Foreign Bank Guarantees in Turkish Public Tenders

Introduction

Foreign bank guarantees in Turkish public tenders are one of the most important issues for foreign companies, international contractors, suppliers, manufacturers, service providers and financial institutions participating in Turkey’s public procurement market. A foreign bidder may have strong technical capacity, competitive pricing and international experience, but if its guarantee letter does not comply with Turkish public procurement rules, the bid may be excluded from evaluation or the successful bidder may lose the right to sign the contract.

Public procurement in Turkey is highly formal. Tender security, performance bonds and other guarantee instruments are not merely financial documents; they are legal validity requirements. A bank guarantee that is commercially acceptable in another country may not be sufficient for a Turkish public tender. The guarantee must comply with Public Procurement Law No. 4734, tender documents, Public Procurement Authority standard forms, EKAP procedures and, increasingly, electronic guarantee mechanisms through Takasbank.

Under Law No. 4734, tender security must generally be submitted in an amount determined by the tenderer but not less than 3% of the tender price. The law accepts letters of guarantee from banks and special financing institutions as tender security, and it also recognizes certain guarantee letters arranged by foreign banks permitted to operate in Turkey or by banks and special financing institutions operating in Turkey based on counter-guarantees from foreign banks or similar foreign credit institutions.

This article explains the legal framework of foreign bank guarantees in Turkish public tenders, including tender security, performance bonds, counter-guarantees, guarantee validity periods, electronic guarantees, foreign currency guarantees, EKAP-Takasbank integration, common mistakes, legal remedies and practical checklists for foreign bidders.

Legal Framework of Guarantees in Turkish Public Procurement

The main law governing the tender phase is Public Procurement Law No. 4734. This law regulates bid submission, tender security, guarantee letters, performance bonds, contract signing obligations and remedies in public tender processes. The Public Procurement Authority’s English translation of Law No. 4734 is expressly marked as an unofficial, non-binding translation, so the Turkish text and current legislation should always be checked in practice.

The guarantee system is mainly regulated under Articles 33, 34, 35, 42, 43 and 44 of Law No. 4734. Article 33 regulates tender security. Article 34 lists accepted values as tender security. Article 35 regulates guarantee letters and authorizes the Public Procurement Authority to determine their form and scope. Article 42 regulates invitation to contract signing. Article 43 regulates performance bonds. Article 44 regulates the successful tenderer’s obligations and the consequences of failing to sign the contract after award.

After the contract is signed, Public Procurement Contracts Law No. 4735 becomes important for contract performance, additional performance bonds, return of guarantees, forfeiture, termination and contractor liability. In practice, a foreign bidder must review both the tender-stage guarantee obligations under Law No. 4734 and the contract-stage guarantee obligations under Law No. 4735 before submitting a bid.

What Is Tender Security?

Tender security, also known as temporary guarantee, is a guarantee submitted by bidders at the tender stage. Its purpose is to protect the contracting authority against risks arising before contract signing. For example, if the successful bidder refuses to sign the contract, fails to submit the performance bond or fails to fulfil pre-contract obligations, the tender security may be forfeited.

Article 33 of Law No. 4734 provides that tender security must be given in an amount determined by the tenderer, but it cannot be less than 3% of the tender price. In consultancy services, tender security is not compulsory if this is stated in the tender documents.

For foreign companies, tender security is often the first major financial compliance issue. The bidder must determine whether the tender documents accept a foreign bank guarantee, require a Turkish bank guarantee, require an electronic guarantee letter, or allow a guarantee issued by a Turkish bank based on a counter-guarantee from a foreign bank.

A tender security error can be fatal. If the guarantee amount is insufficient, the validity period is too short, the wording is not compliant, the issuing institution is not acceptable, or the electronic submission is defective, the bid may be excluded before technical and financial evaluation.

