Law 1.529 of 29 July 2022 (published in the Monaco Official Journal dated 12 August 2022) has implemented important changes in a vast array of items in Monaco business law. Such changes impact market practices in various area of Monaco law, including solicitation for financial products and services, collateralization and the taking of security, transfer of receivables, etc.
In respect of collaterals, autonomous guarantees are now subject to a dedicated legal regime – included in article 1882-1 of the Monaco Civil Code – identical to the French legal regime. Please see the following link to the new Monaco legal provisions: https://www.legimonaco.mc/305/legismclois.nsf/ViewCode/8E7FA434E8439AB9C12588A3003916D0!OpenDocument
In a nutshell, article 1882-1 requires autonomous guarantees including first demand guarantees to contain a fully independent and stand-alone commitment from the guarantor to pay an identified sum to the beneficiary upon request, with limited recourse and exceptions for the guarantor (e.g. specific cases of fraud and collusion between beneficiary and debtor).
Because the Monaco and French legal regimes are now aligned, Monaco Courts are likely to review – in addition to existing Monaco case law – French case law when considering a dispute on an autonomous guarantee subject to Monaco law.
With this in view it may be advisable for lenders to analyse their current autonomous guarantees and review internal templates to ensure compliance with the requirements of French case law (specific consent of the beneficiary and guarantor, confirmation of the autonomous status of the collateral in respect of the secured debt, etc.) to anticipate potential enforceability challenges. Our Firm has a robust track record in financing transactions and we would be pleased to assist in the review, preparation and/or structuring of guaranteed.