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Landing safely
The targeted securing of performance and payment
with bank guarantees from UBS Trade & Export Finance
Feeling understood
How many banking services does a company need? Every busi- It doesn’t matter whether you’re a large or a small company,
ness is unique and has its own very specific requirements, which whether you manufacture products or provide services, or even
means that no two businesses make exactly the same demands whether your business is local, national or global in scale:
of their bank. we will provide you with exactly the banking services you need.
Which allows us to create added value for you – and that’s
Your business target is long-term, always good for business.
sustainable growth.
So just how many banking services does your company need?
It all comes down to the business you are in, and your organiza-
tion’s requirements. First, we’ll offer you sound advice, based
on your business’s needs, goals and processes. Then we’ll intro-
duce you to the comprehensive offering of products and ser-
vices available to you, and work with you to devise a solution
specifically tailored to your company’s requirements.
2
Securing and financing transactions
UBS Trade & Export Finance helps you reinforce your position as an attractive
business partner and secure and finance your transactions properly
In large-scale transactions, especially in international business, Our range of services covers all kinds of bank guarantees,
it goes almost without saying that bank instruments which including sureties and standby letters of credit, payment
secure performance and payment obligations or which finance instruments such as documentary credits and collections, export
goods and services should be part of the deal. finance, supply chain solutions, forfaiting and discounting
services. Detailed advice from our experts tells you which instru-
When choosing such instruments, it will pay to look for a bank ment or combination of instruments is the right one for your
partner which has broad-based knowledge of Trade & Export particular case. You receive the appropriate solution promptly,
Finance, with a command of the fine detail as well as a broad and can count on smooth processing.
overview of the area.
3
Enjoying security, offering security
Whenever a contract is concluded, the contracting party is The standby letter of credit has its roots in past American bank-
expected to fulfill its obligations. If you are the supplier of ing law and can be used in lieu of a guarantee. It is used mainly
goods or services, however, it can sometimes be difficult for in import-export business with American states, but also fre-
you to assess the financial position of the buyer. And, if you quently in trade with the Far East. Standby letters of credit are
are the buyer, you may well lack information about your suppli- used instead of documentary credits and guarantees to secure
er’s ability to deliver. However, such uncertainties need not both payment and performance. US banks generally prefer the
be an obstacle to successful business transactions. That is the form of standby letters of credit to that of guarantees.
purpose of the bank guarantees provided by our bank.
A legal form of bank guarantee frequently used in and restrict-
With a guarantee, the bank undertakes to pay a certain sum ed to standard transactions amongst with Swiss contracting
to the beneficiary should the contracting partner fail to make partners is the surety bond. Here, the surety (guarantor) obliges
a payment or provide a service as agreed. himself towards the obligee (creditor) of the principal obligor
(main debtor) to answer for the latter’s obligation. Unlike a
Bank guarantees – securing performance guarantee, which is abstract in character, a surety bond estab-
lishes an accessory obligation towards the creditor and, as such,
and payment systematically. defences may be used against claims in respect of the underly-
ing transaction. One of the most common forms of surety is the
Bank guarantees are a way of providing security for a wide building contractor’s guarantee, which is used in dealings with
variety of performance and payment obligations entered into craftsmen.
when tendering offers or signing contracts in connection with
advance payments or goods deliveries against open account. We can show you the options and benefits of using bank
Guarantees can also serve as security for loans. guarantees in your commercial dealings.
4
Contents
6 Expiry of guarantees 17
6.1 Reasons for expiry of direct guarantees 17
6.1.1 Ordinary expiry on the expiry date 17
6.1.2 Payment of the guarantee amount 17
6.1.3 Early return of the guarantee deed 17
6.2 Reasons for expiry of indirect guarantees 17
6.2.1 Expiry date 17
6.2.2 Expiry of counter-liability and counter-guarantee 17
6.2.3 Payment of the guarantee amount 17
5
1 Bank guarantees as a
security instrument
Bank guarantee is the generic term for the legal forms
described below:
Bank guarantees
These legal forms are predominantly used to secure perfor- Guarantees are not usually confirmed, countersigned or
mance. They provide the contracting parties with the assurance endorsed. If a countersignature is required, the international
that the transaction they have entered into will be carried out. standard form of indirect guarantee should be used (see
This element of security is of central importance in international page 12). In the context of securing performance of the con-
trade, where agreements are entered into between parties from tract, letters of credit should also be mentioned as a means
different legal and cultural backgrounds. For most customers of securing payment. Further information on this topic may be
purchasing goods or services, it is difficult to assess the potential found in our brochure “Documentary Credits and Collections”.
expertise or financial prospects of a supplier. Purchasers there-
fore rightly require some guarantee that the seller will be able The main difference between a letter of credit and a guarantee
to perform as promised. To this end, the parties will often agree is that letters of credit are basically used as a payment instru-
to provide a bank guarantee for the purpose of securing per- ment, whereas guarantees provide assurance that contractual
formance. In international trade, the use of bank guarantees as obligations will be fulfilled.
a means of securing payment is basically restricted to (default)
payment guarantees. On the international scene, non-Swiss con-
tracting parties hardly ever accept sureties and payment orders
governed by Swiss law, as they are unwilling to deal with the
specifics of the Swiss Code of Obligations (SCO).
