Demand Guarantee Called Unfairly in Turkey: Can Payment Be Stopped by an Injunction? (2026 Updated Guide)

A demand guarantee is called unfairly in Turkey. Learn when payment may potentially be stopped by an interim injunction, how independent guarantees work, what evidence is required, and what foreign companies should do urgently.

A demand guarantee can create an immediate financial crisis for a foreign company doing business in Turkey. The underlying commercial dispute may still be unresolved, yet the beneficiary may present a demand to the issuing bank and seek payment under an independent guarantee. The applicant may believe that the call is clearly abusive, contrary to the underlying contract, premature or based on an event that never occurred. The critical question is whether payment can be stopped before the bank transfers the guaranteed amount. In Turkey, this question requires careful analysis of the guarantee wording, independence principle, underlying contractual relationship, circumstances of the call, evidence of abuse and requirements for interim judicial protection. Timing is particularly important because obtaining relief after payment may be substantially more difficult than seeking urgent protection while the demand remains pending.

What Is a Demand Guarantee?

A demand guarantee is commonly used in construction, infrastructure, energy, international trade, supply, acquisition and other commercial transactions. A bank or another guarantor undertakes to pay the beneficiary when the conditions stated in the guarantee are satisfied.

The exact legal consequences depend heavily on the wording of the instrument. Therefore, the first question should always be what the guarantee actually says rather than what the parties informally call it.

Why Is the Independence Principle Important?

Many demand guarantees operate independently from the underlying commercial contract. This means that a dispute concerning the underlying EPC agreement, supply contract, share purchase agreement or other transaction does not automatically prevent the beneficiary from demanding payment.

This independence is one of the principal commercial purposes of an on-demand guarantee.

Does a Contractual Dispute Automatically Stop Payment?

Generally, the existence of a contractual dispute alone should not be assumed to prevent payment. If every disagreement under the underlying contract automatically blocked the guarantee, the commercial function of an independent demand guarantee would be substantially weakened.

The applicant therefore needs a stronger legal and evidentiary basis than merely arguing that the beneficiary is wrong in the underlying dispute.

When Can an Unfair Guarantee Call Become Challengeable?

The analysis becomes different where there is strong evidence that the beneficiary’s demand is manifestly abusive, fraudulent or clearly inconsistent with the legal limits applicable to the exercise of its rights.

The exact threshold is highly fact-specific. Courts will generally need to balance the independent nature of the guarantee against the prohibition on abusive exercise of rights and the requirements governing interim protection.

Read the Guarantee Before the Underlying Contract

In an emergency, companies often begin by sending hundreds of pages of correspondence concerning the underlying dispute. The guarantee itself should be reviewed first.

Identify the beneficiary, issuing bank, maximum amount, expiry date, demand requirements, required declarations, documents, governing law, jurisdiction provisions and whether the instrument incorporates international guarantee rules.

Is the Guarantee Truly Payable on First Demand?

The terminology used by the parties is not always decisive. Determine whether payment depends only on a compliant demand or whether the beneficiary must provide specified documents, certificates or statements.

A conditional guarantee can present a materially different dispute from a pure on-demand instrument.

Check Whether the Demand Complies With the Guarantee

Even where the beneficiary has a substantive complaint, the bank’s payment obligation should be analyzed according to the guarantee terms.

Review whether the demand was made by the correct beneficiary, within the validity period, for an amount permitted by the guarantee and in the required form.

Was the Demand Made Before Expiry?

The guarantee’s expiry provisions should be examined carefully. A demand submitted after expiry can raise fundamentally different issues from a timely demand.

Keep evidence of the exact date and time the demand reached the bank.

Was the Required Statement Included?

Some guarantees require the beneficiary to state that the applicant breached specified obligations or that an amount became due.

If the required statement is absent or materially inconsistent with the guarantee terms, the applicant should identify this immediately.

Documentary Compliance Can Be Decisive

Where payment requires presentation of particular documents, compare every document with the guarantee wording.

