Cash Collateral for a Turkish Performance Guarantee Is Not Returned: Release Conditions

Quick summary

The issue and the legal distinction

An international contractor may deposit cash with a Turkish bank to support a performance guarantee and later find the balance still blocked. Identify which facilities the collateral secures, whether there are pending claims and whether the beneficiary returned the original or issued a release. An on-demand guarantee’s text and the bank-customer collateral agreement can have different termination conditions.

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What changes the assessment

Obtain an account of secured liabilities and the precise reason for continuing the block. Check automatic extensions, claim presentation and replacement guarantees.

A customer should not assume the bank can release funds merely because the underlying project was completed, but the bank should be asked to identify a valid basis for continued retention. Preserve project acceptance and release communications.

Legal framework

Provisions to examine: TCO Articles 19, 112 and 117; relevant bank contract.

Identify the creditor, debtor and exact source of the payment obligation before calculating a balance. A bank statement proves a movement of money, but its contractual purpose may require invoices, notices and instructions. TCO Article 112 governs contractual breach where applicable; default under Article 117 requires its own analysis.

Security, assignment, payment-services, banking or financial-leasing rules can change the position and should be checked for the actual product. A demand should state what is due, in which currency, and why. Do not treat a contested accounting entry as an automatically enforceable judgment.

Evidence to preserve

1. Cash-collateral and facility agreement.
2. Guarantee text and amendments.
3. Beneficiary release or expiry evidence.
4. Bank’s secured-liability statement.

Keep the original documents, identify their source and record when they were received. Preserve the version effective when the promise was made. Where a document is held by the opponent, request lawful preservation and consider the appropriate procedural route rather than trying to obtain it through unauthorised access.

A hypothetical example

Suppose a performance guarantee expires but the bank says the cash also secures another open facility. Ask for the security scope and actual liability, not just project completion.

If no secured exposure remains, a release claim becomes more focused. A beneficiary’s informal email can help, but should be checked against the guarantee’s actual discharge mechanism.

This illustration explains the distinction; it is not a reported case or a prediction of an outcome.

Practical next steps

Map each release condition to evidence and request release of demonstrably unencumbered funds with an explanation of any remaining hold.

Build the first notice around the particular evidence: cash-collateral and facility agreement, the relevant date, the alleged failure and the requested response. Keep proof of delivery. A preservation request, a demand for performance and a final election of remedies can have different consequences; choose them with the contract and deadlines in view.

Remedies and financial loss

Calculate the blocked principal and legally supported carrying costs or delay loss. A notional commercial borrowing rate is not automatically applicable.

Procedure for a client outside Turkey

Nationality alone does not decide governing law or forum. Review the parties, place of performance, contractual choice, any arbitration provision and applicable mandatory rules. Consumer and employment matters can require protected-forum analysis. Turkish proceedings may also require a mediation step or security analysis depending on the dispute; neither should be assumed applicable to every case.

For a Turkish civil case, counsel can consider whether evidence preservation under HMK Articles 400 onward or interim relief under Articles 389 onward is justified. These are different measures with specific conditions, possible security and follow-up duties. A general fear of nonpayment does not establish entitlement to every injunction. Calculate the actual notice and filing calendar before waiting for a voluntary reply.

Primary legislation and official sources

• Turkish Code of Obligations No. 6098
• Code of Civil Procedure No. 6100
• International Private and Procedural Law No. 5718

Apply the wording and amendments effective for the relevant transaction and procedural step. A historical enactment text does not by itself establish the current rule.

Related English guides

• Debt Collection and Enforcement in Turkey from Abroad
• Foreign-Currency Debts in Turkey: Proof, Exchange Rates and Partial Payments
• WhatsApp and Email Evidence in Turkish Civil Courts: Screenshots, Originals and Proof
• Contract Disputes in Turkey for International Clients

Frequently asked questions