Authorization Agreement Validity Requirements: How is an Authorization Agreement Established Between Merchants?

1) Why does an “authorization agreement” change the fate of a commercial contract?

In commercial disputes, simply being "in the right" is often not enough; in the right place (competent court) and according to the right procedure . Jurisdiction agreements are particularly important between companies operating in different cities:

In which city the case will be heard,
Cost/logistics burden,
The speed of evidence gathering,
Strategic bargaining power

It has direct effects. Therefore, viewing the authorization agreement as "a routine sentence at the end of the contract" leads to procedural problems that will be difficult to rectify in the future.

2) Let's clarify the concepts: Authority – Duty – Exclusive Authority – Exclusivity

Jurisdictionrelates to the type of court (e.g., Commercial Court of First Instance or Civil Court of First Instance). Rules of jurisdiction are a matter of public order; they cannot be altered by contract.
Jurisdictiondetermines which local court (which city/district) will handle the case within the same type of court.
Exclusive jurisdictionoccurs when the law specifically assigns certain disputes to a particular court. In such cases, a jurisdiction agreement cannot be made.
An exclusive jurisdiction clausemeans that the parties can only file the lawsuit in the chosen location. In the system of the Turkish Code of Civil Procedure, it is accepted that a jurisdiction agreement between merchants will have exclusive effect "unless otherwise agreed."

3) Basis: The legal basis for the jurisdiction agreement between merchants (Code of Civil Procedure, Articles 17-18-19)

Merchants (or public legal entities) may designate one or more courts as competent to resolve any disputes that have arisen or may arise between them.
However, this freedom is not unlimited. For a jurisdiction agreement to be valid, all the conditions stipulated in Article 18 of the Code of Civil Procedure must be met.

Another critical point in practice is this: even if there is a jurisdiction agreement, if the other party files the lawsuit in the wrong place and you a jurisdictional objection within the prescribed time (in your response), the court where the lawsuit was filed may become the competent court.

4) The condition of being "between merchants": It is not enough for the transaction to be commercial; one party must be a merchant

The most common mistake in practice is: "This contract is a commercial transaction, therefore the jurisdiction clause applies." No. According to Article 17 of the Code of Civil Procedure, what is decisive is not whether the dispute is commercial in nature, but the status of the parties: the parties must be merchants or public legal entities. This approach is also emphasized in summaries of case law.

Practical result:

Company ↔ Company: There is usually no problem (both parties are merchants).
In company-to-natural person relationships, if the natural person is not a merchant, Article 17 of the Code of Civil Procedure collapses; the contract carries a serious risk of invalidity.
In "weaker party" relationships, such as between consumers and employees, protective arrangements also come into play; agency agreements are often ineffective.

5) Validity conditions of the jurisdiction agreement according to Article 18 of the Code of Civil Procedure

Article 18 of the Turkish Code of Civil Procedure regulates both the prohibited areas and the positive conditions for the validity of a jurisdiction agreement

(A) Prohibited areas: No authorization agreement can be made in these cases

matters where the parties cannot freely dispose of their
jurisdiction, such as those involving public order (e.g., certain status cases), it is not acceptable for parties to choose a court through a jurisdiction agreement.
In cases of absolute jurisdiction
, if the law explicitly states "this particular court has jurisdiction," a jurisdiction agreement cannot override that absolute jurisdiction.
(Even if a clause you include in the agreement appears to exist, the court will not apply it when a dispute arises.)

(B) Positive conditions: If you want the authorization agreement to be valid

Written form:
The power of attorney agreement must be in writing; this is a requirement for its validity.
- It could be included as a clause within the contract text.
- It could be a separate protocol.
- Proof of authenticity should be strengthened through secure methods such as electronic signatures/REGISTERED electronic mail (leaving it solely to email traffic can be risky).
The use of overly broad expressions like "In any dispute between us..." regarding a specific/determinable legal relationship creates debate in terms of Article 18 of the Code of Civil Procedure, which requires that "the legal relationship from which the dispute arises must be specific or determinable." The law requires that the clause be linked to a specific relationship. Suggestion: Always link the jurisdiction clause to the name/subject matter of the contract: "Arising from this Sales Contract..."
Article 18 of the Code of Civil Procedure requires that the competent court (and, if possible, the type of court) be clearly indicated, stating "the court or courts designated as competent must be indicated"

City + court type + court district distinction if necessary:
E.g., “Istanbul (Çağlayan) Civil Commercial Courts…”
Why? Because in large cities, there are different court districts/districts and different specializations within the same city; vague expressions like “Istanbul Courts” could be grounds for objection later.

