Commercial Contracts in Turkey for Foreign Companies: Governing Law, Jurisdiction, Arbitration and Debt Collection

Introduction

Foreign companies regularly enter into contracts with Turkish manufacturers, distributors, suppliers, construction companies, technology businesses, importers and service providers.

A commercial relationship may begin with a short quotation, purchase order or exchange of e-mails. However, when payment is delayed, goods are defective or one party ends the relationship, the legal consequences may depend on provisions that were never discussed properly.

The most important questions usually include:

• Which country’s law governs the contract?
• Which court has jurisdiction?
• Is the dispute subject to arbitration?
• Must the parties attend mediation before filing a lawsuit?
• Can the creditor begin enforcement proceedings without first obtaining a judgment?
• Can assets in Turkey be frozen?
• Will a foreign court judgment be enforceable in Turkey?
• Will a Turkish judgment be enforceable in the debtor’s country?
• Which currency, interest rate and payment date apply?
• What evidence will prove delivery, acceptance and non-payment?

The governing-law clause, jurisdiction clause and arbitration clause regulate different matters.

A clause stating that “Turkish law applies” does not, by itself, determine which court will hear the dispute.

Similarly, choosing Istanbul courts does not automatically mean that Turkish substantive law applies.

An arbitration clause may remove the dispute from state courts, but the contract must still identify the law governing the parties’ commercial rights and obligations.

International contracts should therefore address these issues separately and clearly.

Can a Foreign Company Enter Into a Contract in Turkey?

Yes.

A foreign company does not generally need to establish a Turkish subsidiary merely to enter into an isolated commercial contract with a Turkish business.

A foreign company may, depending on the transaction:

• Sell goods to a Turkish customer,
• Purchase products from a Turkish manufacturer,
• Appoint a distributor,
• Licence software or intellectual property,
• Provide consultancy,
• Enter into a construction or engineering contract,
• Lease equipment,
• Grant or receive a commercial loan,
• Purchase shares or business assets.

The company should nevertheless examine whether its activities create:

• A permanent establishment in Turkey,
• Turkish tax obligations,
• A workplace or branch-registration requirement,
• Employment or work permit obligations,
• A regulated commercial activity,
• Customs or import responsibilities.

A single supply contract and a continuous business operation through employees or premises in Turkey may have very different legal and tax consequences.

Verify the Legal Identity of the Turkish Counterparty

Before signing, the foreign company should identify the exact legal person with whom it is contracting.

The investigation should include:

• Registered commercial name,
• Company type,
• MERSİS number,
• Trade registry number,
• Tax number,
• Registered office,
• Current directors or managers,
• Signing authority,
• Capital,
• Insolvency or restructuring status.

Commercial groups often use several companies with similar names.

The entity that:

• Negotiates the contract,
• Issues the invoice,
• Receives the payment,
• Owns the factory,
• Delivers the product

may not always be the same company.

The contract should not refer only to a trade name, brand or website.

The full registered legal name and identification details of the contracting party should appear in the document.

Confirm the Signatory’s Authority

A company is bound through persons authorised to represent it.

The foreign party should request and review:

• Trade Registry Gazette records,
• Current signature circular,
• Board or managers’ resolution,
• Power of attorney,
• Internal approval where the contract requires it.

The authorised person may be permitted to sign:

• Individually,
• Jointly with another person,
• Only up to a financial limit,
• Only for specified transactions.

A sales employee, shareholder or consultant does not automatically have authority to bind the company.

The contract should not be signed solely on the basis that the person uses a company e-mail address or business card.

Where a Turkish company representative signs without proper authority, later approval, apparent authority and unauthorised representation issues may become central to the dispute.

Use a Written Contract

Many commercial contracts can theoretically be formed without one long signed document. Offers, purchase orders, order confirmations, e-mails and conduct may collectively establish the agreement.

However, an unsigned or fragmented arrangement creates substantial evidentiary risk.

A written contract should identify at least:

• Parties,
• Products or services,
• Quantity,
• Quality and technical specifications,
• Price,
• Currency,
• Taxes,
• Delivery terms,
• Payment date,
• Inspection and acceptance,
• Warranties,
• Delay consequences,
• Termination,
• Governing law,
• Jurisdiction or arbitration,
• Notices.

The parties should also establish which document has priority if there is a conflict between:

• Master agreement,
• Purchase order,
• General terms,
• Technical annex,
• Quotation,
• Invoice,
• E-mail correspondence.

A clause stating the order of contractual precedence can prevent later arguments over which terms control.

Governing Law

The governing law determines the substantive legal rules applied to the contract.

It may regulate matters such as:

• Contract formation,
• Interpretation,
• Performance obligations,
• Breach,
• Damages,
• Termination,
• Limitation periods,
• Interest,
• Force majeure,
• Assignment,
• Set-off.

