Energy Project Bank Guarantee Disputes in Turkey: Can a Foreign Investor Stop an Unlawful Call? – 2026 Updated Guide

Can a foreign energy investor stop an unlawful bank guarantee call in Turkey? Learn the 2026 rules on on-demand guarantees, performance bonds, abusive calls, fraud, interim injunctions, EPC disputes and urgent legal remedies.

Bank guarantees are fundamental risk-allocation instruments in Turkish energy projects. Solar, wind, electricity storage, hydroelectric and conventional power projects frequently involve performance guarantees, advance payment guarantees, warranty guarantees and other forms of security intended to protect project owners, contractors, suppliers, lenders and other project participants.

The commercial strength of a bank guarantee generally comes from its independence from the underlying contract. When an unconditional or first-demand guarantee is properly called, the issuing bank will normally be expected to honor a compliant demand without first resolving the underlying EPC, supply or project dispute. Turkish jurisprudence has traditionally characterized bank letters of guarantee as independent guarantee undertakings rather than ordinary surety arrangements.

That independence creates a major risk for foreign energy investors. If a beneficiary makes an allegedly unlawful or abusive call, the investor may have very little time to react before the issuing bank pays. Once payment occurs, the dispute may shift from preventing payment to recovering money already transferred.

The critical question is therefore whether a foreign investor can obtain urgent legal protection in Turkey before an allegedly unlawful bank guarantee call is paid. The answer is potentially yes, but Turkish courts generally approach attempts to restrain independent guarantees cautiously. Strong documentary evidence of a clearly abusive, fraudulent or otherwise impermissible demand is usually essential.

Why Are Bank Guarantees So Important in Energy Projects?

Energy projects require substantial capital expenditure before commercial operation begins. The project owner may pay significant advances to an EPC contractor or equipment supplier, while the contractor may simultaneously assume obligations concerning completion dates, plant performance, equipment quality and warranty periods.

Bank guarantees provide financial security against some of these risks.

An advance payment guarantee may secure repayment of an advance if the contractor fails to perform. A performance guarantee may secure contractual performance. A warranty guarantee may remain outstanding during the defects liability period. Other guarantees may secure specific equipment, grid infrastructure or project obligations.

International energy transactions may also use counter-guarantee structures involving a foreign bank and a Turkish issuing bank.

The legal analysis must therefore begin with the actual wording of the particular guarantee.

Are Turkish Bank Guarantees Independent From the EPC Contract?

Generally, yes, where the instrument constitutes an independent bank guarantee.

The Court of Cassation’s established jurisprudence recognizes the independent character of bank letters of guarantee. The bank’s undertaking is generally separate from the underlying relationship between the beneficiary and the party that procured the guarantee.

This distinction is fundamental.

Suppose a foreign project owner and a Turkish EPC contractor disagree over whether the power plant achieved provisional acceptance. If the contractor has provided an unconditional performance guarantee, the issuing bank does not ordinarily conduct a complete EPC trial before deciding whether to honor a facially compliant demand.

The bank primarily examines the guarantee itself and the beneficiary’s demand.

This is why the phrase “payable on first demand” can have enormous practical significance.

What Is an On-Demand Bank Guarantee?

An on-demand guarantee generally requires the issuing bank to pay when the beneficiary makes a demand satisfying the conditions stated in the guarantee.

Some guarantees require little more than a written demand. Others require specific declarations, certificates or supporting documents.

Investors should therefore examine the precise language rather than assuming that every bank guarantee operates identically.

Important provisions include the guarantee amount, expiry date, reduction mechanism, demand procedure, required documents, governing law, place for presentation and conditions for payment.

A demand that does not satisfy the guarantee’s express requirements may create a fundamentally different dispute from a demand that is formally compliant but allegedly abusive under the underlying relationship.

What Is an Unlawful or Abusive Guarantee Call?

The fact that the applicant believes the beneficiary is wrong under the EPC contract does not automatically make the guarantee call unlawful.

This distinction is extremely important.

Turkish courts generally protect the commercial independence of bank guarantees. If every contractual disagreement were sufficient to stop payment, first-demand guarantees would lose much of their commercial function.

