Can a court in Israel stop a beneficiary from calling an autonomous bank guarantee?

The guarantee is a separate undertaking by the bank to the beneficiary, so the bank's duty to pay does not depend on whether the beneficiary is actually owed anything. Courts are especially reluctant to order a bank not to pay, since that would undermine the reliability that makes guarantees useful in commerce. They prefer to leave the dispute for a later claim between the contracting parties, where the customer can recover any sum wrongly collected. The fraud exception covers a beneficiary who knows it has no right to the money, for example by calling a performance guarantee after accepting the work in writing. A beneficiary that honestly believes it is owed, even mistakenly, will not be restrained.

Timing is usually decisive. Most guarantees require payment within days of a written demand, so an application filed after the bank has paid comes too late, and the customer is left to sue the beneficiary for restitution. A foreign supplier or contractor facing a threatened call typically applies urgently, with documents showing the beneficiary's lack of any right, and courts occasionally grant a short ex parte order pending a hearing with both sides. The court weighs the balance of harm and requires an undertaking and security to cover the beneficiary's loss if the order proves unjustified. Our guide to bank guarantees in Israel explains how the wording of a guarantee affects a call.

From the full guide: Bank Guarantees in Israel: A Legal Guide to Michtav Achrayut

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