Jul 20, 2023

The bank guarantees behind the world's greatest research and development projects

What does the Large Hadron Collider, the European Space Agency and the fight against Covid-19 in Bogota, Columbia have in common? The answer is simple: The use of bank guarantees.

Bank guarantees have been used by finance teams around the world for many years, and the benefits they can offer make them an ideal solution for some of humankind’s greatest feats, and some of the world's most advanced projects.

With Government funding and in many cases a requirement to source specialist suppliers, the financing behind global research and development projects is usually highly intricate.

Often, stringent timelines and milestones are imposed, and often, only a small selection of suppliers around the world can provide the goods or services required.

This means projects of this complexity are more prone to risks, so stringent due diligence is required and insulation from these risks should be implemented where possible.

This makes a tailor-made instrument like a bank guarantee, particularly a performance guarantee, a perfect suiter to support the finance teams behind these ambitious projects.

We have examined some of the world’s most well-known research and development projects to compile a list of those that have relied on the use of a bank guarantee to make it all possible.

Large Hadron Collider (LHC), CERN

The Large Hadron Collider is the world’s largest and most powerful particle accelerator. Based in Geneva, Switzerland, the project took 10 years to build at a cost of $4.75bn (AS, 2022).

As one of the most complex structures ever created, procurement for this project was extremely complicated and involved a highly specialist group of contractors.

To qualify as a vendor for a project of this size and stature, there are strict requirements.

One of these requirements is that a Bank Guarantee may be required from a CERN-approved bank at a rating of at least BBB+ to ensure the suppliers meet performance expectations (CERN, 2023).

A project of this magnitude also requires significant funding from the CERN member countries, and over 70% of the almost $5bn coming from the United Kingdom, Germany, Italy, France, and Spain.

It is highly plausible that the same type of bank guarantees would also have been issued by these Governments to CERN, to ensure that the progress milestones set out at the start of the project are met.

Horizon 2020 Guarantee Fund, European Union

Horizon 2020 was the European Union’s research and innovation funding program with a budget of nearly €80bn.

Horizon was responsible for helping initiatives such as the Biowings Project, Mingei Project and DTOceanPlus gain easier access via financial instruments to loans, guarantees and counter-guarantees (European Commission, 2020).

They supported these initiatives by leveraging partnerships with financial partners to apply for bank guarantees, and then extended the obtained credit facilities to help with the development of these new projects.

One of the prerequisites for receiving funding from the Horizon 2020 program was that 5% of the maximum European Union grant was deducted from the pre-financing payment and paid into a Guarantee Fund.

The money in this fund would be invested to make a profit that would help protect the Horizon 2020 program from defaults and underperforming investments.

European Space Agency

The European Space Agency, headquartered in Paris, France, is another intergovernmental initiative that has a range of ambitious projects dedicated to the exploration of space (European Space Agency, 2023).

With their commitment to bringing together European national space programs and the complex nature of the suppliers they deal with, bank guarantees are a preferred instrument for suppliers to win projects with the European Space Agency.

As part of the European Space Agency’s procurement program, suppliers must provide a bank guarantee that is up to 10% of the value of the contract.

As these contracts with suppliers are usually for huge, multi-year contracts, a new guarantee is required for each new phase of the project (European Space Agency, 2014).

Square Kilometre Array (SKA) Project

The Square Kilometre Array is an intergovernmental international radio telescope project being built in South Africa and Australia (SKAO, 2023).

Headquartered in the United Kingdom, the SKA project is estimated to cost around $2.2bn with 197 radio dishes in the Karoo region of South Africa’s Northern Cape, and 131,072 antennas in Murchison, deep in the outback of Western Australia.

When completed, it will be humanity’s biggest-ever telescope (Forbes, 2021).

The SKA project has a similar procurement structure to CERN. It prefers suppliers to utilise bank guarantees to win contracts to work on the development as a way to protect the project from underperformance and supplier defaults (SKAO, 2023).

World Bank’s Multilateral Investment Guarantee Agency’s Covid-19 Support in Bogota

One of the many examples of bank guarantees benefitting international healthcare projects is the Multilateral Investment Guarantee Agency (MIGA), which is part of World Bank.

Out of the many guarantees they issue to developing countries, World Bank’s support for the city of Bogota in Columbia during the Covid-19 epidemic is a prime example.

The Multilateral Investment Guarantee Agency issued a bank guarantee on a local currency loan for the value of $254 million, allowing the Public Credit of the Bogota Capital District access to a more cost-efficient loan from Banco Bilbao Vizcaya Argentaria (MIGA, 2023).

MIGA’s innovative financing package helped health authorities manage the Covid-19 pandemic and strengthen the capital district’s health infrastructure for the future.

The innovative solution for these innovative projects: Digital bank guarantees with Lygon Arc

Interestingly, the bank guarantees issued in response to these projects were all produced on paper.

This means all parties, from global research organisations to governments, had to dedicate time to managing paper documents, and were all at risk of loss and fraud throughout the process.

Whilst the figures of loss and fraud will never be reported, we can assume at least some of these projects experienced issues surrounding paper instruments.

With these projects utilising the most innovative technology to create some of the world’s greatest achievements, it shows there are always areas to improve the operations behind a project.

If these bank guarantees had been issued through Lygon Arc, these issues and inefficiencies would have been solved, allowing the teams behind these projects to dedicate more of their time to the areas of the project that matter more.


Complex project financing and procurement policies often require more intricate solutions to financing.

This explains why bank guarantees are often utilised as a tailor-made instrument for projects with stringent requirements, helping teams to achieve some of humankind’s greatest feats.

Whilst we assume these projects are the pinnacle of modern-day innovation, the use of paper bank guarantees shows that despite the magnitude of these projects and their impressive nature, there is always room for improvement.

A display photo of Nicholas

Nicholas Farley

Marketing Manager

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