Exceptional circumstances may nevertheless justify intervention where the call constitutes a clear abuse of rights, fraud or another objectively demonstrable misuse of the guarantee. Turkish legal commentary and case-law analysis recognize the possibility of interim protection where a payment demand clearly amounts to an abuse of rights.

The evidentiary threshold can be demanding.

Examples of Potentially Abusive Calls

Consider an EPC contractor that has fully performed the secured obligation and has received a signed release expressly confirming that the relevant guarantee should be returned. If the beneficiary subsequently attempts to call the same guarantee despite that documentation, the applicant may have stronger grounds for urgent relief.

Another example may arise where the guarantee has expired but the beneficiary attempts to demand payment outside the applicable validity period.

Similarly, a call exceeding the remaining guaranteed amount after agreed reductions may raise significant issues.

By contrast, a dispute over whether the contractor caused 45 or 60 days of project delay may require extensive evidence and expert analysis. A court considering an emergency injunction may be reluctant to resolve such a complex underlying merits dispute at the provisional stage. Recent Turkish commentary on 2026 practice emphasizes this distinction between clear documentary abuse and ordinary contractual disagreement.

Can a Foreign Investor Obtain an Interim Injunction?

Potentially, yes.

Article 389 and following provisions of the Turkish Code of Civil Procedure establish the general framework for interim injunctions. Provisional protection may be available where changes in the existing situation could make realization of the relevant right substantially more difficult or impossible, or where delay could cause serious harm.

In bank guarantee disputes, an investor may seek urgent relief designed to prevent payment or prevent an abusive demand from being implemented, depending on the circumstances.

However, the existence of an underlying contractual dispute is normally insufficient by itself.

The investor should be prepared to demonstrate the allegedly abusive nature of the call through strong prima facie evidence.

What Evidence Is Needed to Stop Payment?

Speed and documentary evidence are crucial.

The strongest evidence will depend on the dispute but may include a signed release, final acceptance documentation, settlement agreement, written acknowledgment by the beneficiary, guarantee reduction confirmation, evidence of expiry, proof that the secured obligation no longer exists or other documents demonstrating that the call is clearly inconsistent with the guarantee or established contractual position.

Recent Turkish analysis of injunction applications concerning bank guarantees emphasizes that courts generally require convincing evidence and are reluctant to restrain payment based merely on contested allegations requiring a full merits examination.

Foreign investors should therefore organize the evidentiary file before the dispute reaches the guarantee-call stage whenever possible.

Timing Is Critical

Bank guarantee disputes can become emergency litigation.

An investor may discover that the beneficiary has called the guarantee only shortly before the issuing bank intends to make payment.

Waiting several days for internal corporate approval or lengthy negotiations can eliminate the practical possibility of stopping payment.

The project company’s management, Turkish legal counsel, issuing bank and relevant foreign stakeholders should therefore have a rapid-response protocol for material guarantees.

The expiry dates and current outstanding amounts of every major guarantee should also be monitored continuously.

Can the Bank Simply Refuse to Pay?

An issuing bank is generally expected to respect the independent undertaking contained in the guarantee.

The bank normally cannot refuse a compliant first-demand payment merely because its customer alleges that the beneficiary breached the underlying EPC contract.

However, the analysis can change where the demand itself fails to satisfy the guarantee terms or where clear abuse or fraud is established. Turkish sources discussing the applicable jurisprudence recognize this narrow exception to the independence principle.

The investor should therefore notify the bank immediately of the disputed call and provide relevant documentation, while recognizing that a bank may be unwilling to assume the risk of refusing payment without a court order.

Interim Injunction Against the Bank or Beneficiary

The structure of the requested injunction requires careful legal analysis.

Depending on the circumstances, provisional protection may concern the beneficiary’s ability to demand payment or the bank’s ability to make payment.

Turkish procedural law allows interim measures involving third parties in appropriate circumstances where they control the property or right affected by the dispute. Current 2026 litigation guidance notes that Articles 389–399 of the Code of Civil Procedure can allow injunctions involving third parties such as banks where necessary to preserve the disputed right.

The precise form of relief should therefore be designed around the guarantee structure, parties and timing of the demand.

