Jurisdiction and Applicable Law in International Yacht Conventions

How is the competent court and applicable law determined in international yacht contracts? A comprehensive legal guide within the framework of the Turkish Private International Law Act, the Turkish Code of Civil Procedure, and the Turkish Commercial Code for yacht sales, charter, construction, and management contracts.

Entrance

of competent court and applicable law in international yacht contracts is one of the most frequently overlooked, yet crucial, aspects of maritime law when a dispute arises. This is because, in an international yacht contract, the issue is not simply "what the parties agreed upon," but also "in which country the dispute will be heard" and "which country's law will apply." In Turkish law, the fundamental framework for this area is established by Law No. 5718 on International Private Law and Procedural Law. This law regulates the applicable law in private law relationships involving a foreign element, the international jurisdiction of Turkish courts, and the recognition and enforcement of foreign judgments.

This issue is even more important in the context of yacht contracts. Because a yacht is often not a property tied to a single country. The owner may be in another country, the yacht may fly a foreign flag, the sale or charter agreement may be signed in another country, delivery may take place in a different port, and the financing relationship may be subject to a different legal system. According to the Turkish Commercial Code, any vessel that is designed for the purpose of moving through water, has the ability to float, and is not very small is considered a ship. The same Code also defines the concepts of seaworthiness and roadworthiness in detail. Therefore, international yacht contracts should not be treated as ordinary commercial contracts; they should be considered as contracts with a maritime dimension and touching upon multiple legal systems.

In this article, competent courts and applicable law in international yacht contracts within the framework of Turkish law. Specifically, regarding yacht sales contracts, yacht charter contracts, yacht construction contracts, and yacht management contracts, I will explain how the international jurisdiction of Turkish courts is determined, whether parties can choose a court, the limits of the foreign court requirement, the extent to which the choice of law is valid, why the foreign flag and registry elements create a separate problem, and which contract clauses must be included. This is not merely a technical matter of private international law; it is directly a matter of contract security.

Why is the International Yacht Convention different?

A yacht contract becomes "international" only when it involves a foreign element. This element sometimes arises from the nationality or domicile of the parties, sometimes from the yacht's flag, sometimes from its place of registration, sometimes from its port of delivery, and sometimes from the place of performance of the contract. For example, a buyer residing in Türkiye acquiring a Maltese-flagged yacht from a marina in Italy is clearly a relationship involving a foreign element. The scope of application of the Turkish Private International Law Act begins precisely at this point.

Moreover, in yacht contracts, two separate legal questions often intertwine. Firstly, which law applies to the contractual obligation? Secondly, which law applies to the real rights on the yacht, i.e., ownership, mortgage, usufruct, or registration? While Article 24 of the Private International Law Act accepts the choice of law in contractual obligations, Article 22 links real rights on air and sea transport vehicles to the law of the country of origin; the country of origin is the place of registration of real rights on sea transport vehicles, or, if there is no registration, the port of origin. This dual structure often invalidates the "one law solves everything" approach in yacht contracts.

This is precisely why the competent court and applicable law in international yacht contracts is crucial not only when a lawsuit arises, but also during the contract's drafting phase. Otherwise, the parties may waste months debating "which court will hear the case" and "which law will apply" before even addressing the merits of the dispute. This delay, particularly in high-value yacht sales, commercial use dependent on charter revenue, or shipyard projects, directly translates into economic loss.

The competent court and the applicable law are not the same thing

One of the most common mistakes in practice is confusing the concepts of "competent court" and "applicable law." However, they are different. "Competent court" indicates which country and which local court will hear the dispute. "Applicable law," on the other hand, determines which substantive legal rules the court will apply to reach a conclusion. The parties may designate Turkish courts as competent but choose English law; or they may designate a foreign court as competent while still applying Turkish law. Turkish law, as a rule, considers these two choices independent of each other.