7
2 Legal forms of bank guarantees
2.1 Surety (surety bond) In accordance with Art. 496 para. 1 of the Swiss Code of Obliga-
The legal basis of a surety is defined in Art. 492 ff. of the Swiss tions, the joint and several guarantor can be ordered to pay
Code of Obligations: “In a contract of guarantee (i.e. surety), on behalf of the principal obligor if the latter is in arrears with
the guarantor obligates himself toward the obligee of the prin- his or her payment despite reminders or his or her insolvency
cipal obligor to answer for the latter’s obligation” (SCO Art. 492 is manifest. Due to the complexity of the law on sureties, espe-
para. 1). cially regarding the joint and several surety, this legal form is
rarely accepted outside Switzerland. Therefore and because of
The law as applied to sureties consists of numerous individual the inherent potential for disputes, also UBS, in principle, issues
provisions with complex interrelationships. In banking practice, sureties only in connection with standard transactions concluded
this has led to the use of standardized forms which contain amongst Swiss parties and which, from experience, do not hold
references to the text of the law. an increased potential for lengthy and costly disputes.
In accordance with Art. 495 para. 1 of the Swiss Code of Obli- In this context, the “Uniform Rules for Demand Guarantees”
gations, the obligee can require the simple guarantor to pay (ICC Publication No. 758) of the International Chamber
only if the following conditions apply: of Commerce, Paris, governing guarantees, should be men-
• the principal obligor has gone into liquidation after the tioned, since guarantees may be made subject to these rules
surety has been entered into, (see chapter 9, page 21 ff.).
• the principal obligor has been granted an extension
of time to compound with its creditors, In each case, a contract of guarantee has the following char-
• the creditor (obligee) has exercised due diligence in taking acteristics: The contract of guarantee contains an abstract
proceedings to enforce payment pending issue of a final promise to perform and is a separate obligation independent
certificate of shortfall, of the underlying transaction. This means that the guarantee
• the principal obligor has transferred its domicile abroad and secures specific performance, independently of whether or
legal action may no longer be brought in Switzerland, or not such performance is actually owed.
• as a consequence of such transfer of domicile abroad,
there is a significant impediment to bringing legal action For this reason, the guarantor cannot raise any objections
against the principal obligor. based on the underlying transaction and is obliged to pay
in the event that the situation provided for in the guarantee
arises. In general, the text of the guarantee will include the
stipulation that the guarantor is obliged to pay upon first
demand by the beneficiary.
8
Unlike sureties, guarantees may be valid in principle without the 2.4 Standby letter of credit
existence of a written contract. In practice, all guarantees are The standby letter of credit has its origin in the earlier banking
recorded in writing to serve as formal evidence. If the principal legislation of the United States, which forbid US credit institu-
obligor defaults, the beneficiary can turn directly to the guaran- tions from assuming guarantee obligations vis-à-vis third par-
tor, who is obliged to pay. Since the guarantee is independent ties. To circumvent this rule, the US banks created the standby
of the underlying contractual relationship, it is easy for the ben- letter of credit, which is based on the Uniform Customs and
eficiary to handle and has become a widely used security instru- Practice for Documentary Credits. Like the guarantee, the stand-
ment, particularly in international trade. by letter of credit is of an abstract nature, i.e. legally separated
from the underlying transaction. To demand payment under
The wording of the guarantee is based on the purpose for a standby letter of credit, the documents stipulated in the claim
which it is to be used. Guarantee agreements may therefore clause must be submitted within the specified period. These
differ substantially from each other, owing to the special re- documents must usually state that the client (exporter) has not
quirements of the underlying transaction, local practices and the met or insufficiently fulfilled his or her performance obligations
legal position in the countries in which they were issued. or that the debtor has not met a payment on time. The standby
letter of credit basically fulfills the same purpose as a guarantee:
it is payable upon first demand and without objections or de-
2.3 Confirmed payment order (payment undertaking) fences from the underlying transaction. It is up to the beneficia-
Confirmed payment orders are perhaps better known as ry to decide whether a standby letter of credit may be given.
“payment undertakings.” Under SCO Art. 468, a payment under-
taking, like a guarantee, comprises an irrevocable, non- On 1 January 1999, the International Chamber of Commerce
accessory obligation to pay. This payment may be subject to introduced the “ISP 98” (International Standby Practices), new
certain conditions (conditionally confirmed payment order). guidelines which were drawn up especially for standby letter of
This means that the obligation to pay is effectively subject to credit business (see chapter 10, page 24 ff.).
compliance with the conditions referred to in the confirmed
instruction. In practice, however, most standby letters of credit are still
issued under the “Uniform Customs and Practice for Documen-
Under the Swiss Code of Obligations, the instruction amounts tary Credits”.
to a contract authorizing the transfer of money, securities
or other fungibles for the account of the authorising party to a
third-party beneficiary entitled to receive the same in its own
name (SCO Art. 466). More specifically, the client (“principal”)
authorizes the bank (“agent”) to pay a stipulated amount to a
beneficiary (“payee”) on its behalf. The instruction therefore
constitutes an indirect form of payment. Instead of a sum of
money, the instruction may direct the payment of securities or
other fungibles, such as precious metals. The principal may
instruct the bank to pay the beneficiary only under certain con-
ditions, for example against a statement by the beneficiary, or
on presentation of documents.
