Performance Guarantee in Bangladesh: Can a Call Be Stopped in 2026?

How a performance guarantee in Bangladesh works on a construction project

A performance guarantee in Bangladesh is built to be paid before anyone decides who was right on the project. The employer presents a written demand, the bank checks it against the guarantee and pays, and the contractor's arguments about delay, defects or wrongful termination go to the adjudicator, the tribunal or the court later. Stopping that payment is possible, but only on narrow grounds, and Bangladeshi courts disagree about how far the Arbitration Act 2001 widens them.

This guide is for contractors, employers, procuring entities and lenders on construction projects. It explains what performance, advance payment and retention security secure under the October 2025 public works documents and FIDIC contracts, then whether a call can be stopped: the autonomy principle, fraud, unconscionability and irretrievable injustice, contractual limits on the employer, injunctions, and interim measures under sections 7A and 21 of the Arbitration Act 2001. Standby letters of credit and counter-guarantee chains are covered in separate TRW guides.

Summary: A construction performance guarantee in Bangladesh is normally an irrevocable, unconditional demand guarantee. The bank must pay a demand that complies with the guarantee's terms and arrives before expiry, and Appellate Division authority since 1981 allows a court to restrain payment only for fraud of which the bank has notice. Disputes about the works do not stop a call. The realistic routes are a demand that fails the guarantee's own terms, clear documentary fraud, an advance payment call that ignores amortisation, a contractual bar on the employer's right to call, and section 7A interim relief against the beneficiary, which some High Court Division benches have granted and others refuse.

Key point: The public works contract, not the guarantee, is where most contractor protection now sits. Under the October 2025 BPPA works conditions the procuring entity must notify the contractor of any claim on the performance security, may claim only after a notified breach or unpaid amount has continued for fourteen days, and must not claim except for amounts to which it is entitled under the contract. Those terms do not bind the bank, but they give the contractor a case against the employer itself, which is where the High Court Division's protective arbitration decisions have directed their orders.

At a glance

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Table of Contents

Three instruments, three relationships

Every performance guarantee in Bangladesh sits on three separate contracts. The works contract between employer and contractor sets out when the employer may claim. The guarantee between bank and employer sets out what the bank must pay and against which documents. The counter-indemnity between contractor and bank, usually in the facility letter, sets out what the contractor must repay. Most disputes about stopping a call come down to confusing the first contract with the second.

The Contract Act 1872 supplies the vocabulary. Section 126 defines a contract of guarantee as a contract to perform the promise, or discharge the liability, of a third person in case of his default.[8] Construction instruments, however, are rarely pure suretyships. They are demand guarantees: promises to pay on presentation of a demand, whether or not default is later proved.

In Kamrul Ashraf Khan v BCIC (9 July 2025), the beneficiary's counsel relied on the definition in Article 2 of the ICC Uniform Rules for Demand Guarantees (URDG 758), a signed undertaking providing for payment on presentation of a complying demand, and the High Court Division accepted that the guarantees were separate contracts encashable at any time before expiry.[4]

Performance security

A performance guarantee in Bangladesh secures completion. Under the BPPA's national standard tender document for works above BDT 5 crore (e-PW3, October 2025), performance security is five per cent of the contract price, furnished in Taka as a bank draft, pay order or irrevocable unconditional bank guarantee from a scheduled bank in the prescribed form "without any alteration".[7] It must be furnished within seven, ten or fourteen working days of the notification of award depending on the estimated cost, by reference to Rule 123(7) of the Public Procurement Rules 2025, and must remain valid until 28 days beyond the intended completion date.[7]

Advance payment guarantees

An advance payment guarantee secures repayment of a mobilisation advance. The e-PW3 conditions require an irrevocable unconditional guarantee equal to the advance, recommend a maximum advance of ten per cent of the original contract price, and provide that the guarantee amount "shall be progressively reduced by the amounts amortized by the Contractor".[7] Of the three instruments, it is the one most often called for more than is actually owed.

