THE CONCEPT OF LEGAL PERSONALITY, ITS ESTABLISHMENT, AND THE BEGINNING OF LEGAL CAPACITY (Turkish Civil Code Articles 47-49)
In Turkish private law, the concept of a person encompasses not only biological entities such as natural persons, but also groups of persons or assets organized as independent entities for the purpose of achieving a specific objective. Articles 47-49 of the Turkish Civil Code are constitutional provisions that define the origin of this abstract legal construct, namely legal personality, its registration regimes, and the limits of legal capacity. To understand the legal basis for companies or foundations to be established in Türkiye by foreign investors, it is necessary to first examine the practical implications of this fundamental theoretical framework.
1.1. The Concept of Legal Personality and General Conditions (Turkish Civil Code Article 47)
According to Article 47 of the Turkish Civil Code: “Groups of persons organized as entirely independent entities and independent groups of assets dedicated to a specific purpose acquire legal personality in accordance with the special provisions relating to them.”
Based on this definition, three fundamental elements must be present simultaneously for an entity to acquire legal personality:
Organization: The group of individuals or assets must possess a minimum institutional structure (organs) capable of expressing its will and representing it to the outside world.
A Continuous and Specific Purpose: The reason for the existence of a legal entity must be directed towards a continuous purpose that is not contrary to law and morality.
Independent Entity: A legal entity is a completely independent legal subject separate from its constituent members or those who have dedicated its assets. This independence is a prerequisite for the legal entity to possess its own assets and legal capacity.
The legislator has divided legal entities into two categories according to their fundamental characteristics:
Groups of Individuals: These are formed by the coming together of at least two or a number of individuals as stipulated by law for a common purpose. Associations and joint-stock/limited liability companies fall into this category. Property Groups: This is based on the principle of making an asset independent for the realization of a specific purpose. The most typical example of this in private law is foundations.
1.2. Systems for Acquiring Legal Personality and the Choice of Turkish Law (Turkish Civil Code Article 48)
Three main systems have been developed in world legal systems regarding the acquisition of legal personality: the free establishment system, the permission system, and the registration (normative) system.
Turkish Civil Code Article 48 explains the mixed system adopted by Turkish law: “Person and property groups whose purpose is contrary to law or morality cannot acquire legal personality. Person and property groups that do not aim at sharing profits acquire legal personality when the conditions stipulated by law are met.”
1.2.1. Legal Entities Not Aiming for Profit Sharing (Associations and Foundations)
Associations acquire legal personality under the free establishment system without the need for any permission or registration, as soon as they submit their establishment notification and bylaws to the local administrative authority (Turkish Civil Code, Article 59). Foundations, by their nature, are a collection of assets, and therefore acquire legal personality upon registration in the central register maintained by the civil court of first instance in their place of residence (registration system).
1.2.2. Legal Entities with Commercial Purposes (Capital and Sole Proprietorships)
Commercial companies (Joint Stock, Limited, Collective, Limited Partnership) within the scope of the Turkish Commercial Code (TTK), which directly concern your investor clients, are absolutely subject to the normative registration system. These companies are born as independent legal entities the moment they are registered in the commercial register. Those who carry out transactions prior to registration are personally and jointly liable.
Regimes for Acquiring Legal Personality:
├── Associations ────────> Upon Notification (Free Establishment)
├── Foundations ────────> By Registration in the Court Registry (Normative)
└── Commercial Companies ─> By Registration in the Commercial Registry (Absolute Registration)
1.3. Legal Capacity and Limitations of Legal Entities (Turkish Civil Code Article 49)
Turkish Civil Code Article 49 Article 49 defines the scope of legal capacity of legal entities with a universal principle: “Legal entities are capable of all rights and obligations except those inherently exclusive to humans, such as gender, age, and kinship.”
This provision acknowledges that legal entities are almost equal subjects of rights to natural persons.
What Can They Do? They can acquire immovable property, inherit, register trademarks/patents in their name, enter into contracts, and claim moral damages (due to damage to commercial reputation).
What Cannot They Do? They cannot marry, adopt, become guardians, and cannot benefit from usufruct rights or alimony rights, which are inherently exclusive to humans.
1.3.1. The Impact of the Abolition of the “Ultra Vires” Ban on Investors
The Ultra Vires principle, which was valid during the period of the old Turkish Commercial Code and stipulated that companies only had legal capacity within the scope of their business activities (subjects of business) as stated in their articles of association, has been completely abolished with the new Turkish Commercial Code No. 6102.