9
3 Structure of a bank
guarantee payable upon
first demand
As contracts of guarantee are not regulated by law, the con- tees are made subject to the applicable law at the place of the
tracting parties have a certain amount of leeway in wording guarantor, with the place of jurisdiction being at that place.
the contract according to the freedom of contract principle
under the Swiss Code of Obligations. The following features Indirect guarantees are an exception to this rule. Here, the
always have to be included in a bank guarantee: guarantee is not given directly to the beneficiary, but via a sec-
• introduction: preamble, ond bank authorized to do so – under the counter-liability and
• main section: guarantee clause, counter-guarantee of the first bank (see chapter 4.2, page 12).
• duration of obligation: expiry clause, Sometimes, foreign banks stipulate that this counter-guarantee
• applicable law and place of jurisdiction: choice of law and from the Swiss bank should also be subject to the law of the
place of jurisdiction clause. country in which the foreign bank is located. In this case, the
law of the relevant country will also apply in respect of claims
made by the foreign bank under the counter-guarantee of the
3.1 Introduction: preamble Swiss bank.
The contractual relationship between the obligor in the under-
lying transaction and the beneficiary is set out in the preamble.
3.5 Additional clauses
Besides the four main features mentioned above, guarantees
3.2 Main section: guarantee clause may contain additional clauses, depending on the type of
The guarantee clause is the core component of any guarantee. transaction to be covered:
It obligates the guarantor (bank), on behalf of the principal
obligor (bank client), to pay a sum of money to the benefi- 3.5.1 Reduction clause
ciary (generally, a contracting partner of the principal obligor This clause sets out the conditions for reducing the guarantor’s
in the underlying transaction). Payment must be made upon liability.
first demand and is independent of the underlying transaction
(abstractness). The guarantee clause contains the following Example:
elements: ”Our guarantee will be reduced by each payment made by us
• designation of the guarantor and the beneficiary, as a result of a claim.”
• amount of the guarantee (total, currency),
• definition of the circumstances under which the bank can 3.5.2 Identification clause
be required to pay. This clause ensures that the claim is being made by the legi-
timate beneficiary.
Since the bank guarantee is independent of the underlying
transaction, the guarantor does not need to verify whether a Example:
claim is justified. All the guarantor has to do is make sure that ”For the purpose of identification, your written request for
the demand for payment made by the beneficiary of the guar- payment must bear or be accompanied by a signed con-
antee, as well as any other documents described in the guar- firmation of one of our correspondent banks stating that the
antee, appear to correspond to the terms thereof. latter has verified your signature(s) appearing on the said re-
quest for payment.”
11
4 Direct and indirect guarantees
2. Order 3. Guarantee 5. G
uarantee 2. Order 4. Guarantee
advice
12
5 Types of guarantees
and sureties
This chapter provides information on the most relevant types 5.2 Advance payment guarantee
of guarantees and sureties along with useful tips regarding:
• scope, Scope of application
• purpose of guarantee, In import-export business, but also in domestic commercial
• indication of the amount guaranteed and the lifetime of business, trade and industry.
the guarantee,
• special features. Purpose
To secure any claims by the buyer on the seller for reimburse-
The appendix contains the sample texts of the most common ment of the buyer’s advance payment on the contract price
guarantees. More model forms are available on our home- before delivery of the goods (or advance payment of the full con-
page ubs.com/tef tract price) – in the event that the seller has failed to meet
his or her contractual delivery obligations either partly or in full.
Special features
In international business, “pay or extend” claims are relatively
frequently made with the goal of extending the validity of the
guarantees.
13
5.4 Guarantee for warranty obligations 5.6 Loan guarantee (credit security guarantee)
(warranty bond)
Scope of application
Scope of application Worldwide.
In import-export business, but also in domestic commercial
business, trade and construction industry, where it is more often Purpose
a surety. To secure any claims by the lender on the borrower due to a
credit (loan, etc.) not being repaid in accordance with the terms
Purpose of the contract.
To secure any claims by the buyer on the seller due to possible
defects appearing after delivery resp. after execution. Amount
Amount of the credit. Usually includes a margin to cover ac-
Amount crued interest and incidental expenses.
Stipulated in the contract. Frequently 5% to 20% of the value of
the contract. Duration
Expiry of loan plus e.g. 15 days.
Duration
Depends on business sector. Often one year after delivery or
commissioning. 5.7 Standby letter of credit
Purpose
5.5 Payment guarantee To secure any claims by the obligee on the obligor due to non-
contractual delivery or performance or payment by the agreed
Scope of application date or credit repayment on the due date.
This type of guarantee is used in the domestic and international
market, for supply of goods on an open-account basis. In im- Amount
port-export business, it often substitutes the letter of credit. 5% to 20% of the value of the contract or in the amount of the
purchase price or of the loan, respectively part thereof.
Purpose
To secure any claims by the seller on the buyer for payment of Duration
the contract price by the agreed date. Contingent upon the purpose of the guarantee (see types of
guarantee described above).
Amount
Contract price or part thereof. Special features
Standby letters of credit are governed by the “Uniform Customs
Duration and Practice for Documentary Credits” issued by the Interna-
Payment date plus e.g. 15 days. tional Chamber of Commerce (ICC), Paris, or the “International
Standby Practices”, being ICC guidelines specifically created for
this instrument (see chapter 2.4, page 9). Unlike guarantees,
standby letters of credit can be confirmed (i. e. shifting country
and borrower risk), always under the condition that the terms
of the standby letter of credit provide for this.
