Foreign Creditors in Turkey: What Happens When the Debtor Invokes a Foreign Court or Arbitration Clause?

When a foreign creditor starts court or enforcement proceedings in Turkey, it is common for the Turkish debtor to respond with a jurisdiction objection such as: “Turkish courts are not competent, our contract sends disputes to a foreign court / mediation / arbitration.” This does not automatically kill your case, but it changes the strategy.

Below is a practical overview of what this objection means and how it affects foreign creditors wishing to proceed in Turkey.

---

1. First distinction: Are you suing on the merits, or enforcing an existing judgment/award?

As a foreign creditor you may be:

• Bringing a substantive lawsuit in Turkey (e.g. claim for unpaid invoices); or
• Trying to enforce a foreign judgment or arbitral award against assets in Turkey.

A jurisdiction or arbitration clause is generally relevant in the first scenario. If you already have a foreign judgment or arbitral award, the contract clause has “done its job”; your main task in Turkey is usually to obtain recognition and enforcement (tenfiz) and then start ilamlı enforcement. In that context, the debtor’s objection that “Turkish courts lack jurisdiction because of a foreign court or arbitration clause” is usually misplaced, because the Turkish court is not deciding the underlying dispute again, it is only deciding whether to enforce an existing decision.

---

2. Foreign court jurisdiction clauses

Many international contracts state that disputes will be resolved by a specific foreign court (for example, “Courts of London shall have exclusive jurisdiction”).

Under Turkish law, jurisdiction agreements in international commercial disputes are in principle recognised, provided that:

• The agreement is in writing and clearly identifies the chosen court, and
• The subject-matter is not one where Turkish courts have exclusive jurisdiction (such as certain immovable property or company law issues), and
• The weaker party is not a protected consumer or employee under special mandatory rules.

If you, as a foreign creditor, file a lawsuit in Turkey despite such a clause, the debtor can raise a timely jurisdiction objection and ask the Turkish court to decline jurisdiction. If the clause is valid and clearly applicable, the court may dismiss the case and direct the dispute to the agreed foreign court.

However, this is not automatic. Your Turkish counsel will examine, for example:

• Whether the clause is exclusive or only non-exclusive;
• Whether the clause really covers this type of dispute;
• Whether the debtor has already acted in Turkish proceedings on the merits (which can amount to tacit acceptance of Turkish jurisdiction);
• Whether mandatory Turkish rules or public policy limit the effect of the clause.

The key takeaway: a foreign court clause is serious, but there is room for legal argument. Do not assume that a simple “we have a foreign court clause” email from the debtor ends the case.

---

3. Arbitration clauses

Arbitration clauses (ICC, LCIA, ISTAC, ad hoc, etc.) are treated more strictly than foreign court clauses. If the contract contains a valid arbitration agreement and the debtor raises this before arguing the merits, Turkish courts are normally obliged to refer the parties to arbitration and declare the court case inadmissible.

This means that if you start a full lawsuit in Turkey for a contract that clearly contains an arbitration clause, you must expect a serious jurisdiction challenge. But there are important nuances:

• Turkish courts can still grant interim measures (e.g. freezing orders, attachments over assets in Turkey) in support of arbitration. So even with an arbitration clause, bringing targeted applications in Turkey to secure assets can be a rational strategy.
• If the arbitration clause is ambiguous, pathological (poorly drafted) or clearly inapplicable to the specific claim, your counsel can resist the objection and ask the court to retain jurisdiction.
• Once you obtain a foreign arbitral award, the arbitration clause no longer blocks Turkish enforcement; you then apply for recognition/enforcement of the award and proceed with ilamlı enforcement.

For foreign creditors, the usual path is: respect the arbitration clause for the merits, but make full use of Turkish courts for interim measures and enforcement against assets located in Turkey.

---

4. Mediation and multi-tier clauses

Many international contracts require negotiation or mediation before court or arbitration (“escalation clauses”). Debtors sometimes argue that, because you did not mediate first, Turkish courts lack jurisdiction.

In practice, Turkish courts often treat such clauses as procedural obligations, not absolute bars to jurisdiction, unless the wording is extremely clear that mediation is a strict condition precedent. Even then, the outcome is fact-sensitive. The court might:

• Grant extra time for parties to attempt mediation; or
• Consider the failure to mediate as a contractual breach relevant for costs or damages, rather than as a reason to dismiss the case.

Therefore, a mediation clause objection is usually less dangerous than a clear arbitration clause, but it should still be analysed carefully.

---

5. Practical advice for foreign creditors

If you plan to start proceedings in Turkey and anticipate a “we have a foreign court / mediation / arbitration clause” defence:

1. Have the dispute resolution clause translated and analysed by Turkish counsel before filing anything.
2. Decide whether your main battlefield should be a foreign court, arbitration, or Turkish court, and align your Turkish enforcement and interim-measure strategy accordingly.
3. If arbitration is involved, consider combining:
   • Interim relief in Turkey to secure assets, and
   • Arbitration on the merits in the agreed seat.
4. If you already have a foreign judgment or award, focus on recognition/enforcement in Turkey, rather than re-litigating the dispute.
5. Act quickly: the earlier you secure assets in Turkey, the more leverage you will have, regardless of the forum where the merits are decided.

Handled correctly, a jurisdiction or arbitration objection is not the end of the road for foreign creditors; it is simply a sign that you need a coordinated cross-border strategy.