What happens to guarantee withholdings under a construction contract if either party goes bankrupt is featured in the August edition of “Commercial Arbitration Practice” publication.

When settling payments with the contractor for the works performed, a portion of them (normally amounting to 5-10%) is withheld by the customer and paid back to the contractor upon expiration of the guarantee period, if within this period no defects in the works for which the contractor is liable are revealed or if such defects are removed, or in the event other conditions mentioned in the contract arise. Possible scenarios of what happens to guarantee withholdings, if the customer or contractor goes bankrupt: the current court practice summarized by Nikolay Andrianov in LiveLawyer.