TTSJV W.L.L. and Others v Bapco Refining B.S.C. [2026] EWHC 2047 (TCC)

In refusing an urgent application to restrain a US$484 million bond call, the Technology and Construction Court (TCC) reaffirmed the exceptionally high threshold contractors face when seeking to prevent an employer from exercising its rights under an on-demand performance security arrangement. In the absence of fraud, a “seriously arguable” case of breach of the underlying contract is insufficient.

Background

The dispute arose out of an Engineering, Procurement and Construction (EPC) contract relating to the modernisation and expansion of an oil refinery in Bahrain. The claimant joint venture, TTSJV, together with its parent companies Technip Energies N.V., Técnicas Reunidas S.A. and Samsung E&A Co. Limited, was engaged by Bapco Refining B.S.C. to carry out the works. The project was supported by significant security arrangements, including an on-demand performance guarantee issued by HSBC Bank Middle East Ltd and a retention bond issued by Mashreqbank.

Following delays to the project, Bapco sought to recover delay liquidated damages (LDs) and made a demand under the performance guarantee to the sum of approximately US$484.4 million, or 10% of the contract sum. In response, TTSJV brought an urgent application under section 44 of the Arbitration Act 1996 seeking injunctive relief. The application was made in support of anticipated LCIA arbitration proceedings and sought both to suspend Bapco’s existing demand and to restrain any further calls on the performance guarantee or retention bond pending the determination of the parties’ disputes.

TTSJV sought to resist the call on three grounds. Firstly, that the LDs provisions in the contract were unenforceable penalties because the contract permitted partial takeover of the works without a corresponding reduction in the LDs payable. Secondly, that Bapco’s demand did not comply with the formal requirements under the bond. Thirdly, that the LDs were not yet due and payable because substantial extension of time claims remained unresolved.

Bapco disputed each of those lines of argument. It argued that the authorities establish a particularly stringent test before the court will interfere with a call on an on-demand bond and that TTSJV was unable to demonstrate any contractual prohibition preventing the call from being made.

Decision

Mr Justice Pepperall dismissed the application in its entirety and declined to grant injunctive relief.

1. Unenforceable penalties

TTSJV had argued that the LDs were unenforceable penalties on the basis that the contract allowed for partial take-over of the works without providing a corresponding reduction in the LDs recoverable by Bapco. This, it contended, meant that the LDs could operate disproportionately and bear no reasonable relationship to any legitimate commercial interest, and could amount to unjust enrichment.

The Court rejected that argument. Applying the principles established in Cavendish Square Holding BV v Makdessi[i], the Court emphasised the strong presumption that LD provisions negotiated between sophisticated commercial parties are enforceable. In the context of a major international EPC project, TTSJV had failed to establish that the LD regime was extravagant, unconscionable or otherwise operated as a penalty.

1. Non-compliance with formal requirements

TTSJV also argued that Bapco’s demand did not comply with the requirements of the relevant security instruments and the Uniform Rules for Demand Guarantees (“URDG”). It alleged defects in the form of the demand and in the supporting documentation accompanying it.

The Court rejected those submissions. On the proper construction of the bond documentation and the applicable URDG provisions, Bapco’s demand satisfied the required formalities. There was therefore no procedural defect that could justify restraining the call on the performance guarantee.

• LDs were not due and payable

Finally, the Court rejected the contention that the LDs were not yet due because of unresolved extension of time claims. On the Court’s reading of the EPC contract, the parties had expressly agreed that determinations concerning extensions of time were to be given effect pending any subsequent arbitral challenge. Accordingly, Bapco was entitled to proceed on the basis of its rejection of TTSJV’s extension of time claims unless and until an arbitral tribunal determined otherwise. The LDs were therefore due and payable for present purposes.

Having failed to establish any contractual prohibition on the bond call, TTSJV’s application was dismissed.

Commentary

TTSJV v Bapco confirms that there remains a very high hurdle when attempting to resist an on-demand bond call. Mere doubts about the employer’s underlying entitlement are unlikely to suffice. Unless it can be clearly demonstrated that the contract prohibits the demand, the courts will generally preserve the autonomy of the guarantee and leave the substantive dispute to arbitration or litigation.

The TCC’s treatment of the penalty argument also reinforces the continuing reluctance of the courts to interfere with liquidated damages provisions negotiated between sophisticated commercial parties. Challenges based on proportionality or alleged unfairness remain difficult, particularly in large-scale infrastructure projects where certainty of risk allocation is commercially important.

Finally, the decision highlights the importance of carefully drafted interim dispute resolution mechanisms. Where a contract requires parties to comply with contractual determinations pending final resolution of disputes, those provisions may have immediate and significant consequences for cashflow and security rights. In practice, contractors should assume that disputes over extensions of time will not necessarily prevent an employer from exercising its rights under performance security pending the final determination.

If you have any questions arising out of the drafting of provisions requiring bonds and guarantees, or require assistance in respect of such bonds and guarantees, please contact James Vernon and Ben Boulter.

[i] [2015] UKSC 67, [2016] A.C. 1172