6) The exclusivity issue: “Exclusive” or “alternative”?

According to Article 17 of the Turkish Code of Civil Procedure, unless the parties agree otherwise, the case is expected to be filed only in the chosen court.
Therefore, when writing the clause, consciously make this strategic decision:

- - Exclusive jurisdiction: “Lawsuits can only be filed in X Courts.”
    Advantage: Clarity and predictability.
    Risk: Filing a lawsuit in the wrong place can lead to missed objections, resulting in greater loss of rights; furthermore, disputes may arise during the enforcement phase.
  - Alternative jurisdiction: “Courts X have jurisdiction; however, the jurisdiction of statutory courts is reserved.”
    Advantage: It both preserves the chosen location and provides the flexibility to revert to general/specific jurisdiction rules if necessary.

7) Jurisdiction challenge strategy: Even if your clause is strong, what if you miss the deadline?

Don't become complacent just because a jurisdiction clause "exists." What if the other party files a lawsuit in the wrong place?

In cases where jurisdiction is not definitively established, the objection must be raised in the response brief
The party raising an objection to jurisdiction the competent court (or the court they choose if there is more than one) in their objection; otherwise, the objection may not be considered.
If no objection is raised within the prescribed time limit, the court where the case was filed may become competent.

Summary: An authorization clause is not an "automatic shield"; it requires the right procedural move at the right time.

8) If there is a foreign element: Selection of a foreign court (Article 47 of the Private International Law Act) and case law approach

The parties sometimes include provisions such as "London/Zurich/Paris courts have jurisdiction." When a foreign court is chosen, Law No. 5718 on Private International Law , and especially Article 47, comes into play.

In practice Supreme Court decisions regarding the evaluation of agreements that generally grant jurisdiction to foreign state courts in terms of "specificity".

Practical note:

If you want to completely rule out the possibility of the dispute being heard in Türkiye, both the contract text and the framework of the Private International Law Act must be very carefully drafted.
"Both foreign courts and Turkish courts"—such contradictory arrangements—raise serious jurisdictional disputes.

Frequently Asked Questions

1) Can a power of attorney agreement between merchants be made orally?
No. Article 18 of the Code of Civil Procedure requires it to be in writing for validity.

2) Is it sufficient to simply state "Istanbul Courts have jurisdiction"?
To avoid creating a debate about specificity, it is safer to specify the city, court type, and, if necessary, the courthouse. Article 18 of the Code of Civil Procedure requires the court to be indicated.

3) What should I do if the other party files a lawsuit elsewhere despite a jurisdiction clause existing?
If there is no definitive jurisdiction, you must raise the objection to jurisdiction in your response; otherwise, the court where the lawsuit was filed may become competent.

4) Can a jurisdiction agreement change the court with exclusive jurisdiction?
Yes, it can.

It is not permissible. In cases of absolute authorization, an authorization agreement cannot be made.

5) If the contract is commercial and one of the parties is not a merchant, is the jurisdiction clause still valid?
Validity is seriously at risk; Article 17 of the Code of Civil Procedure focuses on the status of the parties. Case law summaries also emphasize that "the transaction being commercial" alone is not sufficient.

6) Is it possible to choose a foreign court?
If there is a foreign element, the framework of the Private International Law Act becomes important; the matter is evaluated according to the approach of Article 47.

When properly established, a jurisdiction agreement between merchants time, cost, and strategic advantages in commercial disputes; however, if incorrectly established, it can stall the case from the outset with risks such as "preliminary objection," "lack of jurisdiction," and "procedural rejection." The core formula is this:

The party designation must be correct (merchant/public legal entity),
The conditions of written form, certainty, and clear indication of the court, as stipulated in Article 18 of the Code of Civil Procedure, must be met
No encroachment will be made on the area of strict jurisdiction
When a dispute arises, the deadlines stipulated in Article 19 of the Code of Civil Procedure must not be missed.

HMK, law, special jurisdiction, commercial litigation, procedure, jurisdiction agreement

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Authorization Agreement Validity Requirements: How is an Authorization Agreement Established Between Merchants?