14
5.8 Builder’s guarantee
Scope/purpose
Simple or joint and several builder’s guarantees are used to
secure claims of the principal of a building contract (beneficiary
of the guarantee) against building contractors for any potential
defects following supply and/or installation of goods or painting
or plastering work, etc.
Amount
The amount of a builder’s guarantee is determined by the con-
tract for services. This is frequently 5% to 10% of the value of
the contract.
Duration
Usually 2 to 5 years after completion of the work and/or
supply of the goods.
15
6 Expiry of guarantees
6.1 Reasons for expiry of direct guarantees 6.2 Reasons for expiry of indirect guarantees
A direct guarantee arises when the client authorizes the In the case of indirect guarantees, a Swiss bank requests a for-
bank to issue a guarantee directly to the beneficiary. A direct eign bank in the beneficiary’s country of domicile to issue the
guarantee expires in the following cases: guarantee, while guaranteeing to indemnify this bank for any
potential loss arising from enforcement of the guarantee.
6.1.1 Ordinary expiry on the expiry date
If the expiry date referred to in the expiry clause of the 6.2.1 Expiry date
guarantee deed has elapsed and if the beneficiary has As a result of the situation described above, indirect guarantees
not enforced the guarantee by that date, then the guarantee have two different expiry dates:
will expire. This applies irrespective of whether the guaran- • expiry of the bank guarantee issued by the guaranteeing
tee document was returned to the bank or not. (foreign) bank in favor of the beneficiary,
• expiry of the counter-liability and counter-guarantee issued by
6.1.2 Payment of the guarantee amount the initiating (Swiss) bank in favor of the guaranteeing
In the event of the definitive and final settlement of the foreign bank (usually 15 to 30 days after the above-mentioned
guarantee amount due to a claim by the beneficiary, the expiry date).
guarantee will expire.
For the instructing (Swiss) bank, the decisive date is the expiry of
6.1.3 Early return of the guarantee deed its counter-liability and counter-guarantee. Due to the possible
In the event of formal discharge by the beneficiary. application of foreign law, this expiry may be unclear.
17
7 Enforcing a bank guarantee
18
8 Order to issue a guarantee and
the contractual relationship between
client and bank
The client’s instructions to the bank are the basis on which 8.1 Client’s (letter of) indemnity
a bank guarantee is issued. Our instruction form can be found The client’s indemnity comprises an undertaking to indemnify the
on our homepage at ubs.com/tef This form also contains the con- bank for all costs and expenses incurred in connection with issu-
ditions and information regarding the issuing of bank guarantees ing the bank guarantee.
which apply in addition to the bank’s general terms and condi-
tions. There may also apply specifically agreed conditions. Please
bear in mind that correct completion of the form enables smooth 8.2 Commissions and fees
execution of the order. In return for the bank issuing a guarantee or surety, the client
pays the bank a commission plus a one-off issuing fee. With
indirect guarantees, the full commission, fees and expenses of
the guaranteeing bank are charged on to the client. Guarantee
commissions are charged when the bank guarantee is issued and
for a certain period in advance. Commission is payable for the
period commencing on the date of issue until final cancellation
of the guarantee, even if the wording of the bank guarantee in-
cludes a suspensive condition (effective clause).
Example:
”The present guarantee enters into force on ... and remains valid
until ... .” or “The present guarantee enters into force only after
receipt of the amount ... , evidencing this guarantee no. ... by ...
into their account held with us, and remains valid until ... .”
19
9 Guarantees according to the “Uniform
Rules for Demand Guarantees”
(URDG) of the International Chamber
of Commerce
9.1 Purpose and intent 9.2 Uniform Rules for Demand Guarantees,
The International Chamber of Commerce (ICC), for the first Publication No. 758 of the ICC, Paris
time, issued guidelines, effective 1 January 1992, governing For reasons of copyright, the guidelines of the International
guarantees payable upon demand. These rules were revised, in Chamber of Commerce are reproduced only in the print version:
the meantime, and have entered into force in a new version as pages 21 to 31.
per 1 July 2010. The rules are intended to encourage uniformity
of practice. They are also a means of curbing misuse and ensur-
ing that due consideration is given to the interests of all parties
concerned. The Uniform Rules only apply if they are expressly re-
ferred to in the guarantee. Under the Uniform Rules for Demand
Guarantees, the beneficiary can only invoke the guarantee by
giving a qualified explanation for the claim. The beneficiary
must indicate in what respect the contractual obligations have
been breached. There are sample forms of wording in the ap-
pendix for the most common types of guarantee, which satisfy
the requirements of these uniform rules:
• tender / bid bonds, performance bonds, guarantees for
warranty obligations (warranty bond),
• advance payment guarantees.
21
10 International Standby Practices ISP98
33
11 Appendix
Sample texts
Bid bond 50
Advance payment guarantee 51
Performance bond 52
Payment guarantee 54
Loan guarantee/
Guarantee securing a credit line 55
Indirect guarantee 56
ICC guarantees 61
49
Sample
Bid bond direct to the buyer
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Bid Bond No. dated
for amount (in words: )
This being stated, we, UBS Switzerland AG, , irrespective of the validity
and the legal effects of the above mentioned bid and waiving all rights of objection and defense arising
therefrom, hereby irrevocably undertake to pay to you, on your first demand, any amount up to
maximum, upon receipt of your duly signed request for payment in original stating that
a) have withdrawn their offer before its expiry date without your consent, or
b) have failed to sign the contract awarded to them in the terms of their offer, or
c) have failed to provide the performance bond foreseen in the tender upon signing the contract.
