not discussed here is between guarantees triggered by default (selvskyldnergaranti) and guarantees triggered by insolvency (simpel kausjon).)
The Supreme Court scrutinised the wording of various guarantee clauses and concluded that the Silvercoin guarantee was indeed an ordinary guarantee triggered by the principal debtor's default and not an on-demand guarantee.
The Supreme Court's reasoning and conclusion arguably express the complete opposite view as that held by the English Court of Appeal. This is not necessarily the case. The Silvercoin guarantee was not a bank guarantee as in Wuhan Guoyu Logistics Group, and the Supreme Court clearly distinguished the case at hand from guarantees issued by banks or other financial institutions.
It is possible that the Supreme Court could have arrived at a different conclusion had the guarantee been issued by a bank or other financial institution. The fact that the issuer was a bank was also mentioned by the English Court of Appeal. However, in the matter at hand, there existed other evidence (outside the guarantee itself) which pointed towards the conclusion at which the Supreme Court arrived. Hence, it may be that the final conclusion would have been the same even if issued by a bank or other financial institution.
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