ISP98 sits behind most serious standby letters of credit, but many users still treat it as a rulebook in the background rather than a practical drafting tool. The ISP98 Model Forms change that. They provide tested templates for common standby structures, with wording that already reflects the mechanics in ISP98, so banks, corporates, and advisors do not need to improvise every time they issue or receive a standby.
ISP98 (ICC Publication No. 590) is drafted for standby letters of credit of all types: performance standbys, financial standbys, direct pay standbys, and similar undertakings. It defines how standbys are issued, amended, presented, and honoured, and it assumes that documents will be examined strictly, not on vague notions of fairness. Making a standby “subject to ISP98” without carefully drafting the text is only half the job. The commercial wording still needs to match the rules that will be applied.
The ISP98 Model Forms were developed by standby specialists to bridge that gap. Each form is a complete, fillable template for a particular standby structure, written in the same language and style as ISP98 itself. They can be adopted as is or adapted to specific bank policies. For arrangers and corporates, understanding which form to start from is often the fastest way to get to a workable standby draft.
The first group of ISP98 Model Forms focus on standbys issued by a single bank in favour of a beneficiary, with common features such as payment on demand, automatic extension, reduction of the available amount, or transfer of drawing rights. These are the templates most often referenced in day-to-day trade, project, and performance-related standby work.
For most corporate SBLC needs, one of these five forms will be the starting point. The choice depends on whether the standby should extend automatically, step down over time, be transferable, or stay as a simple fixed-expiry instrument tied to a single beneficiary.
Beyond the basic structures, ISP98 Model Forms also address the relationships between issuers, confirming banks, and local banks that issue their own undertakings on the back of an international standby. These forms are highly relevant where a global bank supports a local bank or where a beneficiary requires a local issuer for legal or practical reasons.
Form 6 is drafted for counter standbys, where one bank issues a standby in favour of another bank, supporting that bank’s local undertaking to the ultimate beneficiary. It includes an annexed model form of local bank undertaking, so the relationship between the counter standby and the local standby is clear and consistent.
Form 7 sets out standby wording that anticipates confirmation by another bank. It specifies how and when the confirmation is to be added, and ensures that the rights and obligations of the confirming bank follow ISP98 principles, rather than being left to guesswork or purely local habits.
Form 8 is a standalone confirmation text that a confirming bank can issue in favour of the beneficiary. It links the confirmation clearly to the underlying standby, sets out what documents must be presented and where, and tracks ISP98 terminology so that there is no doubt about the standard for honour or refusal.
The model set extends further with specialised templates, including forms tailored to certain government requirements or sectors. In each case the drafting approach is the same: clear linkage to ISP98, explicit treatment of extension, transfer, or assignment issues, and model demand language that keeps presentations clean for all parties.
ISP98 itself is neutral on the commercial purpose of a standby. It can govern performance standbys, financial standbys, direct pay standbys, and hybrids. For structuring and credit analysis, the distinction matters. Many users combine the model forms with clear labelling of the standby type, so the text lines up with the underlying obligation.
Performance standbys support non-financial obligations: delivery of goods, completion of works, maintenance obligations, bid and tender undertakings, and similar commitments. The model forms help document clear events of default and objective drawing conditions, so disputes turn on compliance with the standby, not on subjective arguments about project performance.
Commercial standbys are often used in trade flows as a backstop to payment obligations in sales contracts or supply arrangements. Here, using a model payment demand under Form 1 or Form 5 helps avoid vague wording that creates unnecessary examination issues at the point of drawing.
Financial standbys support obligations to pay money, including repayment of loans, notes, or other funding arrangements. They tend to mirror the payment conditions in the underlying debt, while still preserving the independence of the standby. Direct pay standbys sit even closer to the payment obligation, functioning in some cases as a primary payment mechanism rather than pure security.
For these standby types, the ISP98 model demand forms are particularly valuable. They reference maturity, non-payment statements, and other elements that match ISP98’s expectations, which reduces scope for technical objections and keeps the instrument closer to what credit committees thought they were approving in the first place.
In practice, banks and corporates rarely lift a model form word for word. Instead, they treat ISP98 Model Forms as a reference starting point. Legal and credit teams keep the core ISP98-consistent clauses, then add house language on sanctions, compliance, jurisdiction, or governing law where required. The advantage is that they are editing around a stable structure, not writing from scratch.
For beneficiaries and applicants, understanding which ISP98 model form sits behind a draft standby is a way to sanity-check it. A standby that closely follows Form 1 or Form 2, for example, is likely to behave in line with mainstream standby practice. A draft that bears no resemblance to any model form, mixes commercial contract concepts into the standby text, or leaves extension and transfer issues vague should attract more scrutiny before it is signed.
Financely helps sponsors, trading companies, and project counterparties structure SBLCs and demand guarantees that are consistent with ISP98 and acceptable to real lenders and issuers. If you are preparing a standby, or you have been handed wording that does not look market standard, share the draft and the underlying contract so we can tell you where it aligns with ISP98 model forms and where it creates avoidable risk.
Ask About ISP98-Compliant Standby DraftingFinancely acts as arranger and advisor through regulated partners. Where lending or securities activity requires registration, activity is carried out by or through appropriately licensed firms in the relevant jurisdictions. This article is for general information and does not constitute legal advice, an offer to issue or confirm a standby, or a commitment to provide financing or credit support. Any mandate will be subject to KYC, AML, sanctions screening, full credit approval by issuing and funding counterparties, and formal documentation that sets out the final standby wording and related fees.
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