For the purpose of identification your written request for payment must bear or be accompanied by a signed
confirmation of one of our correspondent banks stating that the latter has verified your signature(s)
appearing on the said request for payment.
Your claim is also acceptable if transmitted to us in full by authenticated SWIFT through one of our
correspondent banks confirming that said bank has verified your signature(s) appearing thereon.
In case that at the time of a request for payment under this guarantee, there is a client relationship between
you and a branch of UBS Switzerland AG with a valid list of authorized signatures regarding the persons
signing for you, the verification of signature(s) by a third bank is not required. In such case, your request for
payment must be presented to us duly signed in writing (SWIFT excluded).
and expires in full and automatically, should your original written request for payment or the authenticated
SWIFT not be in our possession at our above address on or before that date.
UBS Switzerland AG
55546E 08.2015
50
Sample
Advance payment guarantee direct to the buyer
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Advance Payment Guarantee No. dated
for amount (in words: )
This being stated, we, UBS Switzerland AG, , irrespective of the validity and the legal
effects of the above mentioned contract and waiving all rights of objection and defense arising therefrom,
hereby irrevocably undertake to pay to you, upon your first demand, any amount up to
maximum, upon receipt of
your duly signed request for payment in original stating that have failed to fulfill their
contractual delivery obligations.
For the purpose of identification your written request for payment must bear or be accompanied by a signed
confirmation of one of our correspondent banks stating that the latter has verified your signature(s)
appearing on the said request for payment.
Your claim is also acceptable if transmitted to us in full by authenticated SWIFT through one of our
correspondent banks confirming that said bank has verified your signature(s) appearing thereon.
In case that at the time of a request for payment under this guarantee, there is a client relationship between
you and a branch of UBS Switzerland AG with a valid list of authorized signatures regarding the persons
signing for you, the verification of signature(s) by a third bank is not required. In such case, your request for
payment must be presented to us duly signed in writing (SWIFT excluded).
and expires in full and automatically, should your original written request for payment or the authenticated
SWIFT not be in our possession at our above address on or before that date.
The amount of this guarantee will automatically be reduced in proportion to the value of each delivery upon
receipt by us of copies of the commercial invoice and the corresponding transport document which we shall
be entitled to accept as conclusive evidence that such delivery has been effected.
The present guarantee enters into force only after receipt of the above mentioned advance payment,
evidencing this guarantee no. , by into their account held with us.
UBS Switzerland AG
55547E 08.2015
51
Sample
Performance bond direct to the buyer
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Performance Bond No. dated
for amount (in words: )
This being stated, we, UBS Switzerland AG, , irrespective of the validity and the legal
effects of the above mentioned contract and waiving all rights of objection and defense arising therefrom,
hereby irrevocably undertake to pay to you, upon your first demand, any amount up to
maximum, upon receipt of
your duly signed request for payment in original stating that have failed to fulfil their
contractual obligations.
For the purpose of identification your written request for payment must bear or be accompanied by a signed
confirmation of one of our correspondent banks stating that the latter has verified your signature(s)
appearing on the said request for payment.
Your claim is also acceptable if transmitted to us in full by authenticated SWIFT through one of our
correspondent banks confirming that said bank has verified your signature(s) appearing thereon.
In case that at the time of a request for payment under this guarantee, there is a client relationship between
you and a branch of UBS Switzerland AG with a valid list of authorized signatures regarding the persons
signing for you, the verification of signature(s) by a third bank is not required. In such case, your request for
payment must be presented to us duly signed in writing (SWIFT excluded).
and expires in full and automatically, should your original written request for payment or the authenticated
SWIFT not be in our possession at our above address on or before that date.
UBS Switzerland AG
55548E 08.2015
52
Sample
Guarantee for warranty obligations direct to the buyer
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Warranty Bond No. dated
for amount (in words: )
This being stated, we, UBS Switzerland AG, , irrespective of the validity and the legal
effects of the above mentioned contract and waiving all rights of objection and defense arising therefrom,
hereby irrevocably undertake to pay to you, upon your first demand, any amount up to
maximum, upon receipt of
your duly signed request for payment in original stating that have not fulfilled their
contractual warranty obligations.
For the purpose of identification your written request for payment must bear or be accompanied by a signed
confirmation of one of our correspondent banks stating that the latter has verified your signature(s)
appearing on the said request for payment.
Your claim is also acceptable if transmitted to us in full by authenticated SWIFT through one of our
correspondent banks confirming that aid bank has verified your signature(s) appearing thereon.
In case that at the time of a request for payment under this guarantee, there is a client relationship between
you and a branch of UBS Switzerland AG with a valid list of authorized signatures regarding the persons
signing for you, the verification of signature(s) by a third bank is not required. In such case, your request for
payment must be presented to us duly signed in writing (SWIFT excluded).
and expires in full and automatically, should your original written request for payment or the authenticated
SWIFT not be in our possession at our above address on or before that date.
