Background
BapCo engaged a consortium under an English-law EPC contract to modernise its Bahrain oil refinery for approximately US$4.2 billion. The contract required LCIA arbitration seated in London and was later novated to TTSJV. A dispute arose over delayed completion: BapCo claimed delay liquidated damages, while TTSJV asserted an entitlement to extensions of time arising from a May 2025 explosion and its aftermath.
After rejecting TTSJV’s extension claim, BapCo demanded US$484,406,323 in delay liquidated damages and called an HSBC performance guarantee. TTSJV and its parent companies sought urgent, pre-action relief under section 44 of the Arbitration Act 1996 requiring BapCo to suspend that demand and restraining further calls on the performance guarantee or a Mashreqbank retention bond until an LCIA emergency arbitrator could act.
The Court’s Holding
Mr Justice Pepperall accepted that the matter was sufficiently urgent for the court to act temporarily in support of anticipated arbitration because the bank might pay before an emergency arbitrator could provide effective relief. He nevertheless refused the injunction. Absent fraud, a seriously arguable case that the beneficiary breached the underlying contract is insufficient: the applicant must clearly establish that the contract precluded the bond call.
TTSJV did not meet that standard. It failed clearly to establish that the liquidated-damages regime was an unenforceable penalty; BapCo’s demand followed the guarantee’s prescribed form and was supported by the statement required by the incorporated Uniform Rules for Demand Guarantees; and TTSJV did not show that the damages were not due and payable. The contract also required the parties to give effect to BapCo’s determination rejecting the extension claim while any challenge remained pending. TTSJV abandoned its fourth argument after the contract was shown expressly to permit use of the retention bond for claims including liquidated damages.
Key Takeaways
- A court may provide urgent, short-term support under section 44 when an emergency arbitrator cannot act effectively before security is likely to be paid.
- Without fraud, an applicant seeking to restrain a beneficiary’s bond call must clearly establish a contractual prohibition; a merely seriously arguable underlying breach is not enough.
- Commercial parties challenging liquidated damages or bond demands must establish the relevant contractual and factual case with evidence, even on an urgent application.
Why It Matters
The decision reinforces the autonomy and cash-like function of on-demand security in international projects. Courts will not ordinarily interrupt payment merely because the parties dispute delay, extensions of time, or liability under the underlying construction contract.
It also clarifies the demanding threshold for injunctions against beneficiaries and illustrates how “pay now, argue later” determination clauses can undermine attempts to suspend bond calls pending arbitration.