Retention and the contractual security cap

Retention is not a bank guarantee, but it belongs to the same package. The e-PW3 data sheet deducts five per cent from each interim payment certificate as retention and caps the combined "Contractual Security", performance security plus retention, at ten per cent of the contract price.[7] Higher retention, up to twenty per cent, may be recommended where a tender is front-loaded. Where a government-owned enterprise wins the tender, no performance security is required and ten per cent retention is taken instead.[7] Retained amounts are kept to meet claims during the defects liability period and returned once the defects correction certificate issues.[7]

The table reflects the October 2025 documents. Contracts tendered under the 2008 Rules, private EPC contracts and donor-funded projects follow their own forms, so always check the operative tender document.

Why a performance guarantee in Bangladesh is paid first

The autonomy principle is settled at the highest level. In Uttara Bank v Macneill & Kilburn, 33 DLR (AD) 298, decided in 1981, the Appellate Division held that a bank guarantee could not be the subject of an injunction except for fraud of which the bank has notice.

The High Court Division restated that rule in July 2025 in Kamrul Ashraf Khan, adding Nuvista Pharma v National Board of Revenue, 65 DLR (AD) 302, for the proposition that an injunction on a bank guarantee cannot be sustained.[4] Gooryonly (BD) Textile v Chatkar Information Holding, 54 DLR (AD) 70, and Smart Apparels v Hanvit Bank, 57 DLR (AD) 194, are cited to the same effect.[3]

The principle has commercial content. In Unique Cement Industries v Bangladesh Bank (8 May 2025), the High Court Division treated performance guarantees, bank guarantees and letters of credit as "cognate" instruments, held that disputes about performance of the underlying contract are for an action in damages, and directed Bangladesh Bank to take action for encashment within thirty days.[6] Our guide to bank guarantee encashment in Bangladesh traces the full line of authority; this guide applies it to construction.

What the bank looks at

The bank examines the demand against the guarantee, not the project. For a public works performance guarantee in Bangladesh, the e-PW3 performance guarantee form obliges the bank to pay "without cavil or argument" up to the guaranteed sum on receipt of the procuring entity's "first written demand accompanied by a written statement that the Contractor is in breach of its obligation(s) under the Contract conditions", without the procuring entity "needing to prove or show grounds or reasons". The demand must be received at the stated office on or before the validity date.[7]

That wording gives the contractor four documentary questions, each of which works with the autonomy principle rather than against it. Was the demand received at the named office before expiry? Does it carry the written statement of breach? Is it signed by someone authorised to sign for the beneficiary? Is the amount within the guaranteed sum, as reduced? A demand that fails any of them is not a complying demand, and a bank that pays one risks its own right to reimbursement, because section 145 of the Contract Act entitles a surety to recover only what it has "rightfully paid".[8]

Wording that closes the argument

Commercial guarantees can be drafted even more tightly than the public forms. In M/s Haji Traders v Aman Cement Mills (21 January 2024), the guarantee stated that the beneficiary's demand would be "conclusive proof of default", that payment would be made within three calendar days, and that the bank's obligation was "independent from the obligation of the Principal". The High Court Division held that wording decisive.[5] Contractors negotiating private EPC guarantees should resist "conclusive evidence" language for exactly that reason.

Advance payment guarantees: the amortisation argument

Advance payment calls deserve separate treatment, because the employer's entitlement shrinks with every interim payment. Under e-PW3, the advance is recovered by proportionate deductions from payments due, following a schedule in the particular conditions; the guidance note suggests amortisation should start when progress payments reach twenty per cent of the contract price and finish at eighty per cent.[7] If amortisation is incomplete 28 days before the guarantee expires, the contractor must extend it, and the guarantee is released once the advance is fully amortised.[7]

The difficulty is that the reduction lives in the general conditions, not in the guarantee. The prescribed e-PW3 advance payment guarantee form promises to pay "any sum or sums not exceeding in total" the stated amount on first written demand, and says nothing about automatic reduction.[7] A bank reading only its own instrument may therefore see a demand for the full face value as compliant, even after most of the advance has been deducted from interim certificates.