UBS Switzerland AG
55549E 08.2015
53
Sample
Payment guarantee direct to the buyer
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Payment Guarantee No. dated
for amount (in words: )
This being stated, we, UBS Switzerland AG, , irrespective of the validity and the legal
effects of the above mentioned contract and waiving all rights of objection and defense arising therefrom,
hereby irrevocably undertake to pay to you, upon your first demand, any amount up to
maximum, upon receipt of
a) you have supplied with the goods ordered in conformity with the terms of the contract
and
b) you have not received payment at the due date in the amount claimed under this guarantee.
For the purpose of identification your written request for payment must bear or be accompanied by a signed
confirmation of one of our correspondent banks stating that the latter has verified your signature(s)
appearing on the said request for payment.
Your claim is also acceptable if transmitted to us in full by authenticated SWIFT through one of our
correspondent banks confirming that said bank has verified your signature(s) appearing thereon.
In case that at the time of a request for payment under this guarantee, there is a client relationship between
you and a branch of UBS Switzerland AG with a valid list of authorized signatures regarding the persons
signing for you, the verification of signature(s) by a third bank is not required. In such case, your request for
payment must be presented to us duly signed in writing (SWIFT excluded).
and expires in full and automatically, should your original written request for payment or the authenticated
SWIFT not be in our possession at our above address on or before that date.
UBS Switzerland AG
55550E 08.2015
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Sample
Loan guarantee direct to the institution guaranting credit
a b
UBS Switzerland AG
Trade Finance
Bank Example AG
I M E N
E C
P.O. Box
CH-8000 Zurich
S P
Credit Facilities Guarantee No. dated
for amount (in words: )
we, UBS Switzerland AG, , irrespective of the validity and the legal effects of the above
mentioned credit relationship and waiving all rights of objection and defense arising therefrom, hereby
irrevocably undertake to pay to you, upon your first demand, any amount up to
maximum (including principal, interest and all other charges) upon receipt of
your request for payment duly signed in original or by authenticated SWIFT stating that
has not repaid the amount claimed under this guarantee on the due date.
and expires in full and automatically, should your request for payment in writing and original or by
authenticated SWIFT not be in our possession at our above address on or before that date.
UBS Switzerland AG
55551E 08.2015
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Sample
Indirect guarantee
a b
UBS Switzerland AG
Trade Finance
I M E N
E C
P.O. Box
IN-New Delhi 100000
S P
Order and counter-guarantee no. dated
for amount (in words: )
Please issue under our responsibility in favour of the Beneficiary your guarantee under URDG 758 as per your
standard wording including the particulars below:
Applicant:
Beneficiary:
Expiry of guarantee:
As Counter-guarantor (as defined hereinafter), we hereby irrevocably undertake to pay to you any amount up
to the Counter-Guarantee Amount, as defined and indicated below, upon presentation of your complying
demand, in the form of presentation indicated below, supported by your statement, whether in the demand
itself or in a separate signed document accompanying or identifying the demand, indicating that you have
received a complying demand under your guarantee.
Any demand under this Counter-guarantee must be received by us on or before Expiry (as defined
hereinafter) of this Counter-guarantee at the place for presentation indicated below:
Counter-guarantee No.:
Guarantor: yourselves
Form of Presentation: duly signed in paper form or in electronic form by way of authenticated swift
You are requested to confirm to us the issuance of your guarantee and let us have two copies for our files.
This Counter-guarantee is subject to the Uniform Rules for Demand Guarantees (URDG) 2010 Revision, ICC
Publication No. 758.
UBS Switzerland AG
55624E 08.2015
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Sample
Standby letter of credit UCP
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Irrevocable standby-L/C no. dated
for amount (in words: )
We hereby issue our irrevocable Standby Letter of Credit as per following specifications:
Form of credit:
Irrevocable
Credit number:
Issuing bank:
UBS Switzerland AG,
Beneficiary:
Amount:
maximum
Available with:
UBS Switzerland AG,
By:
Payment. We shall effect payment with a deferred value date of 3 (three) banking days after receipt of
documents strictly complying with the terms and conditions of this Standby Letter of Credit.
Covering/relating to:
Partial drawings:
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Sample
Standby letter of credit UCP, Page 2
ab Page 2 of 2
Additional conditions:
I M E N
C
Commission and charges:
PE
All commission and charges outside Switzerland are for beneficiary's account.
S
Period for presentation of documents:
Within credit validity
Confirmation instructions:
Do not confirm
Operative instrument:
Yes
Documents to be sent to us by registered mail or by courier service in one lot to the respective address stated
hereafter:
We hereby undertake that payment will be effected if documents tendered comply with the credit terms and
if all other conditions of this credit are fulfilled.
This Standby Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits, 2007
Revision, ICC Publication no. 600.
UBS Switzerland AG
55553E 08.2015
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Sample
Standby letter of credit ISP
a b
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Irrevocable standby-L/C no. dated
for amount (in words: )
Form of standby:
Irrevocable
Standby number:
Issuing bank:
UBS Switzerland AG,
Beneficiary:
Amount:
maximum
Available with:
UBS Switzerland AG,
Available by:
Payment. We shall effect payment with a deferred value of 3 (three) business and banking days after receipt
of documents strictly complying with the terms and conditions of the present standby.
Covering:
Documents:
Written demand purportedly signed by the beneficiary, indicating the amount drawn hereunder and
incorporating beneficiary's statement that (default declaration, e.g. that applicant has
failed to fulfil his contractual obligations) .