This distinction is crucial in yacht contracts. Simply stating "Istanbul courts have jurisdiction" in the contract does not automatically guarantee the application of Turkish law. Similarly, saying "Turkish law will apply" alone does not guarantee jurisdiction of Turkish courts. When drafting an international yacht contract, these two points must be clearly and consciously addressed in separate clauses. One of the biggest contractual errors is attempting to implicitly select both the court and the law in a single sentence.

How is the international jurisdiction of Turkish courts determined?

The main rule regarding the international jurisdiction of Turkish courts is Article 40 of the Private International Law Act (MÖHUK). According to this article, the international jurisdiction of Turkish courts is determined by the territorial jurisdiction rules of domestic law. Therefore, in a dispute concerning a yacht contract involving a foreign element, the MÖHUK is examined first; the MÖHUK then refers us to the domestic jurisdiction rules in the Code of Civil Procedure (HMK). This systematic approach establishes a bridge between "international jurisdiction" and "territorial jurisdiction.".

In this context, Article 6 of the Code of Civil Procedure (HMK) regulates the general jurisdiction rule and states that the court with general jurisdiction is the court of the domicile of the defendant, whether a natural or legal person, at the time of the lawsuit. Article 9 of the HMK, for persons who do not have a domicile in Türkiye, appoints the court of the defendant's habitual residence in Türkiye; and in cases concerning property rights, appoints the court of the place where the disputed property is located. Article 10 of the HMK accepts that lawsuits arising from contracts can also be filed in the court of the place where the contract is to be performed. Therefore, the place of delivery in yacht sales, the check-in port or the place where use begins in yacht chartering, and the delivery shipyard or acceptance port in yacht construction contracts can become important.

The issue of jurisdiction should also not be overlooked here. According to Articles 4 and 5 of the Turkish Commercial Code, lawsuits arising from matters related to the commercial enterprises of both parties, and many maritime trade relationships regulated in the TCC, are considered commercial lawsuits; as a rule, the primary commercial court has jurisdiction. If there is more than one primary commercial court in a location, one or more of them may be exclusively assigned to handle legal cases related to maritime trade and marine insurance. Therefore, the competent court and applicable law in international yacht contracts, not only the question of "which city" but also "which court has jurisdiction" should be asked.

Can the parties choose Turkish courts by contract?

Yes, but not in every case. According to Article 17 of the Code of Civil Procedure, merchants or public legal entities may, by contract, designate one or more courts as competent to hear a dispute that has arisen or may arise between them. Unless otherwise agreed by the parties, the lawsuit can only be filed in these courts specified in the contract. Article 18 of the Code of Civil Procedure stipulates that for this jurisdiction agreement to be valid, it must be in writing, the legal relationship from which the dispute arises must be specific or ascertainable, and the court or courts designated as competent must be indicated. Furthermore, jurisdiction agreements cannot be made in matters over which the parties cannot freely dispose or in cases of absolute jurisdiction.

This provision has the following effect regarding yacht contracts: If the parties are two commercial enterprises, for example, a foreign shipyard and a Turkish buyer, or if the contract is between two commercial charter companies, the Istanbul Commercial Courts or a specific Turkish court may be designated as having jurisdiction. However, instead of writing a general and vague statement such as "Turkish courts have jurisdiction" in the contract, it is safer to clearly state which city and, if possible, which court group has jurisdiction. Furthermore, since Article 17 of the Code of Civil Procedure is limited to merchants and public legal entities, it may not be possible to rely on this article in every yacht contract. Particular caution is needed in transactions involving consumers.

Is it possible to enter into a jurisdiction agreement in favor of a foreign court?

Article 47 of the Private International Law Act answers this question. According to the provision, in cases where territorial jurisdiction is not determined on the basis of exclusive jurisdiction, the parties may agree that a dispute arising from a debt relationship involving a foreign element shall be heard in a court of a foreign state. This agreement must be proven by written evidence. The same article further states that the case can only be heard in a competent Turkish court if the foreign court declares itself incompetent or if no objection to jurisdiction is raised in Turkish courts. Furthermore, it is specifically stipulated that the jurisdiction of the courts determined in Articles 44, 45, and 46 of the Private International Law Act cannot be overridden by agreement with regard to employment contracts, consumer contracts, and insurance contracts.