Contractors can close this gap in three ways. First, ask the issuing bank to amend the guarantee amount each time a payment certificate records amortisation, and give the bank and the employer copies of each certified deduction. Second, if a full-value demand arrives after substantial amortisation, write to the bank with the certified figures: a beneficiary that demands repayment of an advance it has already recovered is asserting something its own certificates contradict, which is the kind of documentary evidence a fraud argument needs. Third, in any section 7A application, frame the relief as restraining the employer from receiving more than the unamortised balance, not as freezing the whole instrument.

Variation and the discharge of the surety

Contractors sometimes argue that a change to the works discharged the guarantee. Section 133 of the Contract Act discharges a surety where the principal contract is varied without its consent.[8] That rule was written for suretyships. The e-PW3 advance payment form expressly waives release by contract changes, and the conditions adjust the performance security when variations move the contract price by more than twenty per cent.[7] A discharge argument is weak against a demand guarantee and should not be the lead point.

Can a performance guarantee in Bangladesh be stopped?

Yes, but only on a short list of grounds, each proved by documents: a non-complying demand, clear fraud, a contractual bar on the employer's right to call, and, more weakly, foreign-law arguments Bangladeshi courts have not adopted.

Fraud of which the bank has notice

Fraud is the one exception the Appellate Division recognises. The Bangladeshi formulation is precise: fraud "of which the bank has notice".[4] The contractor must therefore show not only that the demand is dishonest, but that the bank was told, with documents, before it paid. In Kamrul Ashraf Khan the High Court Division refused relief in part because the carrier did not allege fraud at all; its complaints about warehouse refusals, pandemic disruption and unpaid bills were contract arguments.[4]

When a performance guarantee in Bangladesh is called on a construction project, credible fraud evidence usually takes one of four forms: a statement of breach made after the employer issued a completion or taking-over certificate; a demand for an advance the employer's own certificates show as recovered; a demand supported by a forged or backdated engineer's certificate; or internal correspondence admitting that no breach has occurred and the call is being made for leverage. Each is a document a bank can read quickly.

Irretrievable injustice: the Indian exception

The Supreme Court of India allows a restraint for irretrievable injustice, but only where reimbursement would be impossible if the applicant later succeeds; apprehended difficulty in recovery, financial hardship or a pending arbitration is not enough, and fraud must vitiate the very foundation of the guarantee.[14]

Bangladeshi decisions have not adopted irretrievable injustice as an independent ground. Kamrul Ashraf Khan describes fraud as the only exception, and Haji Traders says that "under no circumstances" can an injunction be granted against encashment of an independent guarantee.[4] [5] Indian authority is persuasive at most, and best used to support a fraud case, for example where an offshore beneficiary has no assets in Bangladesh.

Unconscionability: the Singapore exception

Singapore goes further. Its Court of Appeal in BS Mount Sophia v Join-Aim [2012] 3 SLR 352 confirmed that a call on a performance bond may be restrained if it is unconscionable, short of fraud, but the applicant must show a strong prima facie case of conduct lacking in good faith; a mistaken but honest call is not unconscionable.[13] Construction contracts governed by Singapore law, or arbitrated at SIAC, may expose an employer to that test in the courts of the seat. Bangladeshi courts have not adopted it, and a Bangladeshi application built on unconscionability alone is unlikely to succeed.

