Introduction
Choice of law is one of the most important clauses in any international commercial agreement connected with Turkey. A well-drafted choice of law clause determines which legal system will govern the parties’ contractual rights and obligations. In cross-border commerce, this issue is not merely technical. It directly affects contract interpretation, breach, remedies, limitation periods, penalty clauses, damages, force majeure, hardship, termination rights, liability limitations and dispute strategy.
Turkey is a major jurisdiction for international trade, logistics, manufacturing, construction, energy, infrastructure, distribution, agency, technology, foreign investment and regional commercial operations. Many contracts involving Turkish companies contain foreign elements: one party may be foreign, payment may be in foreign currency, goods may be shipped across borders, performance may occur in multiple countries, and disputes may be resolved by foreign courts or international arbitration. In such cases, the parties should decide in advance which law will govern the contract.
Under Turkish law, the primary statute governing choice of law in private law matters with a foreign element is Law No. 5718 on International Private and Procedural Law, commonly referred to as MÖHUK. Law No. 5718 entered into force on 12 December 2007 and regulates applicable law, international jurisdiction of Turkish courts, and recognition and enforcement of foreign judgments in private law relationships containing a foreign element.
This article explains choice of law in international commercial agreements under Turkish law, focusing on MÖHUK Article 24, express and implied choice of law, partial choice of law, changes to the chosen law, absence of a governing law clause, mandatory Turkish rules, public policy, third-state overriding mandatory rules, CISG, arbitration clauses and practical drafting recommendations.
1. What Does “Choice of Law” Mean?
A choice of law clause, also called a governing law clause, is a contractual provision identifying the law that will apply to the agreement. For example, an international supply agreement may state:
“This Agreement shall be governed by and construed in accordance with the laws of the Republic of Türkiye.”
Alternatively, the parties may choose English law, Swiss law, German law or another national legal system. The purpose of the clause is to create predictability. Without a governing law clause, the applicable law must be determined later by conflict-of-laws rules, which may lead to uncertainty, additional litigation costs and inconsistent expectations.
Choice of law should not be confused with jurisdiction. Choice of law answers the question: “Which law governs the contract?” Jurisdiction answers the question: “Which court or arbitral tribunal will decide the dispute?” A contract may choose Turkish law but London arbitration. It may choose English law but Istanbul courts. It may choose Swiss law and ICC arbitration seated in Paris. These combinations are possible, but they must be drafted carefully to avoid procedural contradictions.
A proper international commercial agreement should therefore contain both a governing law clause and a dispute resolution clause. Leaving either issue unclear may create serious problems once a dispute arises.
2. Legal Framework under Turkish Private International Law
The central rule on contractual choice of law is MÖHUK Article 24. This provision governs contractual obligations with a foreign element. According to Article 24, contractual obligations are subject to the law expressly chosen by the parties. A choice of law that can be understood without hesitation from the contract terms or circumstances is also valid. The same article allows the parties to choose a law for the whole contract or only part of it, and permits the parties to make or change the choice of law later, subject to the protection of third-party rights.
This rule reflects the principle of party autonomy. In international commercial contracts, parties are generally free to choose the law that will govern their relationship. This freedom is commercially important because international parties often want legal certainty, neutrality or familiarity. A Turkish exporter and a German buyer may choose Turkish law, German law or another legal system depending on bargaining power, enforcement strategy and commercial expectations.
However, party autonomy is not absolute. Turkish courts apply Turkish conflict-of-laws rules ex officio. Law No. 5718 also provides that the judge may request assistance from the parties in determining the content of applicable foreign law; if the content of foreign law cannot be determined despite research, Turkish law may be applied.
This means that choosing foreign law is legally possible, but it must be pleaded and proved properly in Turkish proceedings. A party relying on foreign law should be prepared to submit expert opinions, legal materials, translations and explanations of the relevant foreign rules.
3. Express Choice of Law
The safest method is an express choice of law clause. The clause should be clear, specific and comprehensive. It should identify a national legal system rather than vague concepts such as “international law,” “general commercial principles” or “European law.”
A strong clause may read:
“This Agreement, including its formation, interpretation, performance, breach, termination and consequences of termination, shall be governed by the laws of the Republic of Türkiye, excluding its conflict-of-laws rules.”
This wording is useful because it clarifies that the chosen law governs not only performance but also interpretation, breach and termination. It may also exclude renvoi or further reference to conflict rules, depending on the structure of the clause and the applicable procedural context.
In practice, many poorly drafted contracts contain wording such as “international commercial law shall apply.” This is dangerous. There is no single, automatically applicable body of “international commercial law” governing all private contracts. Unless the parties clearly identify a legal system or an applicable convention, the clause may create uncertainty.