Under Article 24 of Turkey’s International Private and Procedural Law, contractual obligations are governed by the law expressly selected by the parties. A governing-law choice may also be understood clearly from the contractual provisions or the circumstances. The parties may choose a law for the entire agreement or only part of it.

A useful clause may state:

“This Agreement and all contractual and non-contractual obligations arising out of or in connection with it shall be governed by the laws of the Republic of Türkiye.”

The scope of the clause should be considered carefully. A clause referring only to the “interpretation” of the contract may be narrower than a clause governing all obligations and disputes arising from the relationship.

What Happens If the Contract Does Not Choose a Law?

If the parties do not choose a governing law, Turkish conflict-of-laws rules apply the law most closely connected with the contract.

For commercial or professional contracts, the law of the establishment of the party performing the characteristic obligation is generally presumed to have the closest connection. If several establishments exist, the establishment most closely connected with the contract is considered. A different law may apply where the circumstances show a closer connection with another country.

The characteristic performer may be:

• Seller in a sale agreement,
• Service provider in a consultancy agreement,
• Distributor in certain distribution relationships,
• Contractor in a construction agreement,
• Licensor in a licensing agreement.

The answer may be less obvious in complex or reciprocal transactions.

Leaving the governing law unspecified can therefore produce costly preliminary litigation before the court or tribunal even begins examining the commercial merits.

Mandatory Turkish Rules May Still Apply

A foreign governing-law clause does not necessarily exclude every Turkish rule.

Turkish courts may still apply Turkish rules that operate directly because of their purpose and scope. Turkish public policy may also prevent the application of a foreign-law provision where its application to the particular case would be manifestly incompatible with fundamental Turkish legal principles.

Potential mandatory areas may include:

• Competition law,
• Customs,
• Tax,
• Foreign exchange,
• Import and export restrictions,
• Sanctions,
• Employment,
• Consumer protection,
• Real estate,
• Corporate authority,
• Insolvency.

A contract governed by English, Swiss or German law may therefore still be affected by Turkish mandatory legislation where the transaction, performance or assets are located in Turkey.

Real Estate Contracts

Contracts concerning ownership or use of real estate require special attention.

Turkish private international law generally subjects contracts concerning real estate or its use to the law of the country where the real estate is located. Turkish real estate transfers must also comply with Turkish mandatory form and land registry rules.

A foreign-law clause cannot ordinarily transfer ownership of Turkish real estate through a private agreement that does not comply with the required Turkish form.

International Sale of Goods and the CISG

Turkey is a contracting state to the United Nations Convention on Contracts for the International Sale of Goods, known as the CISG. The Convention entered into force for Turkey on 1 August 2011.

The CISG may apply where:

• Buyer and seller have places of business in different contracting states,
• Private international law leads to the law of a contracting state,
• The parties expressly choose it.

The CISG addresses matters including:

• Contract formation,
• Seller’s delivery duties,
• Conformity of goods,
• Buyer’s inspection and notification duties,
• Payment,
• Remedies for breach,
• Damages,
• Avoidance of the contract.

The parties may exclude the CISG or modify its operation.

A clause stating only “Turkish law applies” may result in the CISG forming part of the applicable Turkish legal framework for an international sale.

Where the parties do not want the CISG to apply, the contract should say so expressly.

Example:

“This Agreement shall be governed by Turkish law, excluding the United Nations Convention on Contracts for the International Sale of Goods.”

The decision to exclude the Convention should be deliberate rather than automatic.

Incoterms Do Not Replace the Contract

Incoterms may regulate important delivery matters, including:

• Delivery point,
• Transfer of risk,
• Transport responsibility,
• Insurance obligations,
• Export and import clearance,
• Allocation of certain costs.

However, an Incoterm does not normally determine:

• Transfer of ownership,
• Payment method,
• Product quality,
• Inspection procedure,
• Governing law,
• Dispute resolution,
• Consequences of late payment,
• Warranty duration.

The contract should identify the Incoterm, named place and edition clearly.

For example:

“DAP Buyer’s Warehouse, Istanbul, Incoterms® 2020.”

Writing only “FOB Turkey” may create uncertainty because the loading port is not identified.

Contract Language

International agreements are often prepared in Turkish and English.

A bilingual contract should state which version prevails if the texts conflict.

For example:

“This Agreement is executed in Turkish and English. In the event of inconsistency, the English version shall prevail.”

The prevailing-language clause does not eliminate the need for an accurate Turkish translation where the document will be submitted to:

• Turkish court,
• Enforcement office,
• Tax authority,
• Notary,
• Trade registry,
• Administrative authority.

The parties should avoid using an automatic translation for legal clauses dealing with liability, termination or dispute resolution.