A contractual bar on the employer

The most useful construction-specific argument does not attack the guarantee at all. It targets the employer, on the basis that the works contract limits when the employer may call. In Simon Carves v Ensus [2011] EWHC 657 (TCC), the English Technology and Construction Court held that fraud is not the only ground for restraining a call: where the underlying contract clearly and expressly prevents the beneficiary from making a demand, the court can restrain it, and at the interim stage the applicant needs only a strong case.[11] There, the contract said the bond became null and void on the acceptance certificate, except for previously notified claims.[11]

FIDIC contracts contain similar limits. Sub-Clause 4.2 of the 1999 Red Book, substantially repeated in the 2017 edition, prevents the employer from claiming except for amounts to which it is entitled under the contract and unless a listed trigger event has occurred, and requires it to indemnify the contractor for a claim it was not entitled to make.[12] The South African Supreme Court of Appeal held in 2020 that a FIDIC employer need not prove its entitlement when demanding, but must hold a bona fide belief that it is entitled.[12]

The October 2025 public works conditions have the same structure. GCC 74.3 requires the procuring entity to notify the contractor of any claim against the issuing bank. GCC 74.4 allows a claim only if, for fourteen days or more, the contractor is in breach and has been duly notified, has not paid a notified amount due, or has failed to extend the security. GCC 74.5 ties the amount of a breach-based claim to compensation under GCC 92.1.

GCC 74.8 then provides that the procuring entity "shall not make any claim under the security, except for amounts to which the Procuring Entity is entitled under this Contract".[7] These clauses do not bind the bank. They are, however, enforceable promises by the employer, and they give a contractor a basis for relief against the procuring entity that does not depend on proving fraud.

Injunctions in Bangladeshi courts

Outside arbitration, a contractor sues for a declaration and seeks a temporary injunction under Order 39, rules 1 and 2 of the Code of Civil Procedure. The usual tests apply in form, but in guarantee cases the Appellate Division decisions substitute the fraud test. The High Court Division in Pubali Traders described those Appellate Division cases as decisions on Order 39 applications.[3] Our guide to temporary injunctions in Bangladesh covers the general procedure.

Ad interim orders and the expiry trap

A short ad interim order can turn into a liability. In Unique Cement, the beneficiary demanded payment on 20 December 2015; an injunction obtained in January 2016 led the bank to refuse payment; and the guarantee expired on 18 April 2016 while the injunction was in force. Nine years later the High Court Division held the demand timely, described the injunction as "not an informed decision", and directed Bangladesh Bank to secure encashment.[6] For an employer, the lesson is to demand early. For a contractor, it is that letting a guarantee run out under an interim order does not end the exposure if a valid demand was already made.

Writ petitions against procuring entities

Where the employer is a ministry or statutory body, a writ under Article 102 of the Constitution may be considered if the call follows a decision taken without lawful authority. Writs do not reopen contract disputes. Our constitutional and writ litigation practice advises on when a writ is the right tool.

The Commercial Courts Act 2026

The Commercial Courts Act 2026 (Act No. 23 of 2026, dated 10 April 2026) brings most guarantee disputes into the new commercial courts. Its list of commercial disputes includes ordinary transactions of bankers and financial institutions, including the enforcement and interpretation of commercial instruments; construction and infrastructure contracts and related tenders; and arbitration agreements, arbitrations and awards under the Arbitration Act 2001.[9] Pending civil proceedings, including those under the Arbitration Act, transfer to the commercial court with territorial jurisdiction once one is constituted.[9]

Three provisions matter for an urgent call. Pre-suit mediation under section 7(1) applies only where no urgent interim relief is involved. Section 6(1) bars appeals against anything other than a commercial court's final judgment, leaving revision as the route against an interim order. And section 6(2) allows an aggrieved party sixty days to appeal or file a revision in the High Court Division.[9] Our guide to the Commercial Courts Act in Bangladesh explains how those courts operate.

Arbitration interim measures under the Arbitration Act 2001

The e-PW3 conditions send disputes through amicable settlement, an adjudicator and then arbitration under the Arbitration Act 2001.[7] The Act offers interim relief from the court under section 7A and from the tribunal under section 21.

What section 7A provides

Section 7A allows the court, or the High Court Division in an international commercial arbitration, to make interim orders on a party's application before or during the arbitration and until the award is enforced under section 44 or 45. The listed orders include protective measures over goods or property included in the arbitration agreement, an ad interim injunction, appointment of a receiver and "any other interim protective measures" that appear reasonable or appropriate.[1] Notice to the other side is required unless the purpose would be frustrated by delay.[1] Section 53 then confines all later applications arising out of the same arbitration agreement to the court that received the first one.[1]

The restrictive line

Several High Court Division decisions hold that section 7A cannot be used to stop a performance guarantee in Bangladesh.