Today, a joint-stock company established by foreign investors can carry out any legal transaction, even if it is not stated in its articles of association; even if the transaction is outside the scope of the company, the company…
This ties them together. This situation has enormously increased the security of transactions for third parties and investment partners.
1.4. Prohibition of Activities Outside the Purpose and Unlawful Activities
While the legal capacity of legal entities is broad, it is not unlimited. The situation of “illegality and immorality” specified in Article 47/2 of the Turkish Civil Code can be prevented at the establishment stage, but if it arises later, it necessitates the dissolution of the legal entity.
In particular, if it is determined that companies with foreign capital or associations established by foreigners are carrying out activities outside their founding purposes, concerning national security, public order, or secret political activities, the termination of the legal entity is decided by a lawsuit filed by the public prosecutor’s office.
When does a company acquire legal personality?
According to Turkish law, commercial companies (joint-stock and limited liability companies) officially acquire legal personality the moment they are registered in the commercial registry after the completion of their incorporation procedures.
What is the legal capacity of legal entities?
The legal capacity of legal entities refers to their ability to possess all property rights, the power to incur debts, and ownership rights possessed by natural persons, excluding rights inherent to human nature (marriage, kinship, age, etc.).
Would a transaction become invalid if the company engages in an activity not stated in its articles of association?
No, it would not become invalid. Since the Ultra Vires (prohibition of transactions outside the company’s purpose) has been abolished in the Turkish Commercial Code, a company engaging in an activity or signing a contract not included in its articles of association does not invalidate the transaction; the company remains bound by that transaction.
LEGAL CAPACITY OF LEGAL ENTITIES, LEGAL NATURE OF ORGANS AND REPRESENTATION RISKS (Turkish Commercial Code Articles 50-55)
The legal capacity of legal entities as independent subjects in the legal world is not sufficient for them to act on their own accord. Abstract legal constructs such as groups of people and property require a concrete mechanism for expressing their will in order to exercise these rights and incur obligations.
Articles 50 to 55 of the Turkish Civil Code regulate the legal capacity of legal entities, the concept of “organs” enabling the exercise of this capacity, and the legal/criminal liability regime arising from the actions of these organs. Being able to foresee the limits of authority of directors or board members appointed by foreign investors in companies they establish in Turkey, and how the company will be held liable for the wrongful acts of these individuals, constitutes a cornerstone of corporate risk management.
2.1. Acquisition of Legal Capacity and Conditions (Turkish Civil Code Article 50)
Article 50 of the Turkish Civil Code clearly and unequivocally establishes when legal entities acquire legal capacity: “Legal entities acquire legal capacity by possessing the necessary organs in accordance with the law and their articles of incorporation.”
While the legal capacity of natural persons depends on biological/psychological conditions such as maturity, capacity to discern, and not being under guardianship; the legal capacity of legal entities depends entirely on an institutional and structural condition, namely the establishment of mandatory organs.
Lack of Mandatory Organs: If a joint-stock company’s general assembly has not convened and elected its board of directors, or if a limited liability company has not appointed a manager, that company, even if it legally possesses legal personality (and therefore legal capacity), lacks legal capacity; that is, it cannot sign contracts in its own name, file lawsuits, or incur debts.
2.2. The Concept and Legal Nature of Organs
In Turkish private law, organs are individuals or groups of individuals established to achieve the purpose of a legal entity, included in the structure of the legal entity, and reflecting its will to the outside world. Organs are divided into two categories:
Mandatory (Legal) Organs: These are organs whose establishment is mandated by law. For example, the General Assembly and the Board of Directors in associations; the General Assembly and the Board of Directors in joint-stock companies; In limited companies, the General Assembly and the Directors are mandatory bodies.
Optional (Elective) Bodies: These are bodies established by the legal entity according to its own needs through its articles of association or bylaws (e.g., Advisory Board, Audit Committee, Executive Board).
2.2.1. The Difference Between a Body and a Representative (Agent)
From a legal standpoint, a body is not a “third party” or a simple “agent” appointed from outside the legal entity. A body is the legal entity itself. The actions of a body are considered directly the actions of the legal entity itself.
In contrast, the company’s commercial agent or commercial representative (Turkish Commercial Code, Article 547) is not a body, but an acting representative. While the body derives its authority directly from the law and the bylaws, the representative derives its authority from the will of the body.
2.3. The Will and Responsibility of the Legal Entity (Turkish Civil Code, Articles 51-53)
According to Article 51 of the Turkish Civil Code, the will of the legal entity is expressed through its bodies. The legal consequences of this statement are clearly regulated in Article 50/2 of the Turkish Civil Code: “The organs obligate the legal entity through their legal transactions and all other actions.”
Mechanism for Attributing the Actions of the Organ to the Legal Entity:
[Organ / Manager] ──(While Performing its Duty)──> [Legal Transaction / Contract] ──> The Legal Entity Becomes Directly Obligated
[Organ / Manager] ──(While Performing its Duty)──> [Ha[Tort/Damage] ──> Legal Entities are Jointly and Severally Liable
2.3.1. Liability for Legal Transactions
Contracts signed, lawsuits filed, and settlements reached by the organ of the legal entity directly bind the legal entity’s assets. A credit agreement signed by a natural person constituting the organ (for example, a board member appointed by a foreign partner) who duly represents the company does not incur personal liability for that manager; the debtor is directly the company.
2.3.2. Liability for Torts (Turkish Civil Code Article 50/2 – Last Sentence)
Legal entities incur debt not only through legal transactions but also through torts committed by their organs. The law establishes a dual liability regime, stating that “Organs are also personally liable for their faults”:
Joint and Several Liability: If a company director causes damage to a third party within the scope of the company’s commercial activities (for example, by engaging in an act constituting unfair competition or infringing intellectual property rights), the injured party can sue both the company and the director who caused the damage. The company and the organ are jointly and severally liable to the injured party. Causal Link to Duty: For the company to be held liable, it is essential that the organ committed this wrongful act “while performing its duty.” The company cannot be held liable for the personal wrongful acts of the director, which are entirely in their private life and unrelated to commercial activity.
2.4. Strict Liability of Organs and Principles of Termination (Turkish Civil Code Articles 54-55)
Articles 54 and 55 of the Turkish Civil Code regulate the domicile of legal entities and their dissolution for just cause, while also laying the groundwork for the criminal and administrative dimensions of exceeding the limits of authority of organs in corporate governance.
Liability for Public Debts (Law No. 6183, Article 35): One of the most common risks faced by foreign investors in Turkey is the personal liability of company organs for public debts. If the company’s public debts, such as taxes and social security contributions, cannot be fully collected from the company’s assets, the company’s legal representatives (directors/board of directors) are directly liable for these debts with their personal assets. This liability is an absolute legal responsibility that arises even if the director is not at fault.
Restriction of Representation Authority: The powers of company organs can be restricted by registration and announcement in the trade registry. However, in order to protect the good faith of third parties, restrictions other than “limiting the representation authority to the business of the head office or branches” or “requiring joint signature” (for example, limiting transactions to amounts exceeding 500,000 TL) cannot be invoked against bona fide third parties even if registered in the trade registry (Turkish Commercial Code, Article 371/3). When does a legal entity’s legal capacity begin?
Legal entities acquire legal capacity the moment they duly establish the mandatory organs (board of directors, general assembly, managers, etc.) stipulated by legislation and their articles of incorporation (articles of association/bylaws).
Is the company liable for irregularities committed by the company director?
Yes, if the company director or board member commits this irregularity (wrongful act) while performing their official duties in the company and conducting the company’s business, the company is jointly and severally liable to third parties. The injured party can sue both the company and the director for compensation.
Does a foreign director have personal liability for the company’s tax debts?
Yes, they do. According to Turkish law (Law No. 6183), directors or board members, who are the legal representatives of the company, are directly liable with their personal assets for public debts such as taxes, duties, fees, and social security contributions that cannot be collected from the company’s assets.
MÖHUK m. LAW APPLICABLE TO THE LEGAL CAPACITY AND ACTION STATUS OF LEGAL ENTITIES UNDER ARTICLE 9/4 AND “NATIONALITY/CENTRAL STATES” DISCUSSIONS
In a globalized economy, the validity of contracts concluded in Türkiye by a foreign company, whether the company was properly established in its own country, and which legal capacity rules it is subject to when conducting transactions in Türkiye are of vital importance.
