Letters of Guarantee (LGs)
Letters of Guarantee are widely used instruments in Iraq’s commercial, construction, oil & gas, and government procurement markets. They enable project owners, government entities, and contracting companies to mitigate counterparty performance and payment risks. In practice, no major project in Iraq proceeds without LGs, and most tenders (especially public sector) explicitly mandate their submission as part of the bid or execution phase.
For contractors or suppliers, securing an LG from their bank is a prerequisite to participate in tenders, obtain advance payments, or assure contractual performance.
Common situations where LGs are required:
- Bid participation (Bid Bond)
- Project execution (Performance Bond)
- Advance payment protection
- Financial guarantee obligations
Documentation typically required from the applicant
- Contract/tender documents
- Corporate licenses & registration documents
- Financial statements or credit profile
- Indemnity agreements & bank forms
- Collateral or security (if required by bank)
- KYC & AML documentation
CBI compliance expectations
- Assess commercial viability of the underlying contract
- Perform credit risk analysis on the applicant
- Secure adequate collateral or counter-indemnity
- Monitor exposure as off-balance sheet commitments
- Apply AML/CFT screening to prevent misuse
How Etihad Can Assist
Etihad provides legal and regulatory advisory services to banks, financial institutions, and businesses, supporting compliance with applicable laws, regulations, and regulatory guidance issued by any competent authorities.