In Haji Traders, a Division Bench vacated a stay and held that the applicant could not invoke section 7A against the issuing bank, a stranger to the arbitration agreement, and that an order against a bank guarantee does not concern the "subject matter" of the arbitration.[5] In Kamrul Ashraf Khan, another Division Bench upheld a District Judge's refusal of relief and applied the Appellate Division fraud test.[4] Single Bench decisions in Southern Solar Power v BPDB and ABP India v Power Grid Company of Bangladesh, 73 DLR 362, took the same view.[3]

The protective line

Pubali Traders v Ministry of Food (9 December 2025) went the other way. A wheat supplier had furnished a five per cent performance guarantee of US$1,196,107.50 in June 2010. In a 2010 revision the High Court Division had restrained encashment until arbitrators were appointed. In February 2025 the tribunal rejected both sides' claims but stated that the respondent "may encash the Performance Guarantee in usual course", and the Ministry wrote to the bank ten days later without applying to enforce the award.[3]

The Division Bench held that the Appellate Division cases concerned Order 39 applications, that the Arbitration Act is a special law that prevails over general law, and that the guarantee was part of the contract because the contract itself referred to it. Following an earlier Division Bench decision in Summit Bibiyana Power v Bangladesh, 5 CLR (HCD) 354, and preferring it to the Single Bench decisions, it restrained the Ministry from encashing until the District Judge decided the pending application to set aside the award, and directed that application be decided within six months.[3]

Reading the split

Three features of the protective decisions matter. The orders ran against the beneficiary, not the bank. They were tied to a defined arbitral step: the tribunal's first sitting in Summit Bibiyana, the decision on the set-aside application in Pubali Traders.[3] And in Pubali Traders the tribunal had itself ruled on the guarantee, so the Ministry was in substance enforcing an award without going through section 44.

No Appellate Division decision resolving the conflict appears in the judgments reviewed for this guide. Until one does, a section 7A application should lead with compliance, fraud or contractual-bar evidence and treat the arbitration argument as reinforcement, not the foundation. Our guide to setting aside an arbitral award in Bangladesh explains the challenge that sat behind the Pubali Traders order.

Interim measures from the tribunal

Section 21 allows the tribunal, unless the parties agree otherwise, to order a party to take any interim measure of protection it considers necessary in respect of the subject matter of the dispute, with no appeal against the order. The tribunal may require security, and its order may be enforced by the court on application.[1] A tribunal order directed at the employer, requiring it not to call or to hold proceeds in escrow, avoids the objection in Haji Traders that the bank is not a party. The difficulty is timing: a tribunal must first be constituted, and the Act contains no provision for emergency arbitrators.[2]

Foreign-seated arbitration

The Act applies where the place of arbitration is in Bangladesh, and only sections 45 to 47, on recognition and enforcement of foreign awards, are extended to arbitrations seated abroad.[1] Following the Accom Travels decision, Bangladeshi courts cannot grant section 7A relief before or during a foreign arbitration, although interim relief may be available at the enforcement stage.[2] A contractor on an ICC or SIAC-seated EPC contract who needs to restrain a call in Bangladesh must therefore rely on a civil suit and the fraud test, or seek relief from the tribunal or the courts of the seat.

Extend or pay demands

A common construction pattern is the "extend or pay" letter: the employer tells the bank to encash unless the contractor extends the guarantee. Kamrul Ashraf Khan arose from exactly that. BCIC wrote to the banks asking them to encash if the validity period was not extended; the carrier went to court; and the High Court Division held that a guarantee "can be encashed at any time before expiry of its validity".[4]

The e-PW3 conditions make failure to extend a ground for a claim and require extension 28 days before expiry if the contractor is not yet entitled to the security's return.[7] Extending under protest, with rights reserved, is usually cheaper than litigating a call, unless a completion certificate has already issued with no claim notified.