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Sample
Standby letter of credit ISP, Page 2
ab Page 2 of 2
N
All commission and charges outside Switzerland are for beneficiary's account.
C
Period for presentation of documents:
I M E
Within standby validity
Special conditions: S PE
if any
Operative instrument:
Yes
Documents to be sent to us by registered mail or by courier service in one lot to the respective address stated
hereafter:
We hereby undertake that payment will be effected if documents tendered comply with the standby terms
and if all other conditions of this standby are fulfilled.
This standby is issued subject to the International Standby Practices 1998 – ISP98, ICC Publication No. 590. In
this respect, article 3.14 of the ISP98 is hereby expressly waived.
UBS Switzerland AG
55556E 09.2014
60
Sample
ICC guarantees (tender/bid bond, performance bond, guarantee for warranty obligations) direct to the buyer
ab
UBS Switzerland AG
Trade Finance
Hans Muster AG
N
Postfach
CH-4000 Basel
C I M E
S PE
[e.g. Performance Bond] No. dated
for amount (in words: )
Applicant: ("APPLICANT")
Beneficiary: ("BENEFICIARY")
Form of Presentation ("FORM OF PRESENTATION"): Paper form or transmitted in full by authenticated swift
through one of the GUARANTOR's correspondent banks.
For the purpose of identification the BENEFICIARY's demand and supporting statement must bear or be
accompanied by a signed confirmation of one of the GUARANTOR's correspondent banks stating that the
latter has verified the BENEFICIARY's signature(s) appearing thereon. In case of a swift transmission through
one of the GUARANTOR's correspondent banks, the latter has to confirm having verified the BENEFICIARY's
signature(s) appearing on the demand and supporting statement.
In case that at the time of a demand under this guarantee, there is a client relationship between
BENEFICIARY and a branch of the GUARANTOR in Switzerland with a valid list of authorized signatures
regarding the persons signing for the BENEFICIARY, the verification of signature(s) by a third bank is not
required. In such case, BENEFICIARY's demand and supporting statement must be presented to the
GUARANTOR duly signed in paper form (swift excluded).
Place for presentation: GUARANTOR's address as stated above or swift , respectively ("PLACE
FOR PRESENTATION")
Expiry: ("EXPIRY")
As GUARANTOR, we hereby irrevocably undertake to pay the BENEFICIARY any amount up to the
GUARANTEE AMOUNT upon presentation of the BENEFICIARY's complying demand, in the FORM OF
PRESENTATION indicated above, supported by the BENEFICIARY's statement, whether in the demand itself or
in a separate signed document accompanying or identifying the demand, indicating in what respect the
APPLICANT is in breach of its obligations under the UNDERLYING RELATIONSHIP.
Any demand under this guarantee must be received by us on or before EXPIRY at the PLACE FOR
PRESENTATION indicated above.
This guarantee is subject to the Uniform Rules for Demand Guarantees (URDG) 2010 Revision, ICC
Publication No. 758.
UBS Switzerland AG
55567E 08.2015
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Sample
ICC advance payment guarantee
ab
UBS Switzerland AG
Trade Finance
Hans Muster AG
I M E N
E C
Postfach
CH-4000 Basel
S P
Advance Payment Guarantee No. dated
for amount (in words: )
Applicant: ("APPLICANT")
Beneficiary: ("BENEFICIARY")
Form of Presentation ("FORM OF PRESENTATION"): Paper form or transmitted in full by authenticated swift
through one of the GUARANTOR's correspondent banks.
For the purpose of identification the BENEFICIARY's demand and supporting statement must bear or be
accompanied by a signed confirmation of one of the GUARANTOR's correspondent banks stating that the
latter has verified the BENEFICIARY's signature(s) appearing thereon. In case of a swift transmission through
one of the GUARANTOR's correspondent banks, the latter has to confirm having verified the BENEFICIARY's
signature(s) appearing on the demand and supporting statement.
In case that at the time of a demand under this guarantee, there is a client relationship between
BENEFICIARY and a branch of the GUARANTOR in Switzerland with a valid list of authorized signatures
regarding the persons signing for the BENEFICIARY, the verification of signature(s) by a third bank is not
required. In such case, BENEFICIARY's demand and supporting statement must be presented to the
GUARANTOR duly signed in paper form (swift excluded).
Place for presentation: GUARANTOR's address as stated above or swift , respectively ("PLACE
FOR PRESENTATION")
A demand under this guarantee may be presented as from the crediting of to the
APPLICANT's account maintained with the GUARANTOR, provided such remittance identifies this guarantee.
Expiry: ("EXPIRY")
As GUARANTOR, we hereby irrevocably undertake to pay the BENEFICIARY any amount up to the
GUARANTEE AMOUNT upon presentation of the BENEFICIARY's complying demand, in the FORM OF
PRESENTATION indicated above, supported by the BENEFICIARY's statement, whether in the demand itself or
in a separate signed document accompanying or identifying the demand, indicating in what respect the
APPLICANT is in breach of its obligations under the UNDERLYING RELATIONSHIP.
Any demand under this guarantee must be received by us on or before EXPIRY at the PLACE FOR
PRESENTATION indicated above.
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Sample
ICC advance payment guarantee, Page 2
ab Page 2 of 2
This guarantee is subject to the Uniform Rules for Demand Guarantees (URDG) 2010 Revision, ICC
N
Publication No. 758.