Currency and Payment Clauses

The contract should identify:

• Payment currency,
• Invoice currency,
• Bank account,
• Payment deadline,
• Advance or instalment structure,
• Applicable exchange rate,
• Bank charges,
• Withholding taxes,
• Conditions for withholding payment.

Where payment obligations are expressed in foreign currency, the parties should also review Turkish foreign-exchange restrictions and applicable exceptions.

A payment clause should address whether the creditor may claim:

• Payment in the agreed foreign currency,
• Turkish lira equivalent,
• Exchange rate on invoice date,
• Exchange rate on maturity,
• Exchange rate on actual payment date.

Unclear exchange-rate clauses can substantially change the economic result during periods of currency volatility.

Interest and Late Payment

The contract should identify:

• When default begins,
• Whether a separate notice is required,
• Contractual default interest,
• Currency of interest,
• Compounding, where legally permitted,
• Collection expenses.

A clause should not simply state that “the highest interest applies.”

The applicable interest may depend on:

• Commercial nature of the transaction,
• Governing law,
• Currency,
• Contractual rate,
• Mandatory restrictions,
• Whether the debt is liquid and due.

The creditor should send a formal default notice where there is uncertainty about whether the debtor automatically falls into default on the due date.

Delivery and Acceptance

Commercial payment disputes frequently arise because the contract does not define when goods or services are considered delivered and accepted.

The contract should specify:

• Delivery location,
• Delivery date,
• Transport documents,
• Person authorised to receive,
• Inspection period,
• Defect notification period,
• Acceptance certificate,
• Partial acceptance,
• Consequences of silence,
• Rejection procedure.

For services and construction works, the contract may use:

• Progress reports,
• Milestone certificates,
• Timesheets,
• Test results,
• Handover protocols,
• Completion certificates.

An invoice alone may not prove that the underlying goods or services were accepted.

Warranties and Defects

The contract should distinguish between:

• Visible defects,
• Hidden defects,
• Non-conformity with specifications,
• Performance failure,
• Warranty repairs,
• Replacement,
• Price reduction,
• Contract termination.

The buyer should preserve evidence by:

• Inspecting promptly,
• Sending written notice,
• Taking photographs,
• Obtaining expert review,
• Preserving defective products,
• Avoiding unauthorised alteration.

A buyer who continues using allegedly defective goods without reservation may face evidentiary difficulties.

Force Majeure and Hardship

A force majeure clause should identify events that may excuse or suspend performance.

Possible events may include:

• Natural disaster,
• War,
• Government prohibition,
• Export ban,
• Port closure,
• Severe supply interruption,
• Epidemic-related official restrictions.

The clause should also regulate:

• Notice period,
• Evidence,
• Duty to mitigate,
• Suspension,
• Allocation of additional costs,
• Right to terminate after prolonged disruption.

Force majeure should not be drafted so broadly that ordinary economic difficulty, price increases or foreseeable supply problems automatically release a party from performance.

A separate hardship or adaptation clause may be useful where performance remains possible but becomes extremely burdensome because of exceptional circumstances.

Termination Clauses

The contract should distinguish between:

• Termination for convenience,
• Termination for material breach,
• Immediate termination,
• Termination after a cure period,
• Expiry,
• Non-renewal.

The clause should identify:

• Required notice,
• Delivery method,
• Cure period,
• Outstanding payment,
• Return of property,
• Confidential information,
• Existing orders,
• Inventory,
• Post-termination commissions,
• Survival of dispute and confidentiality clauses.

Using the terms “termination,” “rescission,” “avoidance” and “cancellation” interchangeably can create uncertainty.

Jurisdiction Clauses

A jurisdiction clause identifies the state courts authorised to hear a dispute.

Under Turkey’s Civil Procedure Code, merchants and public legal entities may agree in writing to authorise one or more courts for an existing or future dispute. The legal relationship must be defined or definable, and the chosen court or courts must be identified. Such agreements cannot override exclusive jurisdiction or cover matters over which the parties cannot freely dispose.

An effective domestic clause might state:

“The Istanbul Central Courts and Enforcement Offices shall have exclusive jurisdiction over all disputes arising out of or in connection with this Agreement.”

The parties should consider whether “exclusive” jurisdiction is intended.

Without exclusivity, another court authorised by law may remain available.

Choosing a Foreign Court

For foreign-element contractual obligations, the parties may agree that a foreign state’s courts will hear the dispute where Turkish jurisdiction is not based on exclusive jurisdiction.

The agreement must be provable through written evidence.

Under Article 47 of Law No. 5718, a Turkish court may still hear the case if the chosen foreign court declines jurisdiction or if the defendant does not raise the jurisdiction objection before the Turkish court. The protected jurisdiction rules for employment, consumer and insurance matters cannot be removed by agreement.

A foreign court clause should identify the court system clearly.

Poor example:

“Disputes shall be resolved in Europe.”

Better example:

“The courts of England and Wales shall have exclusive jurisdiction.”

