[Direct answer]In the Beijing area, reimbursement is usually possible, but it requires that the payment be legitimate. After the issuer of the independent guarantee (a bank or non-bank financial institution) makes a payment to the beneficiary in accordance with the guarantee, there is usually a contractual relationship of entrusting the issuance of the guarantee and counter-guarantee arrangements between the issuer and the applicant. The issuer may, on this basis, seek reimbursement from the applicant for the advance payment and corresponding expenses, and have the right to priority compensation from the counter-guarantee property or deposit. The basis for reimbursement is the entrustment contract between the two parties, the application for issuing the guarantee, and the counter-guarantee agreement, which belong to contractual claims and are unrelated to the beneficiary under the guarantee. However, it should be noted that if the payment itself is improper, such as the beneficiary fraudulently demanding payment while the issuer knows about it and still makes the payment, or the issuer fails to perform its reasonable obligation of document review and makes a wrong payment, the applicant may raise a defense against this and the scope of reimbursement may be reduced accordingly. In addition, after the issuer makes the payment, the issuer can also claim corresponding rights from the actual responsible party in the underlying transaction.

1. Problem background and typical scenarios

In engineering, international trade, and financing, applicants often request banks to issue independent guarantees to guarantee performance or payment. The guarantee is payable upon demand. Once the beneficiary demands payment, the bank must pay first and then recover the payment from the applicant and its guarantors. What enterprises care most about is whether they can recover the payment from the bank, the scope of recovery, and whether they can defend themselves on the grounds that the beneficiary is making a malicious claim. Clarifying the recovery rules will help enterprises assess the risks of the guarantee.

II. Key points of contention

First, the legal basis and nature of recourse. Second, whether the scope of recourse includes interest and fees. Third, the realization of counter-guarantees and deposits. Fourth, defenses against the issuer's failure to make payments on time. Fifth, the handling of recourse in the event of fraudulent claims.

III. Professional analysis by Henglue Law Firm

Henglue Lawyers explained it from two aspects: the basis for recourse and practical defenses. Firstly, the basis for recourse: When the applicant applies to the issuer for a letter of guarantee, a trust relationship is formed between the two parties. If the issuer pays according to the letter of guarantee, it is a necessary expense incurred by the issuer in handling the applicant's entrusted matters, and the applicant can request reimbursement according to the trust contract. If there are other counter-guarantee agreements, deposits, or pledge arrangements, the issuer can be prioritized for reimbursement according to the agreement. Secondly, the scope of recourse: It generally includes the actual amount of the letter of guarantee paid by the issuer, the cost of funds occupied from the date of advance payment, and the agreed-upon fees and reasonable expenses, which are subject to the contractual provisions and legal requirements. Thirdly, the realization of counter-guarantees: If the counter-guarantor assumes guarantee responsibility, the issuer can claim according to the provisions of the counter-guarantee contract. The form of counter-guarantee may be a guarantee, mortgage, pledge, or deposit, and the method of realization and priority shall be determined according to the corresponding rules. Fourthly, defenses against improper payments: If the beneficiary makes fraudulent claims, and the issuer still pays despite knowing the situation, or the issuer fails to conduct reasonable review of the documents' conformity to the letter of guarantee and makes a wrong payment, the applicant can raise corresponding defenses and request a reduction or exemption of the amount of recourse. Fifthly, practical handling: Enterprises should evaluate the risks of the beneficiary and the underlying transaction before issuing the letter of guarantee, and stipulate clear counter-guarantee clauses. After receiving the bank's notice of recourse, they should promptly check the basis for payment and the documents, and, if necessary, claim a stop-payment order or file a corresponding lawsuit against the beneficiary in the court. When handling such cases in Beijing, the court will review the legitimacy of the payment and the completeness of the basis for recourse.

IV. Practical suggestions and legal basis

Action suggestions: First, review the underlying transaction and the beneficiary's creditworthiness before issuing a letter of guarantee, and design the counter-guarantee reasonably; Second, keep the application for issuance, the counter-guarantee agreement, and related documents; Third, after the bank makes the payment, check whether the documents are in conformity with the face value and assess whether there is any fraud; Fourth, if fraudulent claims are discovered, apply for a stop-payment in time and assert defenses. For matters involving finance and cross-border transactions, you may refer to the relevant guidelines and regulations.\nFinancial capital and cross-border transactions involving foreign entitiesFor contract disputes, you can refer to the following provisions:Business and contract disputes in enterprisesLegal basis: Article 919 and Article 921 of the Civil Code of the People's Republic of China (effective from January 1, 2021), and Articles 3, 6, and 12 of the "Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Disputes over Independent Guarantees" (amended and effective from January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, after the payer makes the payment, he/she can generally recover the funds in accordance with the letter of credit and the counter-guarantee. Secondly, the scope of recovery includes the advance payment, the cost of funds, and the agreed fees. Thirdly, if the payer makes the payment improperly or knowingly pays the funds despite the fraud, the applicant can raise a defense. Fourthly, timely checking the documents and assessing the fraud are the key to raising a defense. In the case of recovery of an independent guarantee, it can be done through\nFinancial capital and cross-border transactions involving foreign entities.The service obtains an overall solution, and those involving basic contract disputes can be combined togetherBusiness and contract disputes in enterprisesFor reference, you can check the section related to the execution of the paymentCreditor's rights and debts, and enforcementFor any questions regarding difficult cases, please feel free to consult us.Special servicesTeam.

VI. Frequently Asked Questions

Q1: Can the bank recover the payment from the enterprise after making the payment?

Generally, it is possible. There is a relationship of entrusting the issuance of guarantees between enterprises and banks, and there are often counter-guarantee arrangements. After the bank makes payments according to the guarantee, it can recover the advance payments and corresponding fees from the enterprise and its counter-guarantors in accordance with the entrustment contract and the counter-guarantee agreement.

Q2: What does the scope of recourse cover?

It generally includes the amount of the guarantee actually advanced by the bank, the cost of capital occupation from the date of the advance payment, and the agreed upon handling fees and other reasonable expenses. The specific scope shall be subject to the provisions of the guarantee issuance application, the entrustment contract, and the counter-guarantee agreement.

Q3: If the beneficiary is making a malicious claim, do I still have to repay the money?

A defense can be claimed. If the beneficiary makes a fraudulent claim, and the bank still makes the payment despite knowing about it, or fails to reasonably review the documents and results in a mistaken payment, the enterprise can request a reduction or exemption of the amount to be recovered on this basis; at the same time, it should apply for a stop payment in a timely manner and initiate litigation against the fraud.

Q4: How can a counter-guarantee be implemented?

It shall be handled in accordance with the counter-guarantee contract. The counter-guarantee may be a guarantee, a mortgage, a pledge, or a deposit. The bank may, in accordance with the contract, claim that the counter-guarantee provider should assume responsibility or receive priority compensation for the guaranteed property. The implementation method and the order of priority shall be determined in accordance with the corresponding guarantee rules.

Q5: What should I do if I receive a notice of recourse?

First, check the payment basis. Verify whether the terms of the guarantee and the documents submitted by the beneficiary are in conformity with the face of the documents, and assess whether there is any fraudulent situation. If there are no objections, you can negotiate repayment with the bank. If there are objections, you should promptly assert defenses and consider litigation to protect your rights.

The above answer is based on the judicial practice in Beijing. The judicial interpretations in other provinces or cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Financial capital legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on current laws and regulations and publicly available adjudication rules, and is provided for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In the event of a dispute, please consult a practicing lawyer in a timely manner.