C I M E
UBS Switzerland AG
S PE
55566E 08.2015
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12 Index
A R
Advance payment guarantee 13 Reduction clause 11
Assignment 18
S
B Simple surety 8
Bank guarantees 7 Standby letter of credit 9/15
Bid bond 13 Surety 8
Builder’s (or building contractor’s) guarantee 15
T
C Tender bond 13
Choice of law clause 11
Client’s (letter of) indemnity 19 U
Confirmed payment order 9 Uniform Rules for Demand Guarantees (URDG)
Credit security guarantee 14 URDG21
D W
Direct guarantee 12 Warranty bond 14
E
Effective clause 11
Expiry clause 11
G
Guarantee clause 11
Guarantee for warranty obligations 14
I
Identification clause 11
Indirect guarantee 12
J
Joint and several surety 8
L
Loan guarantee 14
P
Payment guarantee 14
Performance bond 13
Place of jurisdiction clause 11
Preamble 11
65
13 Glossary
It is worth noting that UBS does not issue bill of exchange Letter of Credit
guarantees in this form, but only as separate, abstract payment A letter of credit is an undertaking by a bank to pay out a
undertakings in the form of guarantees. certain amount on presentation of certain documents, providing
the conditions of the documentary credit have been satisfied in
Bill of lading (B/L) full.
Freight shipment document equivalent in nature to a security. UBS brochure “Documentary Credits and Collections”.
66
Regress UCP
Legal recourse (e.g. of the guarantor bank to the principal). (Uniform Customs and Practice for Documentary Credits)
UBS brochure “Documentary Credits and Collections”.
SCO
Swiss Code of Obligations. Uncodified contracts
The Swiss Code of Obligations is based on the model of the
SERV individual contract. It provides specific rules for the contents of
Acronym for “Schweizerische Exportrisikoversicherung” (Swiss certain types of contract (e. g. purchase agreement). In prac-
Export Risk Insurance). Export promotor and insurer instituted tice, because of the right of contractual freedom, many typical
by the Swiss Confederation which, against payment of a fee, agreements and contracts known as “uncodified” (or “hybrid”)
covers exporters against certain risks associated with deliveries contracts have developped, in addition to those provided for in
of goods to foreign destinations. In Switzerland, the rules the Code.
governing SERV are set out in the Swiss Export Risk Insurance
Act of 16 December 2005 and the implementing ordinance URDG
of 25 October 2006. “Uniform Rules for Demand Guarantees”.
Syndicate business
Common transactions involving several partners who have
joined together in an ad hoc or lasting partnership for that pur-
pose.
67
Act at an early stage
With our impressive material and human resources and our Further Trade & Export Finance instruments
widely recognized skills, we can help you to find the guarantee
instrument to suit your specific requirements. This ensures that
Documentary Credits
you gain a competitive advantage which might be decisive for
Flexible payment and short-term credit instruments
your business activities.
• Sight letter of credit
• Deferred payment letter of credit
Contact us soon – it will be worth • Acceptance credit
your while. • Negotiable letter of credit
• Transferable letter of credit
• Back-to-back letter of credit
Before a deal is signed, measures to secure the performance
• Assignment of documentary credit proceeds
and payment obligations and payment transaction processing
should all be in place. The sooner you talk to us, the sooner we
Documentary Collections
can offer you comprehensive and effective support, with expert,
Supplementary payment instruments
personalized advice and, of course, prompt and meticulous pro-
• Documents against payment
cessing. Contact your personal UBS advisor.
• Documents against acceptance
• Documents against letter of undertaking
In addition to bank guarantees, we can provide you with all
the other Trade & Export Finance instruments you need. You
and your specialists can find detailed information on the bene-
Export Finance
fits, possibilities and uses of our services in our corresponding
Financing solutions
brochures:
• “Documentary Credits and Collections”,
With SERV (or private insurance or foreign ECA coverage
• “Export Finance”.
[Export Credit Agency]):
• Buyer’s credit
Your personal UBS advisor or any UBS branch will be happy to
• Supplier’s credit
provide you with any of these brochures you wish.
• Frame credit agreement
• Mixed financing
For a comprehensive overview of Trade & Export Finance, please
• Multi-source financing
see our homepage ubs.com/tef, where you will find in-depth
information and animated step-by-step explanations of Trade & Without SERV:
Export Finance transactions, legal aspects, helpful checklists • Forfaiting
and detailed factsheets. • Export finance loan
68
Your contacts
Export Finance
Geneva, Western Switzerland,
Central Plateau and Ticino Regions
Tel. + 41 44 239 23 08
Fax + 41 44 239 21 21
International Exporters
Tel. + 41 44 239 81 01
Fax + 41 44 239 21 21
ubs.com/tef
69
This publication is intended for information only and is not intended as a recommenda-
tion, an offer or a solicitation of an offer. Before making a decision, you should obtain
relevant professional advice. Please note that UBS reserves the right to alter its services,
products or prices at any time without prior notice. Certain products and services are
subject to legal restrictions and cannot be offered worldwide on an unrestricted basis.
Reproduction in whole or part is prohibited without prior permission from UBS.
© UBS 2015. The key symbol and UBS are trademarks of UBS. All rights reserved.
Also available in French and German. December 2015. 81073E
UBS Switzerland AG
P.O. Box
8098 Zurich
ab