In Turkish conflict of laws, the backbone of this issue is Article 9, paragraph 4 of Law No. 5718 on Private International Law and Procedural Law (MÖHUK). In this section, we will analyze the fundamental theories determining the status of foreign legal entities and the mixed approach adopted by Turkish law on this matter.
3.1. Company Statute (Statut Social) in Conflict of Laws
In international trade, all aspects of a legal entity’s establishment, internal structure, powers of its organs, liability of partners, and termination are considered under the “statute of companies” (Loi de la société / Lex societatis). Two major doctrinal theories compete worldwide in determining the law to which a company is subject:
The Place of Incorporation (Nationality / Incorporation) Theory: This theory argues that a company is subject to the law of the country where it is registered and where its incorporation procedures are completed, regardless of where its legal transactions are conducted or where it physically operates. This theory is dominant in Anglo-Saxon legal systems (USA, UK).This provides significant advantages in terms of transaction security and predictability.
The Real Center (Siège Réel) Theory: This theory argues that a company is subject to the law of the country where its “administrative and real center” is located, where managerial decisions are actually made and its top-level organs are situated, rather than the official address stated in its articles of association. This theory, which has found support in Continental European law (especially Germany and France), arose from the desire of states to supervise shell companies operating within their borders.
3.2. Analysis of Article 9/4 of the Private International Law Act and the Choice of Turkish Law
Instead of making a sharp choice between these two theories, the Turkish legislator, with Article 9/4 of the Private International Law Act, adopted a hybrid system aimed at protecting public order and transaction security.
Private International Law Act Article 9/4 Article 9/4 reads as follows:
“The legal capacity of legal entities or groups of persons and assets is subject to the law of the country where their administrative headquarters are located. However, if the headquarters stated in their articles of association and their actual administrative headquarters are in different countries, the law of the country where the actual administrative headquarters are located may be taken as the basis for protecting the good faith of third parties.”
The practical consequences that emerge when the wording and spirit of the provision are as follows:
3.2.1. General Rule: Law of Administrative Headquarters (Lex Fori / Lex Domicilii)
Turkish law, in principle, adopts the “Administrative Headquarters” criterion in determining the legal capacity of foreign legal entities. Therefore, the legal capacity of a foreign company that is a party to a legal transaction in Türkiye is determined according to the law of the country where the company’s administrative headquarters are located.
For example, the limits of the authority of the signatories of a company established in Germany but whose administrative headquarters are in France will be determined according to French law.
3.2.2. Exception: Protection of the Good Faith of Third Parties
The legislator intended to prevent Turkish traders and third parties from being harmed when the official headquarters and the actual headquarters, as stated in the articles of association, differ. If a foreign company is incapacitated or has limited authority under the law of the country where its official headquarters are located, but appears to have legal capacity under the law of the country where it is actually managed, third parties acting in good faith in Türkiye may demand the application of the law of the actual headquarters.
International Private Law Act Article 9/4 Filter:
Legal Capacity of the Foreign Legal Entity
└── Principle: Law of the Country Where the Head Office is Located
└── Is There a Contradiction? (Official Headquarters ≠ Actual Headquarters)
└── Yes ──> “Actual Headquarters Law” Applicable in Good Faith of Third Parties
3.3. Capacity Risks Faced by Foreign Companies When Conducting Transactions in Türkiye
In the processes of your investor clients directly signing contracts or establishing partnerships in Turkey through their parent companies abroad, it is essential to pay attention to the following risks in accordance with Article 9/4 of the Private International Law Act:
Limits of Representation Authority (Ultra Vires and Organ Authority): Whether the signatory of a foreign company has the authority to incur debt is determined not according to the Turkish Code of Obligations, but according to the legal system of the country where the company’s headquarters are located. Therefore, when obtaining the signature circulars, trade registry summaries, and board of directors’ decisions of a foreign company, it should be checked whether the registrations and announcements have been made in accordance with the local legislation of that country. Apostille and Consular Certification Requirement: In order for documents demonstrating the legal capacity of a foreign legal entity and the authority of its representative (e.g., Certificate of Incumbency or Good Standing) to be valid before official authorities in Türkiye (Land Registry, Bank, Notary), they must bear an Apostille or have been certified by a consulate, in accordance with the 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents.
3.4. Public Order Obstacle (Turkish Private International Law Act, Article 5)
If the foreign law to be applied, pursuant to Article 9/4 of the Turkish Private International Law Act, clearly contradicts the fundamental values, moral understanding, or constitutional principles of Turkish law, Article 5 (Public Order) of the Turkish Private International Law Act comes into play, and that foreign provision shall not be applied.
