Banking guarantees play a pivotal role in structuring commercial relationships in Tunisia, particularly when a contract involves significant financial amounts, extended performance timelines, advance payments, or obligations whose breach is difficult to assess in advance. Beyond their documentary form, banking guarantees are fully-fledged legal instruments, banking guarantees serve as genuine legal instruments that help establish trust between contracting parties, define mechanisms for managing non-performance risk, and align with the specific nature, terms, and obligations of each contract.

For foreign investors operating in Tunisia, understanding how banking guarantees function within the local legal framework is a prerequisite for sound contract management and effective risk mitigation.

How Banking Guarantees Fit Into the Commercial Obligation

The relevance of banking guarantees becomes clear whenever a creditor or beneficiary requires an additional mechanism to secure the performance of an obligation — whether that involves payment of a price, delivery of goods, completion of works, provision of a service, or restitution of an advance already disbursed.

A banking guarantee should never be treated as a standalone document. It forms an integral part of the overall contractual architecture, and its legal effects are directly shaped by the drafting of the underlying contract, the nature of the obligation, the conditions for calling the guarantee, and its validity period. From a technical standpoint, banking guarantees sit at the intersection of banking and finance and commercial law, resting on precise documents that define the scope of the commitment, events of default, real or personal security interests, and potential recourse mechanisms between the debtor, creditor, and guarantor.

The Legal Framework Governing Banking Guarantees in Tunisia

The legal analysis of banking guarantees in Tunisia draws on multiple sources of law, each addressing a different dimension of the guarantee relationship.

The Code of Obligations and Contracts (COC), provides the foundational framework for suretyship, covering its effects, extinction, and the triangular relationship between creditor, debtor, and surety. Under the COC, suretyship is built on the commitment of a third party to fulfill the debtor’s obligation toward the creditor — a principle that underpins certain forms of banking guarantees with an accessory character tied to the principal obligation. 

The Tunisian Commercial Code connects banking guarantees to inter-merchant transactions, current accounts, payment instruments, and operations requiring the protection of creditors’ rights.

Law No. 2016-35 of April 25, 2016 entrusted the Central Bank of Tunisia (BCT) with the mission of supervising banks and financial institutions, whether authorized as residents or non-residents, and monitoring their activities to preserve their financial soundness and protect depositors.

For foreign investors specifically, the key legislative reference is Law No. 2016-71 of September 30, 2016 on Investment. This law established a system of guarantees and obligations for foreign investors, granting them treatment no less favorable than Tunisian investors, and protecting both their property and intellectual property rights in accordance with applicable legislation. The investor’s funds shall not be expropriated except for public interest, without discrimination regarding nationality, upon fair and equitable compensation, and in due process of law.

Types of Banking Guarantees Most Used in Commercial Contracts

Banking guarantees vary depending on the purpose of the contract and the nature of the risk to be covered. They may take the form of a bank surety, a letter of guarantee, a demand guarantee, a performance bond, an advance payment guarantee, or a payment guarantee. The label alone is never sufficient to determine legal effects — the content, conditions, and degree of connection to the underlying contract must always be carefully read.

Banking Guarantees for Foreign Investors: Specific Considerations

Foreign investors entering the Tunisian market face a distinct set of considerations when structuring banking guarantees within their commercial contracts. Unlike domestic operators who may rely on established relationships with local banks, foreign investors need to navigate both the regulatory framework of the BCT and the constraints of their home-country financial institutions.

Several practical points deserve attention:

Foreign bank branches and the letter of guarantee requirement. As confirmed by BCT Circular No. 8 of 2024, branches of foreign banks operating in Tunisia are subject to specific capital adequacy requirements enforced through the letter of guarantee mechanism under Article 189 of Law No. 2016-48. Foreign investors relying on their home-country bank to issue guarantees in Tunisia must verify whether that bank operates as a licensed branch or a correspondent institution, as this affects the form and enforceability of the guarantee.

The Investment Law offers foreign investors the possibility to resolve disputes with the Tunisian state before an international arbitration institution. This is particularly relevant when a dispute involves the calling of a banking guarantee in the context of a public procurement or infrastructure contract with a Tunisian government entity. Such disputes may also fall within the scope of commercial litigation and arbitration when they concern the performance of contractual obligations or the interpretation of guarantee terms.

Bank Surety vs. Demand Guarantee: Two Distinct Banking Guarantee Mechanisms

Banking guarantees require a careful distinction between the bank surety and the demand guarantee, as the two instruments function differently and carry different legal risks.

The bank surety is generally more closely tied to the principal obligation and may be subject to defenses linked to the existence or scope of the underlying debt. The demand guarantee, by contrast, tends — depending on its drafting — toward greater autonomy from the underlying contract, though the conditions for calling it and the required documents remain decisive elements in assessing its scope.

A banking guarantee is not necessary in every commercial contract — but it becomes essential when significant amounts, long performance timelines, advance payments, or a material risk of non-performance are involved.

Banking Guarantees in Supply, Works, and Service Contracts — Including Investment Projects

Banking guarantees take on a clear practical dimension in supply, works, and service contracts, helping to structure the relationship between the party awaiting performance and the party bound to deliver it — particularly when these contracts are part of broader investment projects in Tunisia involving suppliers, financial partners, contractors, or investors.

In a supply contract, the guarantee may be linked to goods delivery or price payment. In a works contract, it may cover proper performance or restitution of an advance. In service contracts, it can help frame agreed technical or financial obligations.

In the context of real estate and infrastructures projects, banking guarantees play a particularly important role in framing performance obligations, advance restitution, and risk allocation between the parties across the different phases of acquisition, financing, construction, and delivery.

Similarly, in concession and PPP public partnerships, banking guarantees are often a structural component of the contractual framework, ensuring precise risk allocation, compliance with financing obligations, and performance commitments toward public authorities.

Key Verification Points Before Accepting or Issuing a Banking Guarantee

Banking guarantees require careful review before acceptance or issuance, since a drafting error can trigger a dispute over enforcement conditions or the scope of the commitment. The review must cover the type of guarantee, the amount, the duration, the identity of the beneficiary, required documents, conditions for calling the guarantee, release mechanisms, and consistency with the underlying commercial contract. 

Given the legal complexity involved, seeking the assistance of a qualified lawyer in Tunisia before signing or issuing any banking guarantee is strongly advisable — a legal professional with expertise in Tunisian banking and commercial law can identify drafting risks, ensure alignment with the applicable regulatory framework, and help structure the guarantee in a way that genuinely protects the party’s interests. 

Common mistakes to avoid:

• Accepting a guarantee without a clearly defined validity period
• Using vague or ambiguous language open to conflicting interpretation
• Confusing a bank surety with a demand guarantee
• Overlooking the release conditions once the contract has been performed
• Linking the guarantee to a commercial contract that is unclear or incomplete