Injunctions against bond calls: A reminder of the high threshold - TTSJV V BAPCO

Performance bonds (or performance guarantees) are the “lifeblood of international commerce” and the English courts remain reluctant to intervene when a beneficiary seeks to call on one. In TTSJV WLL & Ors v BapCo Refining BSC [2026] EWHC 2047 (TCC), the Technology and Construction Court refused an urgent application to suspend a demand on a US$484 million performance guarantee arising from a delayed US$4.2 billion oil refinery modernisation project in Bahrain. The decision clarifies the very high threshold that must be met to prevent beneficiaries from calling on performance guarantees and provides useful guidance on the interaction between court intervention and emergency arbitration.

Key Takeaways

• A clear contractual basis is required to prevent a bond call: To restrain a beneficiary from calling on a performance bond, absent fraud, a claimant must positively establish that the beneficiary is precluded from making the call by the terms of the underlying contract. A “strongly arguable” or “seriously arguable” case of breach is insufficient.

• Section 44 of the Arbitration Act 1996 can fill gaps in emergency arbitration: Where an emergency arbitrator might not be appointed quickly enough to grant effective relief, the court may grant interim relief under section 44 until the arbitrator can act.

Background

The dispute arose from a US$4.2 billion EPC contract (the “Contract”) for the modernisation of an oil refinery in Bahrain between BapCo Refining B.S.C. (Closed) (“BapCo”) and a consortium of contractors, but later novated to TTSJV W.L.L. (“TTSJV”).  The Contract was governed by English law with LCIA arbitration seated in London.

BapCo claimed that TTSJV had failed to achieve a key milestone in October 2025 and so it was entitled to liquidated damages of US$100 million plus daily delay damages. TTSJV argued it was entitled to an extension of time following a fatal explosion on 2 May 2025, for which it said BapCo was responsible.

On 18 May 2026, BapCo formally demanded payment of delay liquidated damages of US$484,406,323 (being the contractual cap on such damages under the Contract). On 21 May 2026, it called on a performance guarantee issued by HSBC Bank Middle East Ltd. That same day, TTSJV asked the LCIA to appoint an emergency arbitrator.

The court's jurisdiction: Section 44 Arbitration Act 1996

Due to concern that HSBC would pay out on the bond before an arbitrator could be appointed and before Eid, TTSJV and its parent companies applied to the English court for an urgent injunction to:

1. Require BapCo to suspend its demand on the performance guarantee; and

2. Restrain BapCo from making any further demand on the performance guarantee, pending further order of the court or of an LCIA-appointed arbitrator.

The application engaged section 44 of the Arbitration Act 1996, which permits the court to grant interim relief in support of arbitral proceedings. Pepperall J accepted jurisdiction on the basis that there was a very real prospect that an emergency arbitrator might not be appointed and therefore be unable to grant effective relief before payment was made, but made clear that any relief would only hold the ring until the emergency arbitrator could take over, emphasising the court’s supportive role.

The law relating to bond calls

TTSJV argued that the court could grant injunctive relief to prevent a beneficiary from calling on a bond where there is a “strongly arguable case” that, by reason of the terms of the underlying contract, the beneficiary is precluded from making such a call, relying on the decision in Simon Carves Ltd v Ensus UK Ltd[1].

In Simon Carves, Sirius International Insurance Co v FAI General Insurance Ltd[2] and Permasteelisa Japan KK v Bouyguesstroi[3], the court required the applicant to “positively establish” that the beneficiary was not entitled to call. However, in Doosan Babcock Ltd v Comercializadora de Equipos y Materiales Mabe Limitada[4], the court applied a less rigorous “strong case” test.

Resolving the tension in the authorities, Pepperall J confirmed that, contrary to TTSJV’s argument, the decision in Simon Carves was not authority for the proposition that a strong arguable case was enough to justify an injunction preventing a demand on a performance guarantee. Rather, the judge agreed with Stuart-Smith J’s analysis in MW High Tech Projects UK Ltd v Biffa Waste Services Ltd[5]: absent fraud, the only basis for restraining a call is where it has been clearly established that the beneficiary is precluded from calling by the terms of the contract. A “seriously arguable case” of breach is not sufficient. To the extent that Doosan suggested otherwise, Pepperall J declined to follow it.

The grounds for relief 

TTSJV sought to restrain the call on the performance guarantee on three grounds, all of which were unsuccessful.

Ground 1: The penalty argument

The Contract permitted BapCo to use the works prior to take-over and to retain any revenue generated by operation of the plant. The contract did not, however, contain any corresponding clause adjusting the delay liquidated damages. TTSJV argued that in such circumstances the liquidated damages clause did not protect a legitimate interest but provided BapCo with an unjustified windfall.

Pepperall J applied the Supreme Court’s decision in Cavendish v Makdessi, which emphasised that the penalty rule is an interference with freedom of contract and that, in a negotiated contract between properly advised parties of comparable bargaining power, there is a strong initial presumption that the parties are the best judges of what is legitimate. The applicable test is whether the sum stipulated is “exorbitant or unconscionable” when regard is had to the innocent party’s interest in performance.

The court also considered O’Farrell J’s judgment in Eco World – Ballymore Embassy Gardens Co Ltd v Dobler UK Ltd[1]. In that decision, the court found that it was not automatically fatal to enforceability for a liquidated damages clause not to reduce the rate of damages to reflect partial possession, but it was a factor in the balance.

The court held that TTSJV had not clearly established that the liquidated damages clause was an unenforceable penalty. The most that could be said was that TTSJV had established a “potentially arguable case”, which was insufficient.

Ground 2: The compliance argument

TTSJV argued that the demand under the performance guarantee, which incorporated the Uniform Rules for Demand Guarantees (“URDG”), was not compliant because it did not include a statement by BapCo indicating TTSJV’s breaches of its obligations. However, it transpired that the demand had in fact been supported by a separate statement of claims, as required by article 15(a) of the URDG. This was fatal to the argument.

Ground 3: The due and payable argument

TTSJV argued that delay liquidated damages were only due and payable to the extent that the failure to achieve completion was not excused by events for which TTSJV was entitled to an extension of time. However, the Contract required the parties to give effect to determinations “even where a notice of dissatisfaction is served” and “notwithstanding that a dispute has been referred to be determined”. BapCo had rejected TTSJV’s extension of time claim in a determination advancing seven specific grounds for rejection. TTSJV made no attempt to engage with the detail of that determination. The court held that TTSJV had failed to make out even a strongly arguable case, let alone clearly establish that delay liquidated damages were not due and payable.

Conclusion

This decision reinforces the very high threshold for obtaining injunctive relief against a bond call. Absent fraud, a “strongly arguable” or “seriously arguable” case of breach of the underlying contract is not sufficient. The applicant must positively establish that the beneficiary is precluded from calling by the express terms of the contract. That can be a difficult hurdle to clear at an urgent interim stage.

¹ [2011] EWHC 657 (TCC) 
² [2003] EWCA Civ 470
³ [2007] EWHC 3508 (TCC)
⁴ [2013] EWHC 3010 (TCC)
⁵ [2015] EWHC 949 (TCC)
⁶ [2021] EWHC 2207 (TCC)