For example, a foreign legal entity that, according to its own national law, possesses monopolistic, racist, or slavery-based commercial rights will absolutely not have its legal capacity recognized by Turkish courts and administrative authorities.
Which law determines whether a foreign company operating in Türkiye legally exists?
According to Article 9/4 of the Private International Law Act No. 5718, the legal capacity of foreign legal entities, and therefore their legal existence, is determined according to the law of the country where the company’s headquarters are located.
How do we check if the director of a foreign company is authorized?
It is necessary to examine official documents (with an Apostille) obtained from the country where the foreign company’s headquarters are located, showing the company’s current status and the director’s authority. The limits of authority are subject to the law of that country.
Which law applies to foreign companies whose official headquarters and actual headquarters are different?
In principle, the law of the headquarters applies. However, if the official headquarters and the actual headquarters are in different countries, the law of third parties involved in transactions must be considered.To protect its intent, the law of the country where the actual headquarters are located may also be taken into account.
Establishing Branches and Liaison Offices in Türkiye by Foreign Legal Entities, Real Estate Acquisition Limits, and Direct Foreign Investment Legislation
After defining the international limits of the rights and legal capacity of foreign legal entities within the framework of the Private International Law Act, we need to focus on the actual and operational forms of presence of these entities in the Turkish domestic market. A foreign company’s economic activity, acquisition of real estate, or market research in Turkey falls at the intersection of legislation such as the Direct Foreign Investments Law No. 4875, the Turkish Commercial Code (TTK), and the Land Registry Law. In this section, we will analyze the entry strategies of your foreign investor clients into the Turkish market and the legal limitations they will face.
4.1. The Law on Direct Foreign Investments and the “National Treatment” Principle
Law No. 4875 on Direct Foreign Investments, the fundamental constitution of the foreign capital regime in Turkey, adopts the “National Treatment” principle. According to this principle, subject to international agreements and special legal provisions, foreign investors are free to make direct foreign investments in Turkey and are subject to equal rights, treatment, and performance with domestic investors.
Foreign legal entities can establish a new company in Turkey (Joint Stock or Limited Liability Company), or they can open a branch or liaison office as an extension of their existing companies abroad.
4.2. Operational Structures of Foreign Companies in Türkiye
4.2.1. Branches of Foreign Companies (Turkish Commercial Code Article 40/4)
Branches of commercial enterprises headquartered abroad do not have a separate legal personality in Turkey. However, while they are dependent on the headquarters in their internal relations, they act as independent enterprises in their external relations.
Registration and Title: According to Article 40/4 of the Turkish Commercial Code, registration of foreign company branches in the trade registry is mandatory. The branch title must clearly state the country where the headquarters are located, the headquarters title, and that it is a branch (e.g., X Company Germany Stuttgart Headquarters Istanbul Branch).
Fully Authorized Representative: For the registration of a branch, it is mandatory to appoint at least one fully authorized commercial representative (branch manager) residing in Türkiye.
Commercial Activity: Branches can issue invoices, earn profits, and transfer these profits to the headquarters abroad.
4.2.2. Liaison Offices
These are structures opened by foreign companies in Türkiye not for commercial activity, but solely for market research, promotional activities, and business follow-up on behalf of the parent company.
Prohibition of Commercial Activity: Liaison offices are strictly prohibited from engaging in commercial activity, issuing invoices, and earning profits. All expenses of the office must be covered in foreign currency by the parent company abroad.
Authorization Mechanism: While branches are established by notification to the Ministry of Industry and Technology, the opening, extension, and closure of liaison offices are directly subject to the permission of the General Directorate of Incentive Implementation and Foreign Capital of the Ministry of Industry and Technology. Initially, a maximum of 3 years of permission is granted. Comparison of the Structure of Foreign Companies in Turkey:
├── Branches ──────────> Commercial Activity YES ──> Registration in the Commercial Registry (Turkish Commercial Code Article 40)
└── Liaison Offices ──> Commercial Activity NO ──> Ministry Permission (Market Research/Promotion)
4.3. Limitations on Real Estate Acquisition by Foreign Legal Entities
While the acquisition of real estate in Türkiye by foreign individuals has been greatly facilitated by the removal of the reciprocity requirement, the acquisition of real estate by foreign legal entities is subject to strict legal limitations and controls. A dual distinction exists in this regard:
4.3.1. Real Estate Acquisition by Foreign Companies Established Abroad (Land Registry Law Article 35)
According to Article 35 of the Land Registry Law No. 2644, commercial companies with legal personality established in foreign countries according to their own laws can only acquire real estate in Türkiye within the framework of special laws. These special laws are:
Turkish Petroleum Law No. 6491,
Tourism Incentives Law No. 2634,
Industrial Zones Law No. 4737. Critical Limit: It is prohibited for a foreign company based abroad to directly acquire title deeds in Türkiye in its own name for purposes outside the scope of these specific laws (e.g., purely for investment purposes or for office/residential purposes). Foreign associations, foundations, or similar property groups cannot acquire real estate in Türkiye under any circumstances.