Practical steps for contractors facing a call

When a performance guarantee in Bangladesh is called, the first two working days decide most outcomes. A bank can pay within days, and the e-PW3 form requires the procuring entity to prove nothing to the bank.[7]

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• Lead with compliance. A demand that misses the expiry date, the named office, the statement of breach or the reduced amount fails on the guarantee's own terms.
• Put the bank on notice. Fraud must be fraud "of which the bank has notice"; send the bank the documents, not just the allegation.[4]
• Sue the right party. Seek relief against the employer under the contract's notice and entitlement clauses; the protective orders ran against the beneficiary.[3]
• Start the contractual ladder. Refer the underlying decision to the adjudicator within the fourteen days e-PW3 allows, so any application for relief is tied to a live dispute process.[7]
• Do not rely on cash-flow harm. Financial pressure, reputational damage and debarment risk have not been treated as grounds in Bangladesh.

Review the counter-indemnity at the same time: once the bank pays, it will debit any cash margin and look to the contractor for the balance. TRW's construction claims and project disputes practice runs both tracks together.

Practical steps for employers making a call

For employers and procuring entities, a performance guarantee in Bangladesh is valuable only if the call is clean.

• Follow the contract first. Issue the breach notice, wait out the fourteen days in GCC 74.4, notify the contractor of the claim under GCC 74.3, and calculate the amount under GCC 92.1 where the claim follows termination.[7]
• Present a perfect demand. Use the exact form, signatory, statement of breach and office address, within the guaranteed amount as reduced.
• Demand early. A timely demand survives an injunction and even expiry, as Unique Cement shows; a late one does not.[6]
• Keep the record honest. A statement of breach that contradicts your own completion certificate or amortisation records is the evidence a contractor needs for fraud.
• Enforce awards properly. Where a tribunal has ruled on the guarantee, enforce the award under section 44 rather than writing straight to the bank, the step that cost the Ministry in Pubali Traders.[3]

Where a bank delays or refuses a complying demand, Unique Cement shows that representations to Bangladesh Bank followed by a writ can lead the High Court Division to direct Bangladesh Bank to act under the Bank Companies Act 1991.[6]

After the bank pays

Payment ends the guarantee dispute, not the project dispute. A wrongful-call claim survives and is decided under the works contract, usually in arbitration. FIDIC Sub-Clause 4.2 gives an express indemnity for an unjustified claim, and the e-PW3 limit in GCC 74.8 supports a damages claim for any amount drawn beyond the procuring entity's contractual entitlement.[12] [7] That is the logic of the case law: in Unique Cement the High Court Division held that disputes about performance between the contracting parties can be remedied by an action for damages, which is why the guarantee itself is left alone.[6]

On the bank's side, section 145 of the Contract Act implies a promise by the principal debtor to indemnify the surety for sums "rightfully paid", and section 140 gives a surety that has paid all it is liable for the creditor's rights against the principal debtor.[8] "Rightfully paid" lets a contractor resist reimbursement of a payment against a plainly non-complying demand, but not one it merely disputes.

Diarise limitation and contractual time bars from the date of payment and from any adjudicator's decision. Under e-PW3 a party has 28 days from the adjudicator's decision to give notice of its intention to commence arbitration.[7] Our guide to construction arbitration in Bangladesh covers claim notices and adjudication.