For Turkish law purposes, an express governing law clause should be placed in the main contract, ideally near the dispute resolution clause. If the contract contains annexes, general terms, purchase orders or framework agreements, the hierarchy between documents should also be regulated.
4. Implied Choice of Law
MÖHUK Article 24 also recognizes implied choice of law where the parties’ intention can be understood without hesitation from the contract provisions or circumstances.
However, relying on implied choice is risky. Turkish courts or arbitral tribunals may examine the language of the contract, currency, place of performance, dispute resolution clause, references to statutory concepts, standard terms, previous dealings and overall commercial context. Yet these factors may not always point to one clear legal system.
For example, a contract written in English, providing for Istanbul arbitration, using Incoterms, referring to Turkish customs clearance and requiring payment in euros may not clearly indicate whether the parties intended Turkish law, English law or another law. An implied choice must be unambiguous. If the intention is debatable, the court may proceed to objective connecting factors.
Therefore, international commercial parties should not leave governing law to implication. A simple express clause can prevent expensive preliminary disputes.
5. Partial Choice of Law and Splitting the Contract
MÖHUK Article 24 allows the parties to choose the applicable law for the whole contract or for only part of it. This is known as partial choice of law or dépeçage.
For example, the parties may choose Turkish law for payment and delivery obligations but English law for warranty limitations. In sophisticated financing, construction, technology or multi-contract transactions, different laws may govern different documents or issues.
Although partial choice of law is possible, it should be used carefully. Splitting the applicable law may create interpretative inconsistency. If one part of a contract is governed by Turkish law and another part by English law, the parties should define exactly which issues fall under each law. Otherwise, the dispute may become more complex and expensive.
Partial choice of law may be useful in transactions where certain legal issues are closely connected to a particular jurisdiction. For instance, a share pledge over Turkish company shares may require Turkish law analysis even if the broader financing agreement is governed by English law. Similarly, Turkish real estate, employment, customs, tax and regulatory issues may trigger mandatory Turkish law considerations regardless of the general governing law clause.
6. Changing the Chosen Law after Signing
Another important feature of MÖHUK Article 24 is that the parties may make or change their choice of law at any time. A choice of law made after the contract has been concluded may have retroactive effect, provided that third-party rights are protected.
This may be relevant in settlement negotiations, restructuring, contract amendments or ongoing commercial relationships. For example, parties who originally signed a contract without a governing law clause may later amend the agreement and choose Turkish law. Or they may replace a foreign law clause with Turkish law after deciding that enforcement in Turkey will be central.
However, any later change should be documented clearly in writing. It should be signed by authorized representatives. It should also state whether the new choice applies retroactively or only prospectively. If third parties, guarantors, assignees, banks or insurers are affected, their rights must be considered.
7. What Happens If There Is No Choice of Law Clause?
If the parties do not choose a governing law, MÖHUK Article 24 provides that the contract is governed by the law most closely connected with the contract. For commercial or professional contracts, the law of the workplace of the party performing the characteristic obligation is generally presumed to be the most closely connected law. If there is no workplace, the residence or place of establishment may become relevant; if there are multiple workplaces, the workplace most closely connected with the contract is considered. However, if all circumstances show that another law is more closely connected, that law may apply.
The concept of “characteristic performance” is crucial. In a sale contract, the seller’s obligation to deliver goods is usually the characteristic performance. In a service contract, the service provider’s performance is typically characteristic. In a distribution agreement, the distributor’s or supplier’s role may require closer analysis depending on the structure. In a construction contract, the contractor’s performance is usually central, but the project location may also be highly relevant.
The absence of a choice of law clause therefore creates uncertainty. Different parties may argue for different connecting factors. A Turkish buyer may argue for Turkish law because delivery, payment or assets are in Turkey. A foreign seller may argue for its own law because its characteristic performance was organized abroad. This uncertainty may delay the merits of the dispute and increase litigation costs.
8. Mandatory Turkish Rules
A foreign governing law clause does not automatically exclude all Turkish law. MÖHUK contains special rules on public policy and overriding mandatory rules. Article 6 provides that, where foreign law applies, Turkish overriding mandatory rules are still applied if the case falls within their purpose and scope.
This is one of the most important limitations on choice of law. Certain Turkish rules may apply regardless of the chosen foreign law because they protect public interests, market order, weaker parties, regulatory compliance or essential economic policy.
Examples may include rules concerning customs, foreign exchange, tax, competition law, consumer protection, employment protection, data protection, capital markets, sanctions, import-export controls, real estate, public procurement or regulated sectors. Whether a specific rule qualifies as overriding mandatory must be assessed case by case.