A demand that does not satisfy the instrument’s documentary conditions may create defenses independent from the underlying contractual dispute.

What Is an Unfair or Abusive Call?

An applicant may characterize a call as abusive where the beneficiary seeks payment despite circumstances demonstrating that it has no legitimate basis for doing so.

However, merely asserting “the call is unfair” is insufficient. The applicant should identify objective evidence showing why the demand crosses the line from an ordinary commercial dispute into an allegedly abusive exercise of the guarantee.

Clear Evidence Is Critical

Because an independent guarantee is designed to provide rapid payment, emergency intervention normally requires a strong evidentiary presentation.

The court should be able to understand the alleged abuse quickly from documents rather than being required to resolve the entire underlying commercial dispute before deciding whether temporary protection is justified.

Can a Turkish Court Stop Payment?

Potentially, depending on the circumstances. Interim judicial protection may be sought where the statutory requirements for such relief are satisfied and the applicant can establish an adequate legal and evidentiary basis.

The possibility of an injunction should therefore be evaluated immediately after learning that the guarantee has been called.

Timing Can Determine the Outcome

If the bank has not yet paid, an interim measure may potentially preserve the existing position. Once payment has been completed, the dispute may shift toward recovery of the amount from the beneficiary or other remedies.

Companies should therefore treat notice of a guarantee call as an urgent legal event.

Contact the Bank Immediately

Obtain confirmation of the demand, presentation date, amount requested and expected payment process.

Ask for copies of documents that can lawfully be provided and determine whether payment has already occurred.

Do not rely solely on information received from the beneficiary.

Send a Formal Objection Promptly

Where there is a legitimate basis, the applicant should notify the issuing bank and beneficiary of its objections immediately.

The notice should identify specific defects or abusive circumstances rather than simply stating that payment is opposed.

Does Sending an Objection Automatically Stop the Bank?

No. A unilateral objection by the applicant should not be assumed to suspend an independent bank’s payment obligation.

If payment must legally be prevented, judicial relief may be necessary.

What Must Be Shown for an Interim Injunction?

The precise requirements depend on the relief sought and procedural circumstances, but interim protection generally requires the applicant to establish the legal basis of its claim sufficiently and demonstrate why waiting for the final judgment could cause serious difficulty, damage or make protection of the right substantially harder.

A demand-guarantee case requires these requirements to be connected with the special characteristics of the guarantee.

Risk of Irreparable or Difficult-to-Repair Harm

The applicant should explain concretely what happens if payment occurs before the underlying dispute is resolved.

The analysis should focus on actual circumstances, such as the amount, recovery risks, cross-border enforcement difficulties and consequences of immediate transfer, rather than relying solely on generic statements about financial loss.

The Underlying Contract Still Matters

Although an independent guarantee should be distinguished from the underlying transaction, the contract may provide essential evidence of abuse.

For example, termination notices, acceptance certificates, payment records, variation orders, correspondence and settlement documents may show that the factual basis asserted for the call is manifestly inconsistent with the parties’ documented position.

Performance Guarantees

Performance guarantees commonly secure contractual performance. A call may arise after alleged delay, defective performance or termination.

The applicant should compare the alleged breach with completion records, acceptance documents, extensions of time and contractual notices.

Advance Payment Guarantees

Where a guarantee secures repayment of an advance, review how much advance remains outstanding.

If the advance has been progressively recovered through invoices or payment certificates, the remaining secured amount can become a critical issue.

Retention Guarantees

A retention guarantee may replace amounts that would otherwise have been withheld from payments.

The applicant should examine whether the contractual conditions for release or reduction of the guarantee have already occurred.

Bid Bonds

Bid guarantees raise different issues concerning tender participation, withdrawal and execution of the final contract.

The underlying tender documents should be reviewed together with the guarantee.

Guarantee Amount May Have Been Reduced

Many contracts provide for reduction of guarantee amounts following milestones.