Accepted Forms of Tender Security

Article 34 of Law No. 4734 lists the values accepted as tender security. These include Turkish lira, letters of guarantee from banks and special financing institutions, and domestic borrowing bills issued by the Treasury or documents replacing such bills. The same provision also states that guarantee letters arranged by foreign banks permitted to operate in Turkey, and guarantee letters arranged by banks or special financing institutions operating in Turkey based on counter-guarantees given by banks or similar creditors operating abroad, are accepted as tender security.

This provision is central for foreign bidders. It does not mean that every guarantee issued by any foreign bank anywhere in the world will automatically be accepted in a Turkish public tender. The law recognizes two main paths.

The first path is a guarantee letter arranged by a foreign bank that is permitted to operate in Turkey under the relevant legislation. The second path is a guarantee letter issued by a bank or special financing institution operating in Turkey based on a counter-guarantee from a foreign bank or similar foreign credit institution.

In practice, the second path is often safer for foreign bidders. A foreign company may obtain a counter-guarantee from its international bank, and a Turkish bank may issue the guarantee letter in the required Turkish public procurement format. This helps reduce the risk that the tender commission will reject the guarantee due to form, jurisdiction, enforceability or banking-law concerns.

Foreign Bank Guarantee Versus Turkish Bank Guarantee Based on Counter-Guarantee

Foreign bidders often ask whether they can submit a direct guarantee letter from their foreign bank. The answer depends on the bank’s legal status, the tender documents and the applicable procurement rules. A direct foreign bank guarantee may be possible only if the foreign bank is permitted to operate in Turkey in accordance with Turkish legislation. Otherwise, the safer mechanism is usually a Turkish bank guarantee issued upon a foreign counter-guarantee.

A counter-guarantee structure involves two banking relationships. The foreign bidder’s bank provides a counter-guarantee to a Turkish bank. The Turkish bank then issues the guarantee letter to the contracting authority. From the perspective of the contracting authority, the direct guarantee instrument is issued by a bank operating in Turkey and should comply with Turkish public procurement forms.

This structure is particularly useful in high-value construction tenders, infrastructure projects, medical device tenders, software tenders, defence-related supply chains, energy projects and large goods procurement contracts where international bidders participate.

However, a counter-guarantee must be planned early. International banking approvals, compliance checks, credit limits, sanctions screening, currency selection, guarantee wording and coordination with the Turkish bank may take time. A foreign bidder that waits until the last days before the tender deadline may be unable to obtain a compliant guarantee.

Guarantee Letter Form and Scope

Article 35 of Law No. 4734 authorizes the Public Procurement Authority to determine the form and scope of guarantee letters. The same article states that preliminary guarantee letters must state a period at least 30 days longer than the tender validity period. If the tender validity period is extended, the preliminary guarantee letter period must also be extended accordingly. The validity of performance bonds is determined by the contracting authority by taking into account the completion date of the procured task, and guarantee letters violating the relevant legislation are not accepted.

This is extremely important. Public procurement guarantee letters are not ordinary bank comfort letters. They must comply with the required form and legal content. Wording differences may matter. A guarantee letter that adds conditions, limits payment unlawfully, contains foreign-law restrictions, refers to non-Turkish dispute mechanisms, lacks proper unconditional payment language or does not match the standard form may be rejected.

Foreign bidders should therefore not use their bank’s usual international guarantee template without Turkish legal review. The guarantee should be checked against the tender documents, Public Procurement Authority standard forms and Turkish law requirements.

Validity Period of Foreign Bank Guarantees

The validity period is one of the most common problems in tender security. Under Article 35 of Law No. 4734, preliminary guarantee letters must be valid for at least 30 days longer than the tender validity period. If the tender validity period is extended, the guarantee period must also be extended.

Foreign bidders must calculate this period carefully. If the administrative specification states a bid validity period of 90 days, the tender security letter must generally be valid for at least 120 days unless the tender documents require more. If the bid validity period is extended by the contracting authority and the bidder agrees, the guarantee validity must be extended accordingly.