For international commercial agreements, this means that choosing English law, Swiss law or German law does not necessarily avoid Turkish mandatory rules if the contract is closely connected with Turkey. If goods are imported into Turkey, Turkish customs and product safety rules may apply. If employees work in Turkey, Turkish labor and social security rules may be relevant. If competition restrictions affect the Turkish market, Turkish competition law may intervene.
9. Turkish Public Policy
MÖHUK Article 5 regulates public policy. If the application of a foreign law provision to a specific case would be clearly contrary to Turkish public order, that provision will not be applied; where necessary, Turkish law may be applied instead.
Public policy is an exceptional mechanism. It is not enough that foreign law differs from Turkish law. The conflict must be serious and clearly incompatible with fundamental principles of the Turkish legal order. In commercial matters, public policy may arise in extreme situations involving due process violations, illegality, punitive or excessive consequences, corruption, fraud, sanctions, fundamental rights or rules considered essential to Turkish legal policy.
From a drafting perspective, parties should not assume that every foreign law clause will be applied mechanically. If the chosen law produces a result that is fundamentally unacceptable under Turkish public policy, Turkish courts may refuse to apply that specific rule.
10. Third-State Overriding Mandatory Rules
MÖHUK Article 31 introduces another important concept. When applying the law governing a contractual relationship, effect may be given to overriding mandatory rules of a third state if that state is closely connected with the contract. In deciding whether to give effect to those rules, their purpose, nature, content and consequences are considered.
This rule can matter in complex international trade. Suppose a Turkish company buys goods from a European supplier for delivery to a third country subject to import restrictions or sanctions. Even if the contract is governed by Turkish law, the mandatory rules of the destination country may become relevant if they are closely connected with performance.
Similarly, logistics, energy, defense, technology transfer, financial services and cross-border distribution agreements may involve more than two jurisdictions. A careful governing law clause should therefore be supported by compliance clauses covering sanctions, export controls, import restrictions, anti-corruption and regulatory approvals.
11. Choice of Law and CISG
International sale of goods contracts involving Turkish parties may also be affected by the United Nations Convention on Contracts for the International Sale of Goods, known as the CISG. Turkey signed the CISG on 7 July 2010, and the Convention entered into force for Turkey on 1 August 2011.
The CISG may apply to contracts for the international sale of goods where the parties are located in contracting states, unless the parties validly exclude it. Therefore, if a Turkish seller and a foreign buyer sign an international sale of goods contract, merely choosing “Turkish law” may not automatically exclude the CISG. Since the CISG is part of the applicable legal environment for international sales, it may govern issues such as contract formation, obligations of the seller and buyer, conformity of goods, remedies and damages.
If the parties do not want the CISG to apply, they should expressly state:
“The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.”
If the parties want the CISG to apply together with Turkish law for matters not covered by the Convention, they should also say so clearly. This is especially important in supply, manufacturing, machinery, raw material, commodity and cross-border distribution contracts.
12. Choice of Law and Arbitration
Choice of law must be coordinated with arbitration clauses. In international arbitration, several laws may be relevant at the same time: the law governing the main contract, the law governing the arbitration agreement, the law of the seat of arbitration, institutional arbitration rules and the law of the place of enforcement.
For example, a contract may choose Turkish law as the substantive law, ICC arbitration as the dispute resolution mechanism, Paris as the seat of arbitration, and English as the arbitration language. This structure may be valid, but the parties must understand its consequences. The seat of arbitration affects court supervision, annulment proceedings and procedural law. The governing law affects the merits. The enforcement jurisdiction determines how the award will be collected.
A common drafting error is to include both an exclusive court jurisdiction clause and an arbitration clause without clarifying their relationship. For example, a contract may state that “all disputes shall be settled by arbitration” and later state that “Istanbul courts shall have exclusive jurisdiction.” This creates ambiguity and may lead to preliminary jurisdictional disputes.
The governing law clause and arbitration clause should therefore be drafted together, not separately.
13. Choice of Law and Turkish Courts
If a dispute is filed before Turkish courts, the Turkish judge will apply Turkish conflict-of-laws rules. Under Law No. 5718, the judge applies the Turkish conflict rules and the foreign law indicated by those rules ex officio, while the parties may be asked to assist in identifying the content of foreign law. If foreign law cannot be determined despite research, Turkish law may be applied.
This has practical consequences. A party relying on English law, Swiss law, German law or another foreign law should be prepared to prove its content. In Turkish proceedings, foreign law is not always treated as something the court can easily determine alone. Legal opinions, certified translations, academic sources, statutes and case law may be necessary.
For this reason, some parties choose Turkish law when the counterparty’s assets are in Turkey and Turkish courts or enforcement offices are likely to be involved. Others choