Today, I would like to talk about various international clients who may need a surety bond in the US. European clients may work with banking relationships, which tend to use standby letters of credit to secure different obligations. In the US, the standby letter of credit will generally not be acceptable to whoever requires the bond, so the client will most likely need to post a surety bond.

When dealing with your clients who may need a surety bond, it is a good idea to speak with them and let them know exactly what they need. I have had matters where the client has told their attorney or advisor that they will get a standby letter of credit instead of a surety bond, but the obligee says that is not an option. It is better to find that out early rather than later, so you don’t have to scramble when you only have one or two days to have a bond on file.

If we move to, let’s say, Asia, banks have guarantees or agreements that secure a lot of different obligations. Again, many of these clients may think they can use those to secure an obligation in the US. If you have an obligation running to the city of New York, the state of New York, the Federal Court, or a different state such as California or Texas, that obligee is likely not going to accept a guarantee from a bank in Singapore or an International Bank’s office in the Philippines, etc. 

When communicating with your client, make sure they know what’s required. If they don’t and try to provide something that is not acceptable, there will definitely be an issue. Getting ahead of this before the bond is needed is a good idea so you don’t run into issues towards the end of the process. Finding out that the client can’t comply with the obligation when you’ve done all this hard work is not how you want the situation to end.

Another thing I want to bring up is when you have an international client, they may need to seek certain board approvals to enter into contracts or get further approvals from some entities who are farther up the chain of command than the party you are dealing with. Those approvals should be sought well before the deadline for the bond. 

For example: A client was seeking an attachment proceeding to freeze another entity’s assets, but took over a week to get the necessary approvals. Those approvals should have been sought well in advance, so there was no issue and no delay in obtaining the bond. The delay in the bond issuance was not on my end but on the client’s. They needed the approvals to execute the indemnity agreement, pay the bond premium, and accomplish whatever else needed to get it done.

It’s important to focus on communication with your clients to be sure they can execute the agreements. Another thing I suggest is having the indemnity agreement executed ahead of time so that once the bond is required, there is one less step to be processed, which is a more intelligent approach to bonding than most people take. Taking one step out of the process makes it go a lot smoother. 

I’m Neil Pedersen at Pedersen & Sons Bonding Agency. We try to add value to every bonding situation, so feel free to call me if you have any questions or concerns.

Neil Pedersen
PEDERSEN & SONS SURETY BOND AGENCY, INC.
15 Maiden Lane Suite #800
New York, NY, 10038
212-227-7277
800-720-7277
neil@courtbondnow.com

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