International banks may require time to issue extensions. If the bidder cannot extend the guarantee on time, its bid may become non-compliant. This is particularly risky where the guarantee is based on a cross-border counter-guarantee because both the foreign bank and Turkish bank may need to approve the extension.

Performance Bond Before Contract Signing

A performance bond is different from tender security. It is submitted by the successful tenderer before signing the contract and secures proper performance of the contract.

Article 43 of Law No. 4734 provides that, to ensure performance in accordance with the contract and tender documents, a performance bond calculated as 6% of the contract value must be taken from the successful tenderer before contract signing. Article 42 provides that the successful tenderer is invited to sign the contract by issuing a performance bond within ten days after notification, and an additional twelve days are added for foreign tenderers.

This additional period for foreign tenderers is helpful, but it should not create false comfort. International bank guarantees may take longer than expected. Internal approval from the foreign company’s headquarters, bank credit committee approval, counter-guarantee issuance, Turkish bank coordination and electronic guarantee procedures may all require time.

A foreign bidder should therefore secure performance bond capacity before submitting the bid. Winning the tender and then discovering that the company cannot provide a compliant performance bond may lead to forfeiture of tender security and possible debarment risk.

Consequences of Failure to Provide Performance Bond

Article 44 of Law No. 4734 states that the successful tenderer must sign the contract after submitting the performance bond. After the contract is signed, the tender security is returned immediately. If the successful tenderer does not fulfil these obligations, the tender security is recorded as revenue without the need for further legal action. The contracting authority may then proceed with the second economically most advantageous tenderer under the conditions stated in the law.

This is one of the most serious risks for foreign bidders. Failure to provide a performance bond is not treated as a simple commercial withdrawal. It may result in loss of tender security and damage the bidder’s public procurement reputation. Depending on the circumstances, additional sanctions may also arise.

Foreign bidders should therefore conduct guarantee due diligence before bidding. The company should confirm bank limits, counter-guarantee availability, Turkish bank cooperation, electronic guarantee capacity, required currency, wording, validity period and internal corporate approvals.

Electronic Tender Security and Takasbank

Turkey has significantly digitalized public procurement guarantee procedures. The Public Procurement Authority announced that the Takasbank Public Guarantee Management Platform for electronic temporary guarantee letters was activated on 1 September 2021, and that as of 1 December 2022, procedures for issuing and submitting all temporary guarantee letters would primarily be carried out through the Takasbank platform.

The Authority also clarified that electronic temporary guarantee letters may be used not only in electronic tenders but also in tenders not conducted electronically, provided that the required distinguishing number for the electronic temporary guarantee letter or temporary surety bond is included in the relevant “documents not to be submitted” table.

For foreign companies, this means that the guarantee process may require more than obtaining a bank letter. The bidder may need an EKAP record, a Takasbank-based electronic reference, correct entry of the identifying number, coordination with the bank and preservation of electronic confirmation records.

A foreign bidder working through a Turkish bank should confirm whether the bank can issue the relevant electronic guarantee through the required system. If the foreign bank provides only a traditional paper counter-guarantee, the Turkish bank must still issue the actual guarantee in the required electronic or physical form depending on the tender rules.

Electronic Performance Bonds

The Public Procurement Authority announced in March 2024 that, for tenders under Law No. 4734 with announcement or invitation dates on or after 8 April 2024, only electronic guarantee letters or electronic surety bonds may be submitted as performance bond instruments before contract signing. The announcement also stated that the development allowing performance guarantee letters and surety bonds to be issued and transmitted electronically through Takasbank had been activated on 22 January 2024.

This is particularly important for foreign bidders. A successful foreign bidder may not be able to submit an ordinary physical performance guarantee letter if the tender falls under the electronic guarantee requirement. The bidder must coordinate with a bank or authorized institution capable of issuing the required electronic instrument.

For foreign bidders using counter-guarantees, the practical structure may be: foreign bank issues counter-guarantee to Turkish bank; Turkish bank issues electronic performance guarantee through the required Takasbank/EKAP mechanism; the contracting authority verifies the guarantee through the system.

Contract-Stage Guarantees Through Takasbank

Electronic guarantee procedures have expanded beyond ordinary performance bonds. The Public Procurement Authority announced that, as of 5 January 2026, a development would be activated allowing contract-stage letters and surety bonds for additional performance, advance payment, final account and provisional acceptance deficiency guarantees to be submitted through İstanbul Takas ve Saklama Bankası A.Ş. The announcement explains that the administration must identify the contractor in EKAP, and the contractor must obtain a reference number through EKAP and apply to the relevant bank or insurance company using that reference number.

The Authority later announced that, pursuant to Board Decision No. 2026/DK.D-88 dated 12 March 2026, for tenders under Law No. 4734 with announcement or invitation dates on or after 1 April 2026, contract-stage guarantee letters and surety bonds for additional performance, advance payment, final account and provisional acceptance deficiency guarantees will be issued electronically through EKAP-Takasbank integration.

This development directly affects foreign contractors. After contract signing, additional guarantee obligations may arise during performance. A foreign contractor should ensure that its bank structure can support not only tender security and performance bond, but also later electronic guarantees that may be required during the contract lifecycle.

Foreign Currency Guarantee Letters

Foreign bank guarantees often involve foreign currency. This raises important issues concerning the currency of payment if the guarantee is called.

The Public Procurement Authority announced that, under Board Decision No. 2026/DK.D-89 dated 12 March 2026, if a guarantee letter issued in foreign currency is called, the letter amount must be paid in the relevant foreign currency. However, if the administration’s financial legislation permits collection only in Turkish lira, the amount is paid based on the Central Bank foreign exchange selling rate valid on the date of collection.

This rule is highly relevant for foreign bidders and banks. A foreign currency guarantee may appear to protect the bidder from exchange rate risk, but the actual payment mechanism may depend on the administration’s financial legislation. The bidder and bank should review whether the guarantee is denominated in Turkish lira or foreign currency, whether the tender documents allow it, how collection will occur, and how exchange rate risk will be allocated.

Foreign bidders should also consider currency mismatch. If the bid is in Turkish lira but the guarantee is backed by a foreign currency facility, exchange rate movements may affect the bidder’s banking exposure. If the bid is denominated in foreign currency under a legally permitted tender, the guarantee wording and currency must be consistent with the tender documents.

Foreign Bank Guarantees and EKAP Compliance

EKAP compliance is now an essential part of public tender participation. Guarantee information may be submitted, verified, recorded or connected through EKAP and Takasbank. A foreign bidder must not treat guarantee compliance as a separate banking matter only. It is also a digital procurement compliance issue.

The bidder should confirm that authorized EKAP users are defined, e-signatures are valid, the company can obtain reference numbers where required, the bank can transmit electronic guarantee data through the correct system, the guarantee information matches the bid, and all submission confirmations are preserved.

If the guarantee is issued electronically, the bidder must ensure that the distinguishing number, reference number or relevant electronic information is correctly included in the required form or table. A missing or incorrect number may prevent the tender commission from verifying the guarantee.

Common Reasons for Rejection of Foreign Bank Guarantees

Foreign bank guarantees may be rejected for several reasons.

The first common reason is that the guarantee is issued directly by a foreign bank that is not permitted to operate in Turkey and is not structured through a Turkish bank counter-guarantee mechanism.

The second reason is non-compliant wording. Turkish public procurement guarantee letters must follow the required form and scope. Conditional payment language, foreign-law jurisdiction clauses, limited enforceability, ambiguous beneficiary wording or non-standard expiry language may create rejection risk.

The third reason is insufficient amount. Tender security must not be less than 3% of the tender price, and performance bonds are generally 6% of the contract value.

The fourth reason is insufficient validity period. Preliminary guarantee letters must be valid at least 30 days longer than the tender validity period.