4.3.2. Acquisition of Real Estate by Turkish Companies with Foreign Capital (Land Registry Law Article 36)
The most preferred method for foreign investors to circumvent real estate restrictions is to establish a Turkish company (Joint Stock or Limited Liability Company) in Türkiye. However, the acquisition of real estate by these companies is also subject to control.
Scope: Turkish companies in which foreign investors hold 50% or more of the shares or have the authority to appoint the majority of the board members are considered within the scope of Article 36 of the Land Registry Law. Governor’s Permit: This companyCompanies may acquire real estate to carry out the business activities (fields of operation) stated in their articles of association. However, before title registration, it is mandatory to obtain approval from the relevant Governorship (Commission decision) to determine whether the real estate is located within a military restricted area, military security zone, or strategic zone. Can a foreign company directly purchase real estate in Türkiye?
No, foreign commercial companies established abroad cannot freely acquire real estate in Türkiye. They can only acquire real estate within the scope of projects permitted by special laws such as the Tourism Incentives Law or the Turkish Petroleum Law.
Can a foreign company’s liaison office in Türkiye issue invoices?
No, it cannot. Liaison offices are strictly prohibited from conducting commercial activities, earning profits, or issuing invoices in Türkiye. They can only conduct market research, representation, and promotional activities.
Does a Turkish company with foreign partners need to obtain permission when purchasing land?
Yes. Turkish companies in which foreigners hold 50% or more of the shares are required to apply to the relevant Governorate for permission before purchasing real estate, in order to determine whether the property is located in a military security or strategic zone.
FOREIGN LEGAL ENTITIES’ STANDING TO BE PARTY AND SUE IN TURKISH COURTS, OBLIGATION TO PROVIDE SECURITY (CAUTIO JUDICATUM SOLVI), AND EXCEPTIONS
In the final part of our series, we will address the processes of judicial protection of the assets, investments, and contractual rights of foreign legal entities in Türkiye, i.e., the international procedural law dimension. Whether a foreign company can file a lawsuit in Türkiye in case of loss of rights, and what additional procedural obligations it is subject to compared to domestic merchants in such lawsuits, are shaped within the framework of the Code of Civil Procedure No. 6100 (HMK) and the Private International Law No. 5718 (MÖHUK). The “foreign guarantee,” which directly affects the course of a case, especially in international commercial disputes, will be the focus of this analysis.
5.1. Capacity to be a Party and to Sue of Foreign Legal Entities
In international procedural law, for a case to proceed to its merits, the parties must first have full procedural capacity. Two fundamental concepts emerge in this context:
Capacity to be a Party (Article 50 of the Code of Civil Procedure): This is the procedural law equivalent of legal capacity in civil law. It refers to the ability to be a plaintiff or defendant in a lawsuit. As we examined in Section 3, according to Article 9/4 of the Private International Law Act, every foreign company that has legal personality (legal capacity) according to the law of the country where its headquarters are located automatically has the capacity to be a party in Turkish courts. Capacity to Sue (Article 51 of the Code of Civil Procedure): This is the procedural law equivalent of legal capacity in civil law. It refers to the conduct of a lawsuit either personally or through an appointed representative (lawyer). The existence of legal capacity is accepted if the foreign company has mandatory organs and the persons appointed by these organs have proper representation authority.
5.2. The Concept and Purpose of Foreign Security (Cautio Judicatum Solvi)
In the Turkish legal system, foreign natural or legal persons are free to file lawsuits and seek redress in Turkish courts. However, the legislator has imposed an obligation on foreign plaintiffs to secure the litigation costs and potential loss of rights of domestic defendants.
