Judgment of the Commercial Court of the Canton of Zurich concerning protective court prohibitions on payments under bank guarantees issued by CH banks

Judgment of the Commercial Court of the Canton of Zurich concerning protective court prohibitions on payments under bank guarantees issued by CH banks

The Commercial Court of the Canton of Zurich (ZH Commercial Court) has published on its website an interesting judgment dated 15 July 2017, which relates to an application for precautionary / protective measures directed against potential payments of a bank (defendant) under a bank guarantee (reference of this judgment: HE170200-O).

In the relevant matter, the claimant filed an emergency application with the ZH Commercial Court, in which it asked the court to issue an urgent prohibition directed against the defendant, a Swiss bank, which would forbid the bank to make payments under a bank guarantee.

In the sense of a preliminary remark, it is to be pointed out that commercial disputes related to bank guarantees are quite common in Zurich, which is obviously due to the circumstance that Zurich is an important financial center. In addition to a substantial body of case law, there are also various legal publications dedicated to this topic, such as, for example, my article of 30 March 2015 concerning the interpretation of the conditions for calling bank guarantees on first demand (Jusletter 30 March 2015, Die Auslegung der Abrufvoraussetzungen von Bankgarantien auf erstes Anfordern).

Now, in its judgment at issue, the ZH Commercial Court confirmed its settled case law, pursuant to which prohibitions on payments directed against bank guarantees or rather the banks issuing such guarantees are to be granted with much restraint and in extraordinary circumstances only.

More specifically, the ZH Commercial Court, in essence, pointed out in its judgment at issue that bank guarantees are based on the principle of “pay first, sue later”, which requires that a claimant, which arranged for the issuance of a bank guarantee, may obtain a preventive payment prohibition directed at the issuing bank under exceptional circumstances only. Otherwise the instrument of a bank guarantee would be encroached and its purpose would be missed. For this reason, to obtain a preventive payment prohibition directed against an issuing bank, the ZH Commercial Court requires that the claimant shows (in the sense of prima facie evidence) that under the relevant circumstances the calling of the bank guarantee would obviously constitute an abuse of rights. In this regard, the claimant has to show that the abusiveness of the guarantee’s calling is also obvious from the bank’s perspective.

For the sake of completeness, it shall be mentioned that the claimant had filed an appeal with the Swiss Federal Tribunal (SFT) against the ZH Commercial Court’s judgment discussed herein (SFT case reference: 4A_342/2017). However, before the SFT could rule on the mentioned appeal, the claimant withdrew its appeal, approximately a couple of weeks after having filed it.

This article has first been published on LinkedIn on 5 November 2017.

PHH, Zurich, 4 January 2018 (www.haberbeck.ch)

The information contained in this post is for general informational purposes only and is not intended to constitute legal advice. Readers of this post should not take any actions or decisions without seeking specific legal advice.

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