The parties must also ask whether the resulting judgment will be enforceable where the debtor’s assets are located.

Governing Law and Jurisdiction Must Be Separate

The following clause is incomplete:

“This Agreement is subject to Istanbul law.”

There is no separate “Istanbul law.”

The clause should distinguish:

• Governing law: law applied to the substance,
• Jurisdiction: court hearing the dispute.

For example:

“This Agreement shall be governed by Turkish law. The Istanbul Central Courts and Enforcement Offices shall have exclusive jurisdiction.”

Arbitration

Arbitration allows disputes to be decided by one or more private arbitrators instead of state courts.

Turkey’s International Arbitration Law applies principally where the dispute contains a foreign element and the seat of arbitration is Turkey, or where the statute is chosen by the parties or tribunal.

Arbitration may be attractive where the parties want:

• Neutral forum,
• Specialist decision-maker,
• Confidentiality,
• Flexible procedure,
• International enforceability,
• Proceedings in English or another language.

Arbitration may be less suitable where:

• The claim value is low,
• Urgent enforcement against several third parties is expected,
• The contract involves many related parties without matching arbitration clauses,
• Cost of arbitrators would be disproportionate.

Arbitration Must Be Agreed Clearly

Arbitration requires a valid arbitration agreement.

The clause should express an unambiguous intention to submit disputes to arbitration.

An optional or contradictory clause may fail.

Problematic example:

“Disputes shall be resolved by ISTAC arbitration or Istanbul courts.”

This wording may create doubt about whether arbitration is mandatory.

A complete clause should state:

• Arbitration institution or ad hoc rules,
• Seat,
• Number of arbitrators,
• Language,
• Governing law,
• Scope of disputes.

ISTAC Arbitration

The Istanbul Arbitration Centre, known as ISTAC, administers domestic and international arbitration where the parties agree to use its rules. ISTAC offers arbitration, fast-track arbitration and emergency-arbitrator procedures.

A model clause may be structured as follows:

“All disputes arising out of or in connection with this Agreement shall be finally resolved by arbitration under the Istanbul Arbitration Centre Arbitration Rules. The seat of arbitration shall be Istanbul, Türkiye. The tribunal shall consist of one arbitrator. The language of arbitration shall be English. The substantive law governing the contract shall be Turkish law.”

The clause can be adjusted for:

• Three arbitrators,
• Different seat,
• Different language,
• Specific confidentiality obligations,
• Fast-track procedure.

Emergency Arbitrator

An emergency arbitrator may be useful where urgent protection is needed before the ordinary tribunal is constituted.

Under ISTAC’s emergency procedure, the emergency arbitrator is appointed within two working days after receipt of the application and is expected to issue a decision within seven days.

Urgent measures may concern:

• Preservation of goods,
• Protection of evidence,
• Prevention of transfer,
• Performance of an urgent contractual duty,
• Maintenance of the status quo.

The party should still consider whether a Turkish court order is needed for effective enforcement against assets or third parties.

Seat of Arbitration Is Important

The seat is the legal home of the arbitration.

It determines matters such as:

• Procedural arbitration law,
• Supervisory courts,
• Action to set aside the award,
• Certain interim measure procedures.

The seat is not necessarily the physical location of every hearing.

The parties may choose Istanbul as the seat while holding hearings online or in another country.

The contract should not confuse:

• Seat,
• Hearing venue,
• Arbitration institution.

Institutional or Ad Hoc Arbitration

Institutional arbitration is administered by an organisation such as:

• ISTAC,
• ICC,
• LCIA,
• Swiss Arbitration Centre.

Ad hoc arbitration is organised by the parties and tribunal, often using UNCITRAL Arbitration Rules.

Institutional arbitration provides:

• Administrative support,
• Appointment mechanism,
• Fee rules,
• Procedural framework.

Ad hoc arbitration may offer flexibility but can create procedural delay where the clause does not specify how arbitrators will be appointed or challenged.

Interim Measures and Arbitration

Choosing arbitration does not necessarily prevent a party from requesting interim protection from a court.

Depending on the legal framework and clause, a party may seek:

• Interim injunction,
• Precautionary attachment,
• Evidence preservation,
• Emergency arbitrator relief.

The contract should avoid language suggesting that court applications for urgent protection amount to a waiver of arbitration.

Mandatory Commercial Mediation

Many commercial lawsuits in Turkey involving claims for payment or compensation require an application to mandatory mediation before the lawsuit is filed.

The commercial mediation requirement has applied since 1 January 2019 to qualifying commercial monetary claims.

The claimant should determine whether the specific action is subject to mediation before filing.

Failure to complete mandatory mediation can lead to procedural dismissal.

Mediation should not be confused with:

• Arbitration,
• Enforcement proceedings,
• Private settlement negotiations,
• Court-ordered expert review.

