Bill of exchange (veksel)

Bill of exchange (veksel): a security that records an unconditional obligation to pay a certain sum on a certain date. The rules on bills are uniform across many countries and go back to the 1930 Geneva Convention. In Russia, they are set out in the law On Bills of Exchange and Promissory Notes and the Regulation on Bills of Exchange and Promissory Notes.

Types of bills

• Promissory note: the maker itself promises to pay the holder.
• Bill of exchange (draft): the drawer instructs a third party, the drawee, to pay the holder. In foreign trade, the seller often draws a draft on the buyer.

A bill is transferred to another person by an endorsement, a transfer inscription on the bill. A bank or another person can back payment under a bill: such a surety is called an aval.

Where it comes up in foreign trade

• Deferred payment. The buyer receives the goods and gives the seller a bill with a payment date.
• Documentary collection. The bank releases the shipping documents to the buyer against acceptance of a draft.
• Forfaiting. The exporter sells the buyer’s bill to a bank or finance company at a discount and gets the money at once.

What to watch for

• Settling with a non-resident by a bill is also a currency transaction. The bank will ask for documents, and the amount and dates must match the contract.
• A bill without an aval is only as reliable as the party that pays it.
• Paying a bill to a foreign holder is an ordinary international payment with all its complications.

We review non-standard settlements involving bills, assignment of claims or a change of payer separately. The structure is reviewed by a lawyer before the deal. More on the Complex payments page.