Bank Guarantee in UAE

Bank guarantee in UAE is considered a commercial activity, regardless of the ability of an individual to whom the bank guarantee is issued or the purpose for which it is issued, so they are governed under the CTL. But at certain points reference can be also made to Civil Transactions Act No.2 of 1985. In a bank guarantee, the obligation of the issuing bank is separate from that of the principal debtor. This is an independent obligation by the guarantor to the creditor of the principal Debtor. A bank guarantee is independent of the underlying transaction or contract between the beneficiary and principal debtor. The guarantor is bound by the bank guarantee irrespective of the status of the beneficiary or the nature of the contracts between the guarantor and the principal debtor, or between the principal debtor and the beneficiary. In issuing the bank guarantee, the guarantor is not working as a representative, agent or surety of the principal debtor.