A party may generally begin an enforcement proceeding without first completing the mediation procedure, but a later qualifying commercial lawsuit may require mediation.

Settlement Agreements

A commercial settlement should address:

• Debt amount,
• Currency,
• Instalments,
• Interest,
• Security,
• Default,
• Release,
• Costs,
• Existing enforcement proceedings,
• Confidentiality.

Where settlement is reached through mediation and the legal requirements are satisfied, the agreement may receive enforceable effect through the applicable procedure.

International parties should also consider whether the settlement can be enforced outside Turkey.

Debt Collection Without a Prior Judgment

Turkish enforcement law permits a creditor to initiate ordinary enforcement proceedings for a due monetary claim without first obtaining a court judgment.

The enforcement office issues a payment order to the debtor.

The debtor may object within the statutory period. A timely objection generally stops ordinary enforcement, requiring the creditor to pursue an appropriate legal procedure such as:

• Action for annulment of objection,
• Action for collection,
• Removal of objection where the documents qualify.

The creditor should not assume that filing enforcement proceedings automatically proves the debt.

The quality of the contract and documentary evidence becomes decisive after an objection.

Documents Needed for Debt Collection

The creditor should preserve:

• Signed contract,
• Purchase orders,
• Invoices,
• Delivery notes,
• Bills of lading,
• Customs records,
• Acceptance certificates,
• E-mails,
• Account statements,
• Bank transfers,
• Default notices,
• Acknowledgements of debt,
• Guarantees,
• Cheques and promissory notes.

Documents issued abroad may require:

• Apostille or legalisation,
• Certified Turkish translation,
• Notarial certification.

An English contract may be legally useful, but a Turkish translation will ordinarily be needed in Turkish court or enforcement proceedings.

Invoice Alone May Not Be Enough

An invoice is important commercial evidence but may not independently prove every element of the claim.

The debtor may argue that:

• Goods were never delivered,
• Services were defective,
• Invoice was issued unilaterally,
• Quantity was incorrect,
• Payment was already made,
• Contract was terminated,
• A credit note was agreed.

The creditor should therefore maintain a complete evidence chain from order to delivery and maturity.

Formal Default Notice

A formal notice may be useful to:

• Put the debtor into default,
• Demand payment,
• Preserve termination rights,
• Establish an interest starting date,
• Allow a contractual cure period,
• Create evidence before litigation.

The notice may be sent through:

• Turkish notary,
• Registered electronic mail system,
• Contractually agreed electronic method,
• International service method.

The contract should identify valid notice addresses and when a notice is considered received.

Cheques and Promissory Notes

Negotiable instruments may allow the creditor to use a special enforcement procedure.

Before accepting a Turkish cheque or promissory note, the creditor should verify:

• Mandatory form,
• Signatory authority,
• Maturity,
• Amount,
• Currency,
• Endorsements,
• Presentation period,
• Alterations.

A document called a “guarantee cheque” is not automatically free from negotiable instrument rules.

Strict deadlines may apply to presentation and recourse rights.

Guarantees and Security

The creditor should consider obtaining security before performance.

Possible security includes:

• Bank guarantee,
• Letter of guarantee,
• Parent company guarantee,
• Personal guarantee,
• Pledge,
• Mortgage,
• Assignment of receivables,
• Retention of title,
• Advance payment,
• Escrow.

A guarantee clause should identify:

• Maximum liability,
• Duration,
• Conditions for demand,
• Governing law,
• Jurisdiction,
• Whether liability is joint and several,
• Whether the guarantee is independent or accessory.

A parent company’s ownership of the Turkish debtor does not automatically make the parent liable for the subsidiary’s debts.

Precautionary Attachment

A creditor with a monetary claim may seek precautionary attachment where the statutory conditions are satisfied.

This remedy may be important where there is a risk that the debtor will:

• Transfer assets,
• Empty bank accounts,
• Leave Turkey,
• Conceal property,
• Carry out fraudulent transactions.

The court normally requires evidence of the claim and may require the creditor to provide security.

Precautionary attachment is not a final judgment. The creditor must follow the subsequent enforcement and court steps within the statutory periods.

Foreign Creditors and Security for Costs

A foreign individual or legal entity filing a case, joining a case or initiating enforcement in Turkey may be required to provide security for litigation and enforcement costs and possible loss suffered by the opposing party.

The court may exempt the foreign party where reciprocity exists.

The creditor should examine:

• Nationality,
• Applicable bilateral treaty,
• Reciprocal practice,
• Amount and form of security.

This issue should be budgeted before beginning substantial litigation.

Commercial Courts

Commercial disputes may be heard by the Civil Courts of First Instance acting as commercial courts or by specialised Commercial Courts of First Instance, depending on the location and nature of the dispute.

A dispute is not commercial merely because one party is a company.