The fifth reason is mismatch between the guarantee and tender file. The guarantee may contain wrong procurement registration number, wrong contracting authority, wrong bidder name, wrong currency or wrong amount.

The sixth reason is failure to comply with EKAP or Takasbank electronic procedures.

Practical Checklist for Foreign Bidders

A foreign bidder participating in a Turkish public tender should complete a guarantee checklist before bid submission.

First, review the administrative specification for tender security amount, form, validity period and submission method. Second, determine whether the tender allows or requires electronic temporary guarantee letters. Third, confirm whether the foreign bank is permitted to operate in Turkey or whether a Turkish bank guarantee based on a foreign counter-guarantee is required. Fourth, check whether the Turkish bank can issue the guarantee through Takasbank and EKAP where necessary. Fifth, verify the guarantee wording against Public Procurement Authority forms. Sixth, calculate the validity period carefully. Seventh, confirm currency rules. Eighth, ensure the guarantee amount is sufficient. Ninth, verify bidder name, contracting authority, tender registration number and tender subject. Tenth, preserve all EKAP, Takasbank and bank confirmation records.

The bidder should also prepare for the performance bond before submitting the bid. It should confirm bank credit limits, counter-guarantee capacity, internal approvals and electronic performance bond procedures. If the company cannot provide the performance bond after award, the tender security may be forfeited.

Practical Checklist for Turkish Banks Working With Foreign Counter-Guarantees

Turkish banks involved in foreign bidder guarantees should also conduct careful legal review.

The bank should verify the foreign bank’s creditworthiness, counter-guarantee wording, governing law, reimbursement mechanism, sanctions compliance, currency, expiry date and compatibility with Turkish public procurement forms. It should ensure that the guarantee issued to the contracting authority is unconditional, payable on demand and compliant with the relevant Public Procurement Authority form.

The bank should also confirm its capacity to issue electronic guarantee letters through Takasbank or EKAP-related systems where required. If the tender requires an electronic performance bond, a physical letter may not be sufficient.

Legal Remedies Against Rejection of a Guarantee

If a bidder’s guarantee is rejected unlawfully, the bidder may use complaint and appeal mechanisms under Law No. 4734. The first step is usually a complaint to the contracting authority. If the complaint is rejected or not answered within the legal period, the bidder may file an appeal complaint before the Public Procurement Authority. Final Authority decisions may be challenged before administrative courts.

A guarantee-related complaint should be precise. The bidder should compare the guarantee with the tender documents and applicable law. If the issue concerns foreign bank status, the bidder should explain the legal basis for acceptance. If the issue concerns a Turkish bank guarantee based on a foreign counter-guarantee, the bidder should show that the instrument was issued by a bank operating in Turkey and complies with Article 34. If the issue concerns wording, the bidder should demonstrate conformity with the required form.

Timing is critical. Procurement complaint periods are short. A bidder that receives a notification of exclusion due to guarantee issues should act immediately.

Foreign Bank Guarantees in Construction, Goods and Service Tenders

Foreign bank guarantees are especially common in construction tenders because contract values are high and foreign contractors often rely on international banking relationships. In such tenders, guarantee capacity may determine whether the bidder can participate.

In goods procurement, foreign suppliers may need guarantees for medical equipment, industrial machinery, vehicles, software systems or large-volume supply contracts. The guarantee should be consistent with delivery, warranty and performance obligations.

In service procurement, foreign companies may provide guarantees for facility management, technology services, maintenance, transportation or consultancy-related projects. If the service requires local performance in Turkey, guarantee obligations should be coordinated with tax, social security and local operational risks.

Across all tender types, the key issue is the same: the guarantee must be acceptable under Turkish public procurement law and the tender documents.

Common Mistakes by Foreign Companies

The first common mistake is assuming that any guarantee issued by a reputable international bank will be accepted. Turkish public procurement law has specific rules, and reputation alone is not enough.

The second mistake is starting the guarantee process too late. Cross-border counter-guarantees take time.

The third mistake is using a foreign bank’s standard template without adapting it to Turkish public procurement forms.

The fourth mistake is ignoring electronic guarantee requirements. For many tenders, electronic performance bonds and other electronic guarantee instruments may be mandatory.

The fifth mistake is miscalculating validity periods.

The sixth mistake is failing to prepare performance bond capacity before submitting the bid.

The seventh mistake is not monitoring EKAP and Takasbank confirmations.

The eighth mistake is failing to object quickly after an unlawful rejection.

Frequently Asked Questions

Are foreign bank guarantees accepted in Turkish public tenders?

Yes, but not every foreign bank guarantee is automatically accepted. Article 34 of Law No. 4734 accepts guarantee letters arranged by foreign banks permitted to operate in Turkey and guarantee letters issued by banks or special financing institutions operating in Turkey based on counter-guarantees from banks or similar creditors operating abroad.

What is the minimum tender security amount in Turkey?

Tender security must be submitted in an amount determined by the tenderer, but it cannot be less than 3% of the tender price.

What is the performance bond amount in Turkish public tenders?

The performance bond is generally calculated as 6% of the contract value and must be submitted by the successful tenderer before signing the contract.

Must guarantee letters follow a specific form?

Yes. Article 35 authorizes the Public Procurement Authority to determine the form and scope of guarantee letters, and guarantee letters violating the relevant legislation are not accepted.

Can electronic guarantee letters be used in non-electronic tenders?

Yes. The Public Procurement Authority has stated that electronic temporary guarantee letters may be used not only in electronic tenders but also in tenders not conducted electronically, provided that the required distinguishing number is included in the relevant table.

Are electronic performance bonds mandatory?

For tenders under Law No. 4734 with announcement or invitation dates on or after 8 April 2024, the Public Procurement Authority announced that only electronic guarantee letters or electronic surety bonds may be submitted as performance bond instruments before contract signing.

How are foreign currency guarantee letters collected if called?

According to the Public Procurement Authority’s 2026 announcement, if a foreign currency guarantee letter is called, the amount is paid in the relevant foreign currency; if the administration’s financial legislation permits only Turkish lira collection, payment is made based on the Central Bank foreign exchange selling rate on the collection date.

Conclusion

Foreign bank guarantees in Turkish public tenders require careful legal, banking and electronic procurement analysis. A foreign bidder cannot assume that its ordinary international bank guarantee will be accepted. Turkish public procurement law sets specific rules for accepted guarantee values, foreign bank guarantees, counter-guarantees, validity periods, form requirements, tender security, performance bonds and electronic submission.

Article 34 of Law No. 4734 creates the legal basis for accepting certain foreign bank-related guarantees, but in practice the safest structure is often a Turkish bank guarantee issued upon a counter-guarantee from a foreign bank. Article 35 makes form and scope compliance essential, and Article 43 requires a performance bond before contract signing. Failure to provide a compliant performance bond may lead to forfeiture of tender security.

Electronic procurement has made guarantee compliance even more technical. Temporary guarantees, performance bonds and contract-stage guarantees may involve EKAP, Takasbank, reference numbers, electronic forms and system verification. Public Procurement Authority announcements in 2024 and 2026 show that electronic guarantee mechanisms are now central to public procurement practice in Turkey.

For foreign companies, the practical lesson is clear: guarantee planning must begin before bidding. The bidder should coordinate with Turkish counsel, foreign banks, Turkish banks, EKAP users and internal finance teams early. It should verify guarantee wording, amount, currency, validity, electronic submission, counter-guarantee structure and performance bond capacity before submitting the bid.

A valid guarantee can protect the bidder’s participation rights. A defective guarantee can eliminate the bidder before the merits are even evaluated. In Turkish public procurement, bank guarantee compliance is not a secondary detail; it is one of the core legal requirements for successful tender participation.