Article 48/1 of the Private International Law Act regulates this obligation as follows:
“Foreign natural and legal persons who file a lawsuit, participate in a lawsuit (intervene), or request enforcement proceedings in Turkish courts are obliged to provide security determined by the court to cover litigation and enforcement costs and the damages and losses of the opposing party.”
Nature of Security: Article 48/1 of the Code of Civil Procedure According to Article 114/1-ğ, a foreign security deposit is a prerequisite for filing a lawsuit. If the plaintiff foreign company fails to deposit this security within the deadline set by the court, its case will be dismissed on procedural grounds without addressing the merits.
Security Amount: The court determines a security deposit amount at its discretion by calculating the subject matter of the lawsuit, possible litigation costs, and the attorney’s fees to be paid by the defendant (generally ranging from 10% to 15% of the lawsuit value).
5.3. Exceptions to the Security Deposit Obligation and Exemption Regime
Article 48/2 of the Private International Law Act stipulates that the security deposit obligation is not absolute and can be flexible due to the nature of international relations: “The court may exempt the plaintiff, the party joining the lawsuit, or the party requesting enforcement from the security deposit on the basis of reciprocity.”
There are three main ways for a foreign company to file a lawsuit in Türkiye without depositing a security deposit:
5.3.1. Bilateral Agreements
If “exemption from security deposits” is explicitly provided for in judicial assistance agreements signed between the Republic of Turkey and a foreign state, companies from that country can file lawsuits in Türkiye without providing security deposits. For example, according to bilateral agreements signed with dozens of countries such as Germany, Italy, Russia, and Azerbaijan, companies under the nationality of these countries are exempt from security deposits.
5.3.2. Multilateral AgreementsAgreements
International conventions to which Türkiye is a party provide direct exemption from security deposits. The most important of these is the Hague Convention on Civil Procedure of March 1, 1954. A company from a state party to this convention (e.g., France, Spain, Netherlands) is legally exempt from providing security deposits in the sense of Article 48 of the Turkish Private International Law Act when filing a lawsuit in Türkiye.
5.3.3. De Facto Reciprocity
If there is no written agreement between the two states, but the courts of that foreign state do not require foreign security deposits in lawsuits filed by Turkish companies, then, according to de facto reciprocity, Turkish courts will not demand security deposits from companies in that country.
Security Deposit Exemption Filter for Foreign Companies:
[Foreign Company Files Lawsuit in Türkiye]
└── Is There a Hague Convention or Bilateral Judicial Agreement?
├── Yes ──> EXEMPTION FROM SECURITY DEPOSIT (Proceed Directly to the Merits)
└── No ──> De Facto Reciprocity (Is security applied to Turks?)
├── Yes (Not Applied) ──> EXEMPTION FROM SECURITY DEPOSIT
└── No (Applied) ──> SECURITY DEPOSIT DETERMINED BY THE COURT (Condition of Litigation)
5.4. A Critical Examination from the Perspective of Commercial Companies: The Status of the Branch in Türkiye
One of the most common mistakes made by international companies is filing lawsuits through branches they have opened in Turkey.
As we stated in Section 4, a foreign company’s branch in Turkey does not have a separate legal personality. In lawsuits filed through the branch, the plaintiff is technically the parent company abroad. If there is no exemption agreement between the country where the parent company is located and Turkey, the court will order the deposit of foreign security even if the lawsuit is filed through a branch registered in Türkiye.
The surest way to eliminate this risk is to establish a Turkish legal entity (Joint Stock or Limited Liability Company) in Türkiye, even if it is 100% foreign-owned. Companies registered in the Turkish commercial registry are considered “Turkish citizens,” even if their partners are foreign, and therefore cannot be subject to foreign security under any circumstances.
Is a foreign company obliged to deposit security when filing a lawsuit in Türkiye?
In principle, yes. According to Article 48 of the Private International Law Act, foreign legal entities are obliged to provide security when filing a lawsuit or initiating enforcement proceedings. However, if there is an exemption agreement between the company’s country and Turkey (e.g., the Hague Convention), security is not required.
Which countries’ companies can file lawsuits in Türkiye without depositing security?
Companies from countries such as Germany, France, Italy, England, Azerbaijan, and Russia, which have bilateral legal assistance agreements with Turkey or are parties to the Hague Convention on Civil Procedure, are exempt from security deposits.
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