The court must examine whether the dispute qualifies as a commercial case under Turkish law.

Examples frequently treated as commercial include disputes relating to:

• Commercial enterprises,
• Companies,
• Negotiable instruments,
• Insurance,
• Carriage,
• Agency,
• Distribution,
• Intellectual property involving commercial activity,
• Transactions concerning both parties’ commercial enterprises.

The correct court and mandatory mediation requirement should be determined before filing.

Recognition and Enforcement of Foreign Court Judgments

A foreign court judgment does not automatically become enforceable against assets in Turkey.

Under Law No. 5718, a final foreign civil judgment requires a Turkish enforcement decision before it can be executed in Turkey.

The application generally requires:

• Certified foreign judgment,
• Document proving finality,
• Authenticated Turkish translations,
• Proper service on the opposing party.

The Turkish court examines enforcement conditions rather than retrying the entire commercial dispute.

Enforcement Conditions for Foreign Judgments

Important conditions include:

• Reciprocity for enforcement,
• No conflict with Turkish exclusive jurisdiction,
• Sufficient connection with the foreign court where jurisdiction is challenged,
• No manifest conflict with Turkish public policy,
• Proper notice and opportunity to defend.

The Turkish court may grant enforcement of all or part of the judgment.

Once enforcement is granted, the foreign judgment is executed like a Turkish judgment.

A foreign company should therefore examine enforcement prospects before selecting a foreign court.

Winning abroad may have limited commercial value if the judgment cannot effectively reach the Turkish debtor’s assets.

Recognition and Enforcement Are Different

Recognition gives the foreign judgment:

• Final judgment effect,
• Conclusive evidentiary effect.

Enforcement additionally permits compulsory execution.

A foreign judgment declaring that a contract was terminated may need recognition.

A judgment ordering the Turkish debtor to pay money will generally require enforcement before assets can be seized.

Recognition does not require the reciprocity condition applied to enforcement.

Foreign Arbitral Awards

Foreign arbitral awards that are binding, final or enforceable may be enforced in Turkey through the applicable treaty and domestic framework.

Law No. 5718 requires the applicant to provide:

• Arbitration agreement or clause,
• Arbitral award,
• Certified copies,
• Authenticated Turkish translations.

Enforcement may be refused on limited grounds, including:

• No valid arbitration agreement,
• Lack of proper notice,
• Inability to present the defence,
• Award exceeding the arbitration agreement,
• Procedural irregularity,
• Non-arbitrability,
• Public policy,
• Award not yet binding or set aside at the seat.

This limited review is one reason arbitration is frequently chosen for cross-border contracts.

Turkish Arbitral Awards

Where the arbitration is seated in Turkey, the applicable domestic arbitration framework determines:

• Challenge procedure,
• Supervisory court,
• Enforceability.

An arbitral award is not generally appealed through a full reconsideration of the merits in the same way as an ordinary court judgment.

A setting-aside application is limited to statutory grounds.

The arbitration clause should be drafted carefully because jurisdictional defects may later affect the enforceability of the award.

Service Abroad

International litigation may require service of:

• Lawsuit petition,
• Hearing notice,
• Expert report,
• Judgment,
• Enforcement document

on a party outside Turkey.

The applicable method may depend on:

• Hague Service Convention,
• Bilateral treaty,
• Diplomatic channels,
• Domestic service rules.

International service may take considerable time.

The contract should include:

• Accurate registered addresses,
• Notice obligations following address changes,
• Electronic notice methods for contractual communications.

A contractual e-mail notice clause does not always replace formal judicial service requirements.

Limitation Periods

The applicable limitation period depends on:

• Governing law,
• Contract type,
• Nature of claim,
• Invoice date,
• Delivery date,
• Maturity,
• Acknowledgement,
• Negotiable instrument,
• Carriage or insurance rules.

Turkish private international law generally subjects limitation to the law governing the underlying legal relationship.

The creditor should not rely automatically on the general contractual limitation period.

Special shorter periods may apply to:

• Carriage,
• Agency,
• Insurance,
• Defects,
• Cheques,
• Promissory notes,
• Certain commercial claims.

Settlement discussions do not always suspend or interrupt limitation.

Contractual Limitation Clauses

The parties may attempt to create notice periods or contractual claim deadlines.

Such clauses should be reviewed for validity under the governing law.

A provision stating that every claim disappears unless notified within 24 hours may be ineffective or interpreted narrowly where it conflicts with mandatory law, good faith or the nature of a hidden defect.

The parties should distinguish between:

• Operational notification deadline,
• Contractual claim procedure,
• Statutory limitation period.

Electronic Contracts and E-Signatures

Commercial contracts may be concluded through electronic communication.

Evidence may include:

• Secure electronic signatures,
• E-mails,
• Electronic purchase orders,
• Online acceptance records,
• System logs,
• Registered electronic mail.