Security for an Interim Injunction

A court granting interim protection may require the applicant to provide security.

This is important because stopping payment under a bank guarantee can itself cause losses to the beneficiary if the injunction is later found to have been unjustified.

Foreign investors should therefore consider the potential security requirement when planning urgent litigation.

A theoretically available injunction may have limited practical value if the investor cannot provide the required security promptly.

Special Risk: Guarantees Given to Public Authorities

Foreign energy investors should distinguish private project guarantees from guarantees issued in favor of Turkish public authorities.

Special statutory rules may restrict interim injunctions concerning guarantees received under public procurement or state tender legislation. Turkish legal analysis specifically identifies restrictions under the State Tender Law No. 2886 and Public Procurement Law No. 4734.

This distinction can be crucial in energy projects involving public authorities, concessions, tenders or public-sector counterparties.

The beneficiary’s legal status and statutory basis of the guarantee should therefore be identified before an injunction strategy is selected.

Performance Bond Calls in EPC Disputes

Performance guarantees are particularly common in power plant EPC contracts.

The employer may attempt to call the guarantee after contractor delay, abandonment, failure to achieve performance requirements, insolvency or another alleged default.

The contractor or investor seeking to prevent the call must determine whether the guarantee is genuinely conditional or payable on first demand.

If it is an independent first-demand guarantee, simply arguing that the employer caused the project delay may not be enough to stop payment.

The applicant should identify clear evidence demonstrating that the beneficiary’s demand crosses the line from a disputed contractual claim into objectively abusive conduct.

Advance Payment Guarantee Disputes

Advance payment guarantees create another common source of energy-project disputes.

The guarantee may reduce progressively as the contractor performs work and the advance is amortized through milestone payments.

Problems can arise where the beneficiary demands the original guarantee amount despite substantial amortization.

The guarantee, EPC payment records, interim certificates and reduction provisions should be examined together.

Where the remaining secured exposure is objectively lower than the amount demanded, documentary evidence of the reduction may become important in challenging the call.

Warranty Guarantee Disputes

Warranty guarantees usually remain effective after project completion to secure defect-remediation obligations.

Disputes may arise where the employer attempts to call the guarantee for alleged defects that the contractor disputes.

The investor should examine whether the defect falls within the warranty scope, whether contractual notification and cure procedures were followed and whether the guarantee itself requires any declaration concerning contractor default.

Again, however, a substantive warranty disagreement does not automatically justify an injunction against an independent guarantee.

The distinction between contractual merits and obvious abuse remains essential.

What Happens If the Bank Has Already Paid?

Once payment occurs, preventing the guarantee call is no longer the primary remedy.

The investor may need to pursue a restitution or damages claim against the beneficiary based on the underlying contractual relationship and circumstances of the call.

The fact that the bank was required to honor an independent guarantee does not necessarily mean that the beneficiary was ultimately entitled to retain the money under the EPC or other underlying contract.

This distinction is critical.

The bank guarantee determines the payment mechanism. The underlying contract may determine the ultimate economic entitlement between the project parties.

Foreign investors should therefore avoid assuming that payment under the guarantee ends the dispute.

International Guarantees and Counter-Guarantees

Cross-border energy investments frequently involve more complicated guarantee structures.

A foreign bank may issue a counter-guarantee supporting a Turkish bank’s guarantee in favor of the beneficiary.

The investor must then examine multiple instruments.

The Turkish-law position concerning the local guarantee may differ from the governing law applicable to the counter-guarantee.

An injunction obtained in Turkey may also have limited effect on assets or institutions located abroad. Current Turkish litigation guidance emphasizes that Turkish interim measures generally do not have automatic extraterritorial effect.

Urgent coordinated proceedings in more than one jurisdiction may therefore be required.

Bank Guarantee Due Diligence in Energy Acquisitions

Foreign investors acquiring an energy project should review all outstanding guarantees during legal due diligence.

The investor should identify the issuing bank, beneficiary, applicant, guarantee amount, expiry date, secured obligation, reduction mechanism and circumstances permitting a demand.

Historical disputes should also be investigated.

An acquisition agreement should determine who bears liability if a pre-closing event results in a post-closing guarantee call.

This can be particularly important where the target company provided guarantees connected with EPC contracts, grid infrastructure, equipment procurement or other project obligations.

How Can Foreign Investors Reduce Guarantee Call Risk?

The strongest protection begins when the guarantee is drafted.

Investors should avoid unnecessarily broad guarantee wording, define expiry dates clearly and ensure that agreed reduction mechanisms operate effectively.

Where commercially possible, guarantees may be linked to identifiable contractual stages.

The underlying EPC or supply agreement should also contain clear provisions governing when security may be called.

Copies of all guarantee amendments, extensions, reductions and releases should be maintained in a centralized security register.

When a dispute emerges, the investor should not wait for the formal call before preparing its injunction evidence.

Frequently Asked Questions

1. Can a foreign investor stop a bank guarantee call in Turkey?

Potentially, yes. Turkish courts may grant interim protection in exceptional circumstances, particularly where strong evidence demonstrates clear abuse, fraud or another legally impermissible demand. Ordinary contractual disagreement is generally not enough.

2. Is an on-demand bank guarantee independent from the EPC contract?

Generally, yes. Turkish jurisprudence recognizes bank letters of guarantee as independent guarantee undertakings rather than ordinary accessory surety obligations.

3. Is an unfair EPC claim enough to stop the bank from paying?

Not necessarily. A dispute concerning responsibility for delay, defects or performance may require a full merits examination and may therefore be insufficient for emergency injunctive relief without clear evidence of abuse.

4. What evidence can support an injunction?

Evidence may include signed releases, expiry documentation, settlement agreements, final account confirmations, written admissions, proof of guarantee reduction or other objective documents demonstrating that the call is clearly abusive or inconsistent with the guarantee.

5. Can the issuing bank refuse an abusive demand?

Potentially in exceptional circumstances, but banks generally respect the independence of first-demand guarantees. Investors should not rely solely on the bank refusing payment and should consider urgent judicial protection where appropriate.

6. Can an advance payment guarantee be called for more than the outstanding advance?

This depends on the guarantee wording and reduction mechanism. If the secured amount has been contractually reduced, a demand exceeding the remaining exposure may create grounds for challenge depending on the evidence and guarantee terms.

7. What happens if the bank pays before an injunction is obtained?

The investor may need to pursue recovery from the beneficiary through the dispute-resolution mechanism applicable to the underlying contract. Payment by the bank does not automatically determine the beneficiary’s ultimate contractual entitlement.

8. Can a Turkish injunction stop payment by a foreign bank?

Not automatically. Turkish interim measures generally have no direct extraterritorial effect. Cross-border guarantee structures may require coordinated legal proceedings in the jurisdiction of the foreign bank.

9. What should a foreign investor do immediately after learning of an allegedly unlawful guarantee call?

The investor should obtain the demand, review the exact guarantee wording, notify the issuing bank, preserve all underlying contractual evidence and obtain urgent Turkish legal advice concerning an interim injunction before payment occurs.

Legal Support for Energy Project Bank Guarantee Disputes in Turkey

An unlawful bank guarantee call can transfer substantial amounts within a very short period and create immediate financing and cash-flow consequences for an energy project. Speed is therefore critical. Once an on-demand guarantee has been paid, the investor may have to pursue a separate recovery claim rather than preventing the transfer itself.

Fırat Fesih Kaya Law Office provides legal assistance to foreign investors, international energy companies, EPC contractors, project developers and lenders in performance bond disputes, advance payment guarantee claims, warranty guarantee disputes, allegedly abusive guarantee calls, urgent interim injunction proceedings, EPC disputes, arbitration and commercial litigation in Turkey.

If a beneficiary is threatening to call, or has already called, a bank guarantee connected with your solar, wind, storage, hydroelectric or other energy investment in Turkey, you may contact our office for an urgent project-specific legal assessment. Experienced legal representation can help evaluate the guarantee wording, preserve evidence, assess whether an emergency injunction is available and protect recovery rights if payment has already occurred.

Phone: +90 312 434 22 22
Mobile Phone: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yildirim Tower No: 148, 06520 Balgat, Cankaya, Ankara, Turkey