In international construction, energy infrastructure, and high-value supply agreements in Turkey, Bank Guarantee Letters (Performance Bonds, Advance Payment Bonds, and Demand Guarantees) represent the primary security instrument for commercial creditors. However, when a beneficiary attempts an abusive, fraudulent, or bad-faith call (unfair encashment) despite full contractual performance, corporate contractors face catastrophic liquidity risks. This guide provides a strategic roadmap on the independent nature of bank guarantees under Article 128 of the Turkish Code of Obligations (TCO / TBK) and emergency preliminary injunctions (İhtiyati Tedbir) under Article 389 of the Turkish Civil Procedure Code (CPC / HMK).
1. Legal Classification: Suretyship vs. Independent Bank Guarantee Contract (TCO Art. 128)
Under Turkish legal doctrine and statutory practice, a bank guarantee letter constitutes a Contract to Guarantee the Performance of a Third Party pursuant to Article 128 of the Turkish Code of Obligations No. 6098.
The defining legal characteristic of a bank guarantee is its autonomous and non-accessory (primary) nature. Distinct from suretyship contracts (kefalet):
- Inadmissibility of Contractual Defenses: The issuing bank cannot raise defenses or objections arising from the underlying commercial relationship (such as breach, termination, or set-off between applicant and beneficiary) to withhold payment.
- First Demand Mechanism: Where the guarantee contains a ‘payable immediately upon first written demand’ covenant, the bank must pay without requiring the beneficiary to prove default or judicial adjudication.
2. Abusive and Fraudulent Encashment under Turkish Civil Code Art. 2
Although the bank’s obligation is autonomous, the beneficiary’s right to call the guarantee is strictly circumscribed by the overarching doctrine of Good Faith and Prohibition of Abuse of Rights under Article 2 of the Turkish Civil Code (TCC / TMK).
A demand is legally classified as abusive (haksız nakde çevirme) under the following actionable scenarios:
- Complete Contractual Performance: The contractor has fully executed the underlying obligations, confirmed by statutory final acceptance certificates (kesin kabul).
- Beneficiary’s Own Breach: The beneficiary prevented performance through its own default and opportunistically calls the bond.
- Fraud and Document Forgery: Presentation of falsified draw-down certificates or fraudulent default notices.
3. Securing Emergency Preliminary Injunctions under CPC Art. 389 (İhtiyati Tedbir)
The most immediate and critical defense available to an affected contractor is to petition the competent Turkish Commercial Court (Asliye Ticaret Mahkemesi) for an Urgent Preliminary Injunction Prohibiting the Bank from Executing Payment under Articles 389 et seq. of the Civil Procedure Code.
Statutory requirements to secure a payment-blocking injunction in Turkey:
- Prima Facie Evidence (Yaklaşık İspat): The applicant must present clear documentary evidence (acceptance protocols, expert determinations, formal notices) establishing that the call constitutes a manifest abuse of rights.
- Security Deposit (Counter-Security / HMK Art. 392): The petitioner must as a rule deposit security, in cash or by counter-guarantee, against the damage the beneficiary and third parties may suffer if the injunction proves unjustified. The statute sets no rate: the court fixes the amount, and it may dispense with security, giving its reasons, where the request rests on an official document or other conclusive evidence.
4. Bank Guarantee Types and Dispute Risk Matrix
Standard bank guarantee instruments in cross-border Turkish transactions and their corresponding litigation profiles:
| Guarantee Structure | Commercial Purpose | Statutory Basis | Injunction Success Probability |
|---|---|---|---|
| Bid Bond (Geçici Teminat) | Prevents withdrawal of tender submissions | Public Procurement Law / TBK 128 | Low (Strict tender criteria) |
| Performance Bond (Kesin Teminat) | Secures complete and timely execution | TCO Art. 128 | High (Where completion certificates exist) |
| Advance Payment Bond (Avans) | Secures recovery of unamortized mobilization funds | TCO Art. 128 | Very High (Upon proof of advance offset) |
| Counter-Guarantee (Kontrgaranti) | Foreign bank instruction to Turkish correspondent | URDG 758 / PIL Law 5718 | Complex (Requires cross-border jurisdictional strategy) |
5. Bank Obligations and Liability for Wrongful Payment
The issuing bank is held to a strict standard of Formal Document Examination. If the beneficiary’s draw-down request fails to comply strictly with the terms of the guarantee (e.g., expiry date, required wording, authorized corporate signatories), the bank is legally obligated to reject the call.
Once a valid HMK Art. 389 injunction order is formally served upon the bank, any disbursement made by the bank is unlawful. A bank paying in violation of a court order forfeits its statutory recourse against the corporate applicant.
6. Post-Encashment Restitution (İstirdat) and Commercial Tort Claims
If a fraudulent call is completed before an injunction is obtained, the affected party must immediately initiate a Restitution Lawsuit (İstirdat Davası) and a Tort Compensation Claim before the Commercial Court.
Recoverable damages include:
- Principal Restitution: Complete refund of the encashed guarantee sum with maximum statutory commercial default interest accruing from the date of payment.
- Banking Fees and Credit Limit Impairment: Recovery of penalty commissions, loan interest, and financial holding costs imposed by the issuing bank.
- Commercial Reputation Damages: Compensation for material and moral commercial injury resulting from wrongful default records.
7. Counter-Security: What HMK Art. 392 Actually Says
Counter-security is the most commonly misstated element of an injunction application. Article 392/1 of the Code of Civil Procedure (HMK) sets the rule: the party requesting the interim measure must provide security against the probable damages the other party and third parties would suffer if the applicant turns out to be wrong.
The same paragraph, however, contains two exceptions. Where the request rests on an official document or on other conclusive evidence, or where the situation and circumstances so require, the court may decide not to take security at all, provided it states its reasons expressly. A party benefiting from legal aid is not required to provide security.
The practical consequence is this: the statute fixes no percentage. Figures circulating in the market are estimates drawn from court practice, not a statutory tariff. Building the file on conclusive evidence — delivery protocols, provisional and final acceptance certificates, the beneficiary’s own written statements, independent inspection reports — therefore affects not only the merits but the security burden directly. Where a request is supported by conclusive evidence, applying for an injunction without security is legally available.
Article 392/2 also governs the release of security: it is returned where no compensation claim is filed within one month of the judgment in the main action becoming final, or of the injunction being lifted.
8. Sequence of Action: The First 72 Hours After a Demand
Unfair encashment is measured in hours, not weeks. Once the bank completes its formal examination it pays, and from that moment the file ceases to be an injunction matter and becomes a restitution claim. The sequence is:
- Read the letter itself. Conditional, payable on first demand, or unconditional? The scope of the payment obligation is determined by that wording, not by the underlying contract.
- Serve written notice on the beneficiary and the bank. Record that performance has been rendered, that the demand is unfounded, and that all rights are reserved.
- Assemble the conclusive-evidence file. Acceptance protocols, delivery records, correspondence, progress payment certificates and inspection reports. This file carries both the injunction and the request to be relieved of security.
- Apply to the Commercial Court of First Instance under HMK Art. 389. Frame the relief as a prohibition on payment addressed to the bank, and expressly ask the court to dispense with security under HMK Art. 392/1, giving reasons.
- Have the order served on the bank immediately. The injunction takes effect when it reaches the bank; an order served after payment has been made does not change the outcome.
- If no injunction was obtained, move to restitution. Claim the principal together with commercial default interest, commission and credit-line losses, and additional damages.
What usually determines the outcome in these files is not the strength of the legal argument, but how early the notice and the injunction application were made.
