Unfair Call on a Performance Bond in Turkey: Injunction Options for Foreign Companies – 2026 Updated Guide

Can a foreign company stop an unfair performance-bond call in Turkey? Learn about injunctions, demand guarantees, fraud, documentary defects, bank liability, arbitration, and recovery remedies.

A Turkish beneficiary may call a performance bond even when a foreign contractor believes that no contractual breach occurred. The beneficiary may allege delay, defective work, incomplete delivery, or failure to meet specifications and demand immediate payment from the bank.

A foreign company may seek an injunction to prevent payment, but obtaining urgent relief is not automatic. Performance bonds are often independent bank undertakings, and banks may be required to pay upon a compliant demand without deciding the underlying contract dispute.

The contractor should act immediately and examine the exact wording of the performance bond, the demand, the underlying contract, and the evidence of alleged default.

What Is a Performance Bond?

A performance bond is generally issued to secure the contractor’s performance of obligations under a construction, supply, service, infrastructure, or commercial agreement.

It may be structured as:

• An unconditional first-demand guarantee;
• A conditional performance guarantee;
• A guarantee requiring an engineer’s certificate;
• A guarantee requiring a court or arbitral decision;
• A retention guarantee;
• An advance-payment guarantee;
• A warranty or defects guarantee.

The legal strategy depends on whether the bank must pay upon a simple demand or whether the beneficiary must prove a specified condition.

Why Is a Performance Bond Independent?

A performance bond may be independent from the underlying contract. The bank generally examines the demand and required documents rather than deciding whether the contractor actually breached the agreement.

The contractor may argue that the project was completed, the delay was caused by the beneficiary, or the termination was wrongful. These arguments may support arbitration or commercial litigation, but they may not automatically prevent payment under an unconditional guarantee.

The contractor must therefore analyze the bond itself, not only the underlying contract.

What Makes a Guarantee Call Unfair?

An unfair call may involve:

• A demand made when no contractual default occurred;
• A demand after the bond expired;
• A demand exceeding the guaranteed amount;
• Failure to provide a required certificate;
• Failure to follow a notice or cure procedure;
• A demand made by an unauthorized person;
• False statements about the contractor’s performance;
• Forged or altered documents;
• A call made for a purpose outside the bond;
• A call intended only to obtain commercial leverage.

An allegation that the beneficiary is “acting unfairly” may not be enough. The contractor should identify a clear contradiction between the bond conditions, the demand, and the underlying facts.

Can the Contractor Obtain an Injunction?

A foreign contractor may consider an urgent injunction application against the beneficiary, the bank, or both.

The contractor should generally demonstrate:

• A plausible legal right;
• A serious and imminent risk of payment;
• Documentary non-compliance, fraud, or abuse;
• The urgency of the request;
• The potential irreparable or difficult-to-recover loss;
• The proportionality of the requested measure.

Courts are cautious because the purpose of an independent performance bond is to provide rapid payment security. A simple dispute about project performance may not be sufficient.

A stronger case may exist where the demand is clearly outside the bond, the guarantee has expired, a required condition is missing, or the beneficiary relies on an obviously false statement.

Security may be required for an interim measure.

First-Demand Versus Conditional Performance Bonds

Under a first-demand bond, the bank may only need a written demand and any expressly required declaration. The bank may not be required to investigate whether the contractor actually breached the main contract.

Under a conditional bond, the beneficiary may need to submit an engineer’s certificate, a court decision, an arbitral award, a declaration of default, or another specified document.

The contractor should compare the demand with every condition in the bond. A missing or incorrect document may provide a stronger objection than a general argument that the beneficiary is wrong about the project.

Notice to the Bank

The contractor should notify the bank immediately after learning of the call or threatened call.

The notice should explain:

• The bond number;
• The beneficiary;
• The amount;
• The demand date;
• The expiry date;
• The alleged documentary defect;
• The reasons the demand is disputed;
• Any evidence of fraud or abuse;
• Any pending injunction application.

A notice to the bank does not automatically stop payment. The bank may still honor a compliant demand unless it identifies a valid refusal ground or receives effective judicial protection.

The contractor should communicate accurately and avoid unsupported allegations.

Can the Contractor Stop the Beneficiary From Calling?

The contractor may seek an injunction preventing the beneficiary from making or enforcing a demand. However, the court may focus on whether the call is clearly fraudulent, abusive, or contrary to the bond.

The contractor should not expect the court to conduct a full construction or supply trial during an urgent application.

The application should be supported by completion records, approved variations, extension notices, payment certificates, inspection reports, correspondence, and evidence contradicting the beneficiary’s demand.

Performance Disputes and Employer-Caused Delay

The contractor may argue that the Turkish company caused the alleged delay or non-performance.

Relevant circumstances may include:

• Late access to the site;
• Delayed approvals;
• Changed designs;
• Unpaid progress payments;
• Additional work;
• Delayed materials;
• Incomplete instructions;
• Force majeure;
• Beneficiary interference;
• Failure to obtain permits.

These facts may support the underlying contract claim and may also help demonstrate that a call based on an alleged default is abusive. However, they do not automatically prevent payment under an independent bond.

