Key takeaways
Bridging emergency arbitration gaps
Court may grant urgent relief before arbitrator appointed but in limited circumstances.
Restricting calls on performance bonds
Requires a clear contractual prohibition, not merely arguable breach.
Maintaining trust in international commerce
Courts reluctant to interfere as performance bonds key for global business.
TTSJV WLL & Ors v BapCo Refining BSC [2026] EWHC 2047 (TCC) (04 August 2026)
In this case, the Technology and Construction Court has provided helpful clarification on two issues:
the scope for the Court to support arbitral proceedings where an emergency arbitrator is yet to be appointed and is practically not able to grant relief and
the circumstances in which the Court will grant injunctive relief to restrain a call on a performance bond.
The background facts
An Engineering, Procurement and Construction Contract (EPC Contract) was initially entered into between BapCo and a consortium of companies, but later novated to a joint venture vehicle, TTSJV.
The EPC Contract concerned a USD $4.2 billion update of BapCo’s oil refinery in Bahrain. It was governed by English law and provided for disputes to be resolved in London-seated LCIA arbitration.
A dispute arose as to whether TTSJV was in breach of the EPC Contract. BapCo asserted that TTSJV failed to achieve ‘milestone 12’ by 26 October 2025 and as a result was liable to pay liquidated damages in excess of USD $484 million (Delay Liquidated Damages).
TTSJV averred that it was entitled to extensions of time following a fatal explosion at BapCo’s refinery on 2 May 2025, that BapCo was responsible for the accident and that site restrictions and repair works led to delay. BapCo rejected the extension claim. TTSJV indicated its intention to pursue a claim through arbitration.
On 18 May 2026, BapCo formally demanded payment of the Delay Liquidated Damages and on 21 May 2026 made a call on a performance guarantee issued by HSBC (Performance Bond). On the same day TTSJV sought the appointment of an emergency arbitrator but had concerns that HSBC might pay some or all of the sum demanded by BapCo before that appointment.
TTSJV and its parent companies therefore sought an injunction to suspend BapCo’s demand for payment of the Delay Liquidated Damages on the Performance Bond and to restrain BapCo from making any further demand on the Performance Bond.
The Court decision
S.44 of the Arbitration Act 1996 (1996 Act) provides that the Court may exercise its powers in support of arbitral proceedings in cases of urgency and where the tribunal or emergency arbitrator has no power or is unable to act effectively.
In this case, the Court thought there were good grounds for believing that, absent injunctive relief, there was a very real prospect that an emergency arbitrator might not be appointed and practically able to grant relief before funds were released under the Performance Bond. It was therefore an urgent application and the Court could hear the application to support anticipated arbitral proceedings. However, any relief granted would have to be on a short-term basis to hold the ring until an emergency arbitrator could act.
The applicable law relating to a call on a performance bond
The Court rejected the applicants’ argument that the Court could restrain a beneficiary of a bond from making a call where there was a strongly arguable case that such a call would be a breach of the underlying contract.
Irrevocable obligations assumed by banks under performance bonds are ‘the lifeblood of international commerce’. These obligations are independent of and collateral to the underlying rights and obligations of any contract. The Court will only interfere with such obligations in exceptional circumstances. Trust in international commerce could otherwise be irreparably damaged.
Absent clear evidence of fraud, therefore, relief could only be granted if the applicants could positively establish that BapCo was precluded from making the call by the terms of the underlying contract. This is a higher threshold than showing a strongly arguable breach.
Instances where injunctive relief could be ordered would include circumstances where:
a party had given a contractual undertaking not to draw down on a letter of credit except with written consent
the underlying contract clearly and expressly provided that a bond would be null and avoid upon the issue of an Acceptance Certificate and would thereafter be immediately returnable to the contractor.
Application of the law in this case
The Court refused the application and declined to order the relief sought. The applicants sought to resist the call on four grounds all of which were rejected.
Ground 1: The liquidated damages clause amounted to an unenforceable penalty
The applicants argued that the EPC Contract permitted BapCo to retain revenue generated by operation of the plant without any corresponding adjustment of the Delay Liquidated Damages and, in doing so, did not protect a legitimate interest and provided BapCo with an unjustified windfall.
The Court held that a strong initial presumption must be against finding that the carefully negotiated provisions of the EPC Contract between sophisticated parties amounted to an unenforceable penalty. The issue was highly fact sensitive and not one on which a determination could be made on an urgent interim injunction application heard at very short notice with limited evidence from only one side.
At most, the applicants had established a potentially arguable case that the Delay Liquidated Damages were penal but had not evidenced that BapCo was clearly precluded from calling on the Performance Bond.
Ground 2: The call on the Performance Bond did not comply with the formal requirements of the Performance Bond
The Performance Bond expressly incorporated the Uniform Rules for Demand Guarantees (URDG). The applicants argued that in breach of article 15(a) of the URDG, the demand was not supported by a statement from BapCo identifying TTSJV’s breaches of its obligations.
The Court found that the Performance Bond specified the form in which the demand was to be provided and BapCo’s demand was compliant. That form did not expressly require BapCo to identify the alleged breaches that triggered the demand. It was in any event undisputed that the demand had been supported by a separate statement setting out the details of BapCo’s claims as required by article 15(a). Accordingly, there was no breach of the URDG.
Ground 3: The Delay Liquidated Damages claimed were not due and payable
The applicants further contended that TTSJV’s failure to meet milestone 12 was excused by the defined Relevant Events for which it was entitled to an extension of time. The Delay Liquidated Damages were therefore not due and payable.
The applicants acknowledged that there was no clause in the EPC Contract that provided that unless or until the extension of time claim was resolved, liquidated damages would not be due and owing. Rather it contained a provision which required the parties to give effect to BapCo’s determination of the extension claim even where a notice of dissatisfaction was served and notwithstanding any referral of the dispute to arbitration.
In addition, BapCo’s determination of the extension claim was supported by 34-page report which advanced seven specific grounds for rejection. The applicants failed to grapple with those grounds in their evidence or submissions.
It was therefore held that TTSJV failed to make out even a strongly arguable case, let alone to meet the required higher threshold of clearly establishing that the Delay Liquidated Damages were not due and payable.
Ground 4: The Performance Bond was not security against the payment of Delay Liquidated Damages
The applicants sought to argue that, on its terms, the Performance Bond was not security against the payment of the Delay Liquidation Damages. However, the EPC Contract expressly permitted BapCo to make a call in respect of claims that it was entitled to set-off or deduct including expressly claims for liquidated damages. However, this ground was abandoned by the applicants in reply submissions.
In conclusion, BapCo was not precluded from making a call on the Performance Bond.
Comment
The decision helpfully clarifies that the availability of emergency arbitration does not preclude the Court from intervening to provide support to the arbitral process under s.44 of the Arbitration Act 1996, but that intervention would be limited to preserving the status quo pending the appointment of an arbitrator and their ability to practically act.
The Court has also highlighted that the bar to restrain a call under a performance bond is high and must be supported by evidence to positively establish that a party is contractually precluded from making the call.
For more information on how our International Arbitration experts can support you, contact us today.