The parties should preserve:

• Original electronic files,
• Metadata,
• Time stamps,
• Server records,
• Authorised user records.

A screenshot alone may not prove who sent or accepted the document.

The contract should identify which electronic systems and accounts are authorised for:

• Orders,
• Amendments,
• Notices,
• Acceptance.

Amendments and Waivers

Commercial relationships often change through informal e-mails or conduct.

The agreement should state how amendments become valid.

For example:

“No amendment shall be valid unless made in writing and signed by authorised representatives of both parties.”

The parties should also regulate whether:

• Electronic signature is sufficient,
• E-mail approval is sufficient,
• Purchase orders may modify the master agreement,
• Failure to enforce a right constitutes waiver.

A strict written-amendment clause may still generate interpretation questions if the parties consistently perform under an informal change.

Assignment and Change of Control

A contract should state whether either party may transfer:

• Contract,
• Receivables,
• Rights,
• Obligations.

The other party may wish to prohibit assignment to:

• Competitor,
• Sanctioned entity,
• Financially weaker affiliate,
• Unknown third party.

A change-of-control clause may allow termination or consent where ownership of the counterparty changes.

This is particularly important in long-term distribution, technology, supply and joint development relationships.

Compliance Clauses

Cross-border contracts should consider:

• Anti-bribery,
• Sanctions,
• Export controls,
• Competition law,
• Data protection,
• Money laundering,
• Customs,
• Human rights and supply chain requirements.

The clause should state:

• Required compliance,
• Information and audit rights,
• Notification of investigation,
• Suspension rights,
• Termination rights.

A broad compliance clause should not allow one party to terminate arbitrarily based on unsupported suspicion.

Practical Contract Drafting Checklist

Before signing, the foreign company should verify:

1. Correct legal identity of the Turkish counterparty.
2. Current authority of every signatory.
3. Products, services and technical specifications.
4. Price, taxes and payment currency.
5. Delivery term and Incoterm.
6. Inspection and acceptance procedure.
7. Warranty and defect notification.
8. Delay penalties and damages.
9. Force majeure and hardship.
10. Contract duration and renewal.
11. Termination and cure periods.
12. Confidentiality and data protection.
13. Intellectual property ownership.
14. Assignment and change of control.
15. Guarantee and security.
16. Governing law.
17. CISG inclusion or exclusion.
18. Court jurisdiction or arbitration.
19. Seat, language and arbitrator number.
20. Notice addresses and methods.
21. Mandatory mediation consequences.
22. Evidence and record retention.
23. Enforcement prospects in the asset country.

Practical Debt Collection Checklist

When payment is overdue, the creditor should:

1. Confirm the debtor’s exact legal entity.
2. Review governing law and dispute clause.
3. Calculate the debt, interest and currency.
4. Gather the contract and all annexes.
5. Obtain invoices and delivery evidence.
6. Identify debtor assets in Turkey.
7. Send a formal default notice where appropriate.
8. Review guarantees and negotiable instruments.
9. Consider precautionary attachment.
10. Determine whether to begin enforcement or litigation.
11. Complete mandatory mediation before a qualifying lawsuit.
12. Preserve limitation periods.
13. Arrange apostille and translations.
14. Check whether foreign security for costs may be required.
15. Plan enforcement before investing in a lengthy case.

Frequently Asked Questions

Can a foreign company choose Turkish law?

Yes. Parties to an international commercial contract may expressly select Turkish law as the governing law.

Can the parties choose English or Swiss law?

Yes, subject to mandatory Turkish rules, public policy and any special law governing the transaction.

What happens if the contract contains no governing-law clause?

The law most closely connected with the contract applies under Turkish conflict-of-laws rules, generally using the characteristic performer’s business establishment as a starting point.

Does choosing Turkish law mean Istanbul courts are competent?

No. Governing law and jurisdiction are separate matters.

Can foreign companies choose Turkish courts?

Yes, where the jurisdiction agreement satisfies the legal requirements and does not conflict with exclusive jurisdiction.

Can the parties choose a foreign court?

Yes, for qualifying foreign-element contractual disputes where Turkish jurisdiction is not exclusive. The agreement should be provable in writing.

Can a Turkish court still hear the case despite a foreign court clause?

Potentially, if the foreign court declines jurisdiction or the defendant does not raise the jurisdiction objection in Turkey.

Can foreign companies use ISTAC arbitration?

Yes. ISTAC administers arbitration for domestic and international parties that agree to its rules.

Is an arbitration clause enough if it only says “arbitration applies”?

It may create avoidable uncertainty. The clause should identify the institution or rules, seat, language and number of arbitrators.

Can arbitration and court jurisdiction both be written as alternatives?

An unclear optional clause may be challenged. The intended dispute mechanism should be expressed unambiguously.

Can an emergency arbitrator issue urgent relief?