This provision serves as a crucial filter in international yacht contracts. For example, in a yacht sales contract, the courts of London, Malta, or Monaco may be designated as having jurisdiction. However, this requires that the dispute involves a foreign element, that the relationship is of a debt nature, and that there is an agreement verifiable by written evidence. Conversely, this freedom is limited in disputes concerning individual employment contracts related to the crew, in certain yacht charter relationships involving consumers, or in some cases related to insurance contracts. Therefore, including a foreign court clause in the contract does not automatically refer every dispute to a foreign court.

How is the applicable law determined?

Article 24 of the Turkish Code of Private International Law establishes a fundamental rule in contractual obligations: the law explicitly chosen by the parties applies. Even an implicit choice of law, which is unambiguous based on the contract provisions or the circumstances of the case, is considered valid. The parties may agree that the chosen law applies to the entire contract or only a part of it, and may subsequently change the choice of law. If no choice of law has been made, as a rule, the law most closely related to the contract applies; this is often the law of the business premises or habitual residence of the debtor with a characteristic performance obligation. However, if there is another law more closely related to the contract according to all the circumstances of the case, that law may be applied.

This regulation has the following practical consequences for yacht contracts. In yacht sales contracts, the seller's performance; in yacht construction contracts, the shipyard's performance; in management contracts, the management company's performance; and in charter contracts, the performance of the party providing the use or services, depending on the model, may become important in the discussion of "characteristic performance." If the parties have not chosen a law, whose performance the contract prioritizes is of great importance. Therefore, a well-prepared international yacht contract should clearly and unequivocally state "Turkish law shall apply to this contract" or whatever other law has been chosen. Otherwise, the applicable law must be determined later by the court, which reduces predictability.

Why should real rights on a yacht be considered separately?

As mentioned above, the law applicable to the yacht contract may not be the same as the law applicable to the real rights on the yacht itself. Article 22 of the Turkish Private International Law Act stipulates that real rights on maritime vessels are governed by the law of the country of origin. The country of origin is the place of registration where the real rights on the maritime vessel are registered, or, if there is no such registration, the port of registry. Therefore, in the case of a yacht registered in Malta, even if the parties have chosen Turkish law for the contract, Maltese law or the law governing that registry may apply in terms of the appearance of ownership, ship mortgage, usufruct, or registry annotations.

The provisions regarding the ship registry in the Turkish Commercial Code are also important in this regard. Article 954 of the TCC stipulates that a ship registry is kept for Turkish ships, Article 973 states that the ship registry is open and that everyone can examine the registry records, and Article 974 stipulates that the person registered as the owner in the registry shall be considered the owner. Furthermore, Article 958 of the TCC states that Turkish ships registered in a foreign ship registry, and ships that are not Turkish ships, cannot be registered in the Turkish Ship Registry. This structure clearly shows that in yachts flying foreign flags and registered in foreign registries, the risks of registration and real rights should be considered separately from the contract.

Special circumstances in consumer, insurance and business relationships

Not every international yacht contract is purely commercial. Article 26 of the Turkish Private International Law Act reserves the minimum protection afforded to the consumer under the mandatory provisions of the law of their habitual residence in consumer contracts for the acquisition of goods or services for non-professional or non-commercial purposes; it also invokes the law of the consumer's habitual residence under certain conditions, even if no choice of law has been made. Therefore, even if it is a luxury yacht, if the yacht purchase or chartering relationship in the specific case has a consumer character, acting solely on the assumption that "we have entered into a commercial contract" is risky.

Similarly, Article 46 of the Private International Law Act establishes specific jurisdiction rules for disputes arising from insurance contracts; Article 44 designates the court of the place where the employee habitually performs their work, and certain additional connecting points, as competent for individual employment contracts and employment relationships. Article 47/2 of the Private International Law Act explicitly states that the jurisdiction of the courts determined in these articles cannot be overridden by agreement. Consequently, even if a broad foreign court clause is included in the yacht management contract, certain disputes arising from the individual employment relationships of the crew or the insurance policy may fall outside the scope of this general clause.

Why is the use of foreign-flagged yachts particularly important in Türkiye?

Even if the choice of court and law is correct in an international yachting convention, how the yacht will actually be used in Türkiye is also of great importance. According to Article 42 of the Maritime Tourism Regulation, Turkish and foreign-flagged maritime tourism vessels that have completed border entry procedures can freely navigate between Turkish territorial waters and ports with the approval of the port authority; privately owned maritime tourism vessels under the foreign flag can navigate by specifying their routes on their navigation permit when entering Türkiye and during their voyages in Turkish territorial waters. The same article also shows that a navigation permit system exists for commercial voyages of commercially owned maritime tourism vessels with permits from the Ministry and privately owned maritime tourism vessels under the foreign flag. In addition, a temporary permit is provided for foreign-flagged commercial yachts over 39 meters to operate in Turkish territorial waters.

These matters are not directly related to the "competent court" or "applicable law" clause; however, they are crucial for the enforceability of the contract. Because when a charter or management contract for a foreign-flagged yacht is made, if the commercial use regime in Türkiye has not been considered, the parties may encounter practical performance problems regardless of how well they choose the law. Therefore, in addition to the competent court and applicable law clauses in international yacht contracts, special attention should also be paid to the mandatory and administrative rules of the country of use.

The most common contract errors in practice

The most common mistake in practice is assuming that short formulas such as "London law and London courts" or "Istanbul courts and Turkish law" are sufficient for the entire case. However, in the case of a yacht registered abroad, different legal principles may apply regarding property rights; the jurisdiction agreement may be limited if there is a consumer or insurance aspect; and if the parties are not merchants, a jurisdiction agreement in favor of Turkish courts within the framework of Articles 17-18 of the Code of Civil Procedure may have a different outcome. Therefore, short formula clauses are only reliable if supported by a detailed risk analysis.

The second major mistake is writing the "applicable law" clause but leaving the "competent court" clause blank, or vice versa. The third mistake is ignoring the requirement for written evidence and the nature of the debt relationship for the validity of the foreign court clause. The fourth mistake is relying solely on the text of the contract without examining the yacht's foreign registry, mortgage, and port of registration status. If an international yacht contract is to be established with true security, Articles 22 and 24 of the Private International Law Act should be read together; the ship registry regime of the Turkish Commercial Code should also be evaluated separately.

Conclusion

In international yacht contracts, the issue of competent court and applicable law is not a routine clause added at the end of the contract; it is the main section that determines the entire legal risk architecture. In Turkish law, the starting point regarding international jurisdiction is Article 40 of the Private International Law Act (MÖHUK); this article leads us to the territorial jurisdiction rules of the Code of Civil Procedure (HMK). The parties' ability to choose Turkish courts is subject to the limitations in Articles 17 and 18 of the HMK; the choice of a foreign court is subject to the conditions in Article 47 of the MÖHUK. The basic rule regarding applicable law is Article 24 of the MÖHUK; however, real rights on the yacht may be subject to the law of the country of origin according to Article 22 of the MÖHUK. Therefore, the choice of court and law in a yacht contract should be considered as two separate layers.

A robust international yacht contract should adopt the following approach: First, the type of contract must be clearly defined; a risk map should be created based on the sales, charter, construction, or management model; then, the competent court, applicable law, foreign registry and property rights regime, consumer/business/insurance exclusions, and mandatory rules of the country of use should be regulated together in separate clauses. Especially in cases involving foreign-flagged vessels and high-value projects, if these headings are not clearly stated, the main issue of dispute becomes not the vessel itself, but a fight over procedural and legal choices. A good contract, on the contrary, makes it clear from the outset where and under what law the dispute will be resolved, thus protecting the owner, the operator, and the investment security.