If the beneficiary demands the original amount despite an effective contractual or guarantee-based reduction, preserve the relevant certificates and correspondence.

Expiry Extensions Can Create Disputes

Some beneficiaries demand an extension shortly before expiry and threaten to call the guarantee if it is not extended.

The legality and commercial effect of such a demand depend on the instrument and underlying contractual arrangements. Companies should not wait until the final day to review their position.

International Rules May Apply

Certain demand guarantees incorporate internationally recognized rules by reference. If so, those incorporated provisions should be reviewed together with Turkish mandatory rules and the specific wording of the guarantee.

Never assume that international rules apply merely because the underlying contract is cross-border.

Governing Law Must Be Checked

The underlying contract and guarantee may contain different governing-law provisions.

A Turkish-law EPC contract does not automatically mean that every guarantee-related question is governed by exactly the same rules.

Jurisdiction and Arbitration Must Be Distinguished

The underlying contract may contain an arbitration clause while the guarantee or banking relationship involves different jurisdiction arrangements.

An arbitration agreement between applicant and beneficiary does not automatically answer every question concerning urgent relief against a bank.

Which Party Should the Injunction Target?

This is a crucial procedural question. Depending on the structure of the transaction and requested relief, the applicant must determine against whom protection should be sought and how the issuing bank, beneficiary and other relevant parties fit into the dispute.

Incorrectly structuring an emergency application can waste valuable time.

Counter-Guarantees Create Additional Complexity

International transactions may involve a foreign bank issuing a counter-guarantee to a Turkish bank, which then issues the local guarantee.

The applicant must map the complete guarantee chain and determine which payment obligation is about to be triggered.

Foreign Banks and Turkish Banks May Have Different Roles

Do not treat every bank in the transaction as if it has the same obligation.

Identify the issuing bank, counter-guarantor, advising bank and any other institution involved.

Preserve SWIFT Messages and Banking Communications

SWIFT messages, guarantee amendments, extension requests and demand communications can become central evidence.

Obtain and preserve them immediately.

Evidence of Bad Faith Should Be Specific

Useful evidence may include written admissions, contradictory demands, prior confirmation that obligations were completed, settlement agreements, release letters or correspondence demonstrating that the beneficiary knows the alleged basis of the call does not exist.

The evidentiary value depends on the individual case.

An Ordinary Disagreement Is Not Necessarily Abuse

The applicant should distinguish between a genuine contractual disagreement and a manifestly improper guarantee call.

Where extensive factual and expert analysis is required merely to determine who breached the contract, emergency intervention against an independent guarantee may become more difficult.

Expert Evidence May Be Necessary

Construction and engineering disputes can involve completion percentages, technical defects, commissioning and delay analysis.

A concise preliminary expert opinion may sometimes help explain the factual background, although the urgency of a guarantee call often means that documentary evidence must initially carry much of the case.

Preserve the Full Contract File

Collect the underlying agreement, amendments, guarantee wording, certificates, notices, invoices, payment records, meeting minutes and correspondence.

Create a chronology showing exactly what happened before the call.

Do Not Alter or Manufacture Evidence

Emergency proceedings do not justify retrospective creation of contractual records.

Documents prepared after the dispute should be identified accurately as later explanations rather than presented as historical records.

Security May Be Required for Interim Relief

Depending on the procedural circumstances, a court granting interim protection may require security from the applicant.

This financial consequence should be considered when planning the emergency application.

What If Payment Has Already Been Made?

The case does not necessarily end, but the legal objective changes. The applicant may need to consider recovery claims against the beneficiary based on the underlying relationship, unjust enrichment or other applicable legal grounds depending on the facts.

The availability of recovery should not be assumed without reviewing the transaction.

Recovery From a Foreign Beneficiary Can Be Difficult

If the beneficiary is outside Turkey, jurisdiction, governing law, asset location and enforcement become particularly important.

This is another reason why pre-payment action can sometimes have substantial practical value.

