Dutch contractors and developers entering Türkiye's construction sector for the first time are often surprised by how differently payment security is structured compared to the Netherlands. Where Dutch practice leans on the UAV-GC framework and standard retention or bank guarantee schedules familiar across the EU, Türkiye's system blends its own Public Procurement Law provisions with FIDIC-influenced private contracting, producing a hybrid that catches unprepared foreign parties off guard. For a Dutch investor financing a build, or a contractor bidding as subcontractor to a Turkish main contractor, understanding these instruments before signing is essential.
How Turkish Payment Security Actually Works
Turkish construction contracts typically rely on a teminat mektubu, a letter of guarantee issued by a licensed Turkish bank, rather than the surety-bond model more common in Dutch and broader European commercial practice. These letters function as on-demand bank guarantees: the beneficiary can call the guarantee without first proving default in court, which is a materially different risk allocation than the conditional bonds Dutch parties may be accustomed to. A Dutch party posting or receiving such a guarantee should read the exact wording carefully, since "on first demand" language shifts significant leverage to whichever side holds the instrument.
Advance payment guarantees : When a Dutch developer advances funds to a Turkish contractor before work begins, an avans teminat mektubu should be required as standard practice. This guarantee should cover the full advance amount and step down proportionally as work is certified, rather than releasing in a single lump sum at project completion.
Performance and retention security : The kesin teminat, or definitive performance guarantee, generally sits around 6 percent of contract value under public procurement norms, though private contracts negotiate this freely. Retention held against defects liability is typically withheld from progress payments rather than posted as a separate instrument, and the release schedule should be fixed in the contract, not left to informal agreement.
Bank Selection and Enforceability
Not every Turkish bank guarantee carries equal weight abroad. Dutch parties should confirm that any guarantee is issued by a bank with a correspondent relationship or branch presence recognized internationally, since enforcing a claim against a small regional Turkish bank can be slower and more uncertain than against a major institution. It is also worth confirming the guarantee is denominated in the currency the underlying contract uses, since exchange rate movements between the Turkish lira and the euro can erode the real value of a lira-denominated security over a multi-year build.
Where Dutch Practice and Turkish Practice Diverge
Dutch contracting culture generally assumes good faith cooperation and reserves bonds for genuine failure scenarios. Turkish practice treats guarantees as a routine, expected part of doing business, and Turkish counterparties will not view a request for a robust guarantee package as a sign of distrust. Dutch investors who under-negotiate security instruments, assuming the relationship will smooth over gaps later, are the ones most likely to face disputes when a contractor underperforms or a developer delays certification.
Practical Recommendations
A Dutch party structuring a Turkish construction contract should insist on a written schedule tying guarantee amounts and release triggers to specific project milestones, verified independently rather than by the counterparty's own certification. Legal review should be handled by counsel qualified in both Turkish contract law and the FIDIC or bespoke framework the contract references, since a guarantee that looks standard in translation can carry different enforcement mechanics under Turkish civil procedure.
Payment bond security is not a formality to be handled after commercial terms are agreed. In the Turkish market, it is part of the commercial terms themselves, and Dutch parties who treat it that way from the outset avoid the costliest disputes later in the build.
Eurasia Experts works with Dutch investors and contractors structuring payment security, guarantee schedules, and contract terms for construction projects across Türkiye, coordinating with qualified local legal counsel where needed.