Drafting a performance guarantee in Bangladesh that limits call risk

On public works the guarantee must follow the prescribed form without alteration, so protection comes from the contract conditions and record-keeping.[7] On private EPC and development-partner-funded projects the instrument is negotiable, and these terms do the most work:

• A specific supporting statement: require the demand to identify the clause breached and the notice given.
• Automatic reduction: write the advance payment reduction into the guarantee, by reference to certified amortisation, rather than leaving it in the contract.
• Expiry on a document: tie expiry of the performance security to a completion or taking-over certificate, with a short tail for previously notified claims, the structure that worked in Simon Carves.[11]
• Notice before call: require several working days' notice to the contractor before a demand is presented.
• Resist "conclusive evidence" language: it was the decisive wording in Haji Traders.[5]
• Choose the seat with interim relief in mind: a Bangladesh seat keeps section 7A available; a foreign seat removes it until enforcement.[2]

Foreign contractors whose Bangladeshi guarantee is backed by an overseas counter-guarantee face a second demand abroad as soon as the local bank pays. Our analysis of overseas bank guarantees and SBLCs explains how those chains work.

What to watch in 2026 and 2027

Three developments will shape how a performance guarantee in Bangladesh is called and resisted. First, the conflict between Pubali Traders and the restrictive decisions needs resolution by the Appellate Division. Second, the commercial courts' approach to urgent relief will set the tempo of guarantee litigation.[9]

Third, procurement law is still moving: on 9 April 2026 Parliament passed the Public Procurement (Amendment) Bill 2026, moved by the Finance and Planning Minister, Amir Khosru Mahmud Chowdhury, converting the 2025 amending ordinance into an Act, while the October 2025 standard documents under the Public Procurement Rules 2025 remain the forms in use.[10] [7] Our guide to the 2026 public procurement amendments tracks those changes.

If a guarantee has been called, or an extend-or-pay letter has arrived, send TRW the guarantee, the demand, the works contract and the last three payment certificates. The first 48 hours decide most of the options.

Frequently asked questions

Can a court in Bangladesh stop payment under a performance guarantee?

Only in narrow cases. Appellate Division authority since Uttara Bank v Macneill & Kilburn allows a restraint only for fraud of which the bank has notice, and some High Court Division benches have restrained the beneficiary under the Arbitration Act pending an arbitral step.[4] [3]

Does starting arbitration stop the employer from calling the guarantee?

No. The guarantee is independent of the arbitration clause. Section 7A relief has been granted in some cases, such as Pubali Traders in December 2025, and refused in others, such as Haji Traders and Kamrul Ashraf Khan.[3] [5] [4]

How much is performance security on public works in Bangladesh?

Under the October 2025 national works document for contracts above BDT 5 crore, five per cent of the contract price, with five per cent retention and a ten per cent cap on the combined contractual security.[7]

When must the procuring entity notify the contractor before calling?

The e-PW3 conditions require the procuring entity to notify the contractor of any claim against the bank, and allow a claim only after a notified breach or unpaid amount has continued for fourteen days, or the contractor has failed to extend the security.[7]

Can an advance payment guarantee be called for its full amount after amortisation?

Under e-PW3 the guarantee amount is progressively reduced by the amounts amortised, so a demand for more than the unamortised balance exceeds the employer's entitlement. The bank may not know this unless the guarantee has been formally reduced.[7]

Is unconscionability a ground to stop a call in Bangladesh?

Not on current authority. It is recognised in Singapore, which requires a strong prima facie case of bad faith, but Bangladeshi decisions describe fraud as the only exception.[13] [4]

Can section 7A be used in a foreign-seated arbitration?

Not before or during the arbitration. The Act applies to Bangladesh-seated arbitrations, and following Accom Travels courts will not grant section 7A relief for foreign arbitrations until the enforcement stage.[1] [2]

Can the arbitral tribunal itself stop the call?

A tribunal may order a party to take interim measures under section 21, including directing the employer not to call, and the court can enforce that order. The Act has no emergency arbitrator procedure.[1] [2]

Do guarantee disputes go to the new Commercial Courts?

Generally yes. The Commercial Courts Act 2026 covers banking instruments, construction and infrastructure contracts and arbitration matters, and pre-suit mediation does not apply where urgent interim relief is sought.[9]

What happens if the guarantee expires while an injunction is in force?

A demand made before expiry can still be enforced. In Unique Cement (May 2025) the High Court Division directed Bangladesh Bank to secure encashment of a guarantee that expired during an injunction.[6]