If the Bank Has Already Paid

If the bank has already paid the Turkish beneficiary, the foreign contractor may consider claims for restitution, repayment, damages, and wrongful calling of the bond.

The contractor may also seek compensation for financing costs, loss of credit facilities, additional security requirements, and other provable losses.

Recovery may become more difficult if the beneficiary transfers or spends the payment. The contractor should assess urgent asset-protection measures without delay.

Claims Against the Turkish Beneficiary

The foreign contractor may bring claims against the Turkish company under the underlying agreement.

Possible claims may include:

• Declaration that no default occurred;
• Repayment of the bond amount;
• Wrongful calling damages;
• Contract termination;
• Payment of outstanding contract sums;
• Recovery of retention money;
• Compensation for delay caused by the beneficiary;
• Costs and losses caused by the demand.

The governing-law, jurisdiction, arbitration, notice, and security clauses should be reviewed carefully.

Fraud and Abuse Exception

The independence of a performance bond is not unlimited. Clear fraud, forgery, bad faith, or abuse may justify judicial intervention.

A contractor should focus on objective evidence, such as a demand contradicting an official completion certificate, a call after expiry, a missing mandatory document, or a false declaration that the beneficiary knows to be untrue.

A mere disagreement about the quality or value of the work may not satisfy the high threshold for stopping payment.

Counter-Guarantees and Foreign Banks

Some international projects involve a foreign bank issuing a counter-guarantee to a Turkish bank, which then issues the performance bond to the Turkish beneficiary.

The contractor should identify:

• The local issuing bank;
• The foreign counter-guarantee bank;
• The beneficiary;
• The applicable law;
• Any URDG rules;
• The demand channel;
• The court or arbitration forum.

The obligations under the counter-guarantee may be separate from the contractor’s rights under the local performance bond.

Evidence for an Injunction Application

The contractor should preserve:

• The performance bond;
• Amendments and extensions;
• The underlying contract;
• Project schedules;
• Completion certificates;
• Progress reports;
• Payment records;
• Approved variations;
• Correspondence;
• Delay notices;
• Engineer’s reports;
• Site photographs and videos;
• The beneficiary’s demand;
• Bank communications.

Digital project-management files, electronic signatures, cloud records, online correspondence, and payment certificates may be especially important in 2026.

Arbitration and Court Proceedings

An arbitration clause in the underlying contract may require the contractor to commence arbitration against the beneficiary. However, the bank may not be a party to that arbitration.

Starting arbitration does not automatically stop the bank from paying. The contractor should assess emergency arbitration, interim measures, and court applications separately.

Lawyer Fırat Fesih Kaya assists foreign companies with Turkish performance bonds, unfair guarantee calls, injunctions, construction disputes, arbitration, restitution, and commercial litigation.

2026 Practical Considerations

In 2026, performance bonds may be issued and presented electronically through digital banking systems, electronic signatures, SWIFT messages, and online project platforms.

Foreign companies should negotiate clear conditions for calling the bond, notice and cure requirements, expiry, reduction, certificates, dispute resolution, fraud protection, and return of the guarantee after completion.

A contractor should review the bond before signing the underlying contract and obtain immediate legal advice after receiving any threatened call.

Frequently Asked Questions (FAQ)

1. Can a foreign contractor stop an unfair performance-bond call in Turkey?
Potentially, but the contractor generally needs strong evidence of fraud, abuse, expiry, documentary non-compliance, or another serious defect.

2. Does a dispute about the construction contract automatically stop payment?
No. An independent performance bond may remain payable while the underlying dispute is pending.

3. What if the project was completed?
Completion evidence may support the contractor’s case, but payment depends on the bond wording and compliance of the demand.

4. Can the bank investigate whether the contractor breached the contract?
Usually, the bank examines the demand and required documents rather than resolving the underlying dispute.

5. What if the beneficiary demands more than the guaranteed amount?
An excessive demand may create an objection and may support urgent legal action, subject to the bond terms.

6. Can an expired performance bond be called?
A demand after expiry may be invalid, but expiry, extensions, presentation rules, and electronic transmission dates must be checked.

7. Does notifying the bank stop payment?
Not automatically. The bank may still pay a compliant demand unless it has a valid refusal ground or receives effective judicial protection.

8. Can the contractor recover the money after payment?
Potentially. The contractor may pursue restitution, damages, and wrongful-call claims against the beneficiary.

9. Can arbitration prevent payment by the bank?
Arbitration may protect the contractor’s contractual rights, but it may not automatically bind a bank that is not a party to the arbitration agreement.

10. What should a foreign contractor do immediately?
The contractor should obtain the bond and demand, notify the bank, preserve project evidence, and seek urgent Turkish legal advice about an injunction.

This article is provided for general informational purposes only and does not constitute legal advice. We recommend consulting a lawyer about your specific circumstances to avoid any loss of rights.

Expert Legal Support for Performance-Bond Disputes

Expert legal support is essential to avoid losing valuable rights. By working with a lawyer experienced in Turkish performance bonds, demand guarantees, injunctions, construction contracts, arbitration, restitution, and commercial litigation, foreign companies can protect their financial interests. Fırat Fesih Kaya Law Office provides professional legal support for guarantee disputes in Turkey and abroad.

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