Blockchain and Smart Contracts: Turkish Law and International Arbitration Aspects

1. Introduction: The New Face of Digital Transformation

Blockchain technology, thanks to its decentralized structure and immutable record feature, has created fundamental changes in many areas, especially in the financial sector. Smart contracts, one of the most notable applications of this technology, hold significant potential in the commercial world with their promise of automated and transparent transaction execution. However, the question of how smart contracts will be integrated with legal systems, and especially Turkish law and international arbitration mechanisms , still awaits clarification from many perspectives.

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2. What is a Smart Contract?

Smart contracts are snippets of code written in programming languages, running on a blockchain, and automatically executing themselves when predetermined conditions are met. Typical characteristics include:

• Automatic execution

• Irrevocability

• Decentralized control

• Speed ​​and cost advantage

However, these characteristics also raise legal questions about how they can be reconciled with the elements of classical contract law (declaration of intent, capacity, form, validity, interpretation, etc.).

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3. Evaluation from the Perspective of Turkish Law

a) Nature and Validity of the Contract

The Turkish Code of Obligations (TBK) considers the mutual and congruent declarations of intent of the parties sufficient for the formation of a contract. The fact that intelligent contracts are not in the form of a classic written text does not mean that they are legally invalid. Since freedom of form is the principle in the TBK, intelligent contracts can be considered valid as long as they reflect the intentions of the parties and produce legal consequences

b) The Issue of Legal Capacity and Representation

While smart contracts typically involve natural or legal persons as parties, sometimes entities without legal personality, such as Decentralized Autonomous Organizations (DAOs), can also be parties. Since Turkish law does not grant legal capacity to entities without legal personality, this can create practical problems.

c) Contract Interpretation and Disputes

Since smart contracts are expressed in code, technical expertise may be required when interpretation is necessary. However, in Turkish law, judges prioritize the intentions of the parties when interpreting contractual provisions. Therefore, in the event of a dispute, not only the technical but the legal meaning must be considered.

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4. Smart Contracts in International Arbitration

a) Codification of Arbitration Terms

Arbitration clauses can be integrated into smart contracts. For example, the statement "In case of dispute, the ICC Arbitration Rules shall apply" can be embedded in the code. However, such arbitration clauses must be clear, understandable, and binding

b) Issues of Authority and Enforcement

Initiating the arbitration process through code may create procedural law issues. In particular;

• How will the notification be served?

• How will the arbitration panel be formed?

• How will the collection of evidence be ensured?

These questions have counterparts in traditional arbitration systems; however, how these stages can be integrated into automation in code-based systems is debatable

c) Use of Blockchain Evidence in Arbitration

Blockchain-based transactions are immutable and timestamped, therefore possessing high probative value. The acceptance of digital evidence is expanding in international arbitration practice. However, the authenticity, relationship to the parties' intent, and integrity may be questioned.

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5. Future Legal Perspectives

• Need for a definition at the legal level: Turkish law does not yet have a clear definition or regulation of smart contracts. Therefore, the legislation needs to be updated.

• International alignment: Countries like the European Union and the United Kingdom are preparing draft legislation that includes regulations on blockchain and smart contracts. It is important for Turkey to follow these developments.

• Digitalization of arbitration centers: Institutions such as the Istanbul Arbitration Center (ISTAC) need to strengthen their technical infrastructure in terms of digital evidence management and online arbitration processes.

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6. Conclusion

Blockchain technology and smart contracts are bringing new questions and opportunities to legal systems. While smart contracts may be valid in Turkish law due to the principle of freedom of form, the integration of traditional law and digital systems is critically important in application, interpretation, and dispute resolution processes .

In the realm of international arbitration, coded arbitration clauses, digital evidence, and online dispute resolution mechanisms are becoming the new normal. To adapt to this new era, collaboration between is essential.