ISTAC’s emergency procedure provides appointment within two working days and a decision within seven days under its rules.

Does choosing arbitration prevent all court applications?

Not necessarily. Court assistance may still be available for interim protection, evidence, appointment issues and enforcement.

Is mediation mandatory before a commercial lawsuit?

Many commercial monetary and compensation claims require mandatory mediation before litigation. The specific claim should be classified before filing.

Is mediation required before beginning enforcement proceedings?

An ordinary enforcement proceeding can generally be initiated separately, but a later commercial lawsuit may be subject to mandatory mediation.

Can a foreign creditor start enforcement in Turkey without a judgment?

Yes, an ordinary monetary enforcement proceeding may be initiated without first obtaining a court judgment. A debtor objection may stop the proceeding and require further legal action.

Is an invoice sufficient to collect the debt?

Not always. Delivery, performance, acceptance, maturity and non-payment should also be proved.

Can Turkish assets be frozen before judgment?

A creditor may request precautionary attachment or another interim measure where the statutory conditions are satisfied.

Must a foreign creditor provide security?

A foreign claimant or enforcement creditor may be required to provide security, subject to treaty or reciprocity exemptions.

Can a foreign court judgment be executed directly in Turkey?

No. A Turkish enforcement judgment is ordinarily required first.

Will the Turkish court reconsider the entire foreign dispute?

Ordinarily, the court examines the statutory enforcement conditions rather than retrying the full merits.

Is reciprocity required?

Reciprocity is a condition for enforcement of foreign court judgments. It is not applied in the same way to mere recognition.

Can a foreign arbitral award be enforced in Turkey?

Yes, where the applicable treaty and domestic enforcement conditions are satisfied.

What documents are required for enforcement of a foreign arbitral award?

The arbitration agreement, arbitral award and authenticated Turkish translations are generally required.

Can the Turkish court refuse enforcement because it disagrees with the arbitrator?

A disagreement with the merits alone is not an ordinary refusal ground. Review is limited to the recognised enforcement grounds.

Does the CISG apply to Turkish international sales?

It may. Turkey has been a contracting state since 1 August 2011.

Can the CISG be excluded?

Yes. The contract should exclude it expressly where that is the parties’ intention.

Does an Incoterm decide when ownership transfers?

Not necessarily. Incoterms principally address delivery, risk and cost allocation rather than every contractual issue.

Can the contract be only in English?

Yes, but a Turkish translation will generally be needed for Turkish official proceedings. The parties should state which language version prevails.

Can a parent company be liable for a Turkish subsidiary’s debt?

Not merely because it owns the shares. A separate guarantee, contractual undertaking or another legal basis is normally required.

Conclusion

Foreign companies entering commercial contracts with Turkish businesses should plan dispute resolution before a dispute exists.

A complete international contract should separately address:

• Governing law,
• Court jurisdiction,
• Arbitration,
• Mandatory rules,
• Enforcement.

Under Turkish private international law, the parties may choose the law governing their contractual obligations. If no law is selected, the law most closely connected with the contract applies, generally using the characteristic performer’s establishment as the starting point.

A foreign-law clause does not automatically exclude mandatory Turkish rules concerning matters such as competition, customs, tax, real estate, employment or public policy.

For international sale contracts, the parties should determine whether the CISG applies and whether it should be retained or excluded.

A jurisdiction clause must identify the competent court clearly. For qualifying foreign-element contractual disputes, the parties may select a foreign court unless Turkish jurisdiction is exclusive.

Arbitration may offer a neutral and internationally enforceable mechanism. A properly drafted arbitration clause should specify:

• Institution or rules,
• Seat,
• Language,
• Number of arbitrators,
• Governing law.

ISTAC provides institutional arbitration, fast-track proceedings and emergency arbitrator procedures for parties that choose its rules.

Many commercial monetary claims in Turkey require mandatory mediation before a lawsuit is filed. Mediation should therefore be considered at the procedural planning stage.

A creditor may also begin ordinary enforcement proceedings for a due monetary claim without first obtaining a judgment. However, a timely debtor objection may stop the proceeding and require a further lawsuit.

Foreign creditors should preserve a complete evidence file including:

• Contract,
• Orders,
• Invoices,
• Delivery records,
• Acceptance documents,
• Bank statements,
• Default notices,
• Guarantees.

A foreign court judgment cannot ordinarily be executed directly in Turkey. Recognition or enforcement proceedings must be completed under Turkish private international law.

Foreign arbitral awards may also require enforcement proceedings, but review is generally limited to recognised grounds such as invalid arbitration agreement, lack of due process, non-arbitrability and public policy.

The commercial value of a judgment or award ultimately depends on the availability of assets. The counterparty’s financial position, guarantees and enforcement prospects should therefore be examined before substantial goods, services or credit are provided.