Can Damages Be Claimed for an Abusive Call?

Potentially, where the applicable substantive requirements are established. The applicant should document financing costs, banking expenses and other losses allegedly caused by the wrongful call.

Causation and proof remain essential.

Review Recourse Against the Applicant

If the bank pays under the guarantee, it may seek reimbursement from the applicant under their banking relationship.

The applicant should therefore review facility agreements, security documents and account-setoff provisions immediately.

Bank Account Exposure Should Be Assessed

The issuing bank may hold cash collateral or have rights against company accounts.

The financial consequences of a guarantee call can therefore extend beyond the guaranteed amount itself.

Foreign Companies Should Coordinate Globally

For multinational groups, the guarantee may have been issued through a parent company or international banking facility.

Turkish proceedings should be coordinated with group treasury and foreign counsel where necessary to avoid inconsistent actions.

Immediate Emergency Action Plan

When a demand guarantee is called in Turkey, the applicant should immediately obtain the guarantee and demand documents, confirm whether payment has occurred, identify the payment timetable, analyze documentary compliance, review the underlying contractual events, preserve evidence of alleged abuse, notify the bank appropriately, map any counter-guarantee structure, determine jurisdiction and governing law, evaluate interim judicial protection and prepare recovery claims in parallel if payment cannot be prevented.

Frequently Asked Questions

Can payment under a demand guarantee be stopped in Turkey?

Potentially, but not merely because the applicant disputes the underlying contract. The guarantee wording, circumstances of the call and requirements for interim judicial protection must be evaluated.

Does filing a lawsuit automatically stop the bank from paying?

No. Filing the underlying lawsuit should not be assumed to suspend payment. Separate interim protection may be required.

Is an unfair guarantee call enough for an injunction?

The applicant needs a legally sufficient basis supported by persuasive evidence. Simply describing the call as unfair is not enough.

Can the bank refuse payment because the applicant objects?

An applicant’s unilateral objection does not automatically eliminate an independent payment obligation. The guarantee terms and applicable legal rules must be examined.

What if the beneficiary demanded more than the remaining secured amount?

The guarantee wording, amendments, contractual reductions and supporting records should be reviewed immediately. This may provide an important basis for challenging the demand.

Does an arbitration clause prevent a Turkish court from granting urgent relief?

Not necessarily. The relationship between arbitration and interim judicial measures depends on the contractual structure, applicable arbitration rules and procedural law.

What if a foreign bank issued a counter-guarantee?

The complete guarantee chain must be analyzed. A counter-guarantee can create separate payment obligations and jurisdictional questions.

What happens if the bank has already paid?

The applicant may need to pursue recovery or damages against the beneficiary depending on the underlying legal relationship and circumstances.

Should the company wait for the bank to confirm its final decision?

Delay can be dangerous. If payment is imminent, legal options should be evaluated immediately while simultaneously confirming the bank’s position.

What is the most important first step?

Obtain the exact guarantee, the beneficiary’s demand and confirmation of whether payment has already occurred. An emergency injunction strategy should be built around the guarantee’s actual wording and concrete evidence of the allegedly abusive call, not merely the existence of an underlying contractual dispute.

Client-Focused Legal Support for Demand Guarantee Disputes in Turkey

Demand guarantee disputes require rapid coordination between commercial contract analysis, banking law, interim judicial protection, arbitration strategy and cross-border enforcement. Fırat Fesih Kaya Law Office assists foreign companies, investors, contractors, suppliers and international businesses facing allegedly abusive calls on demand guarantees in Turkey. Lawyer Fırat Fesih Kaya provides legal assistance in reviewing guarantee wording, assessing urgent injunction applications, coordinating underlying contractual and arbitration disputes, responding to bank payment demands and pursuing recovery or compensation claims where payment has already occurred.

Phone:
+90 312 434 22 22

Mobile / WhatsApp:
+90 532 769 22 22

Email:
info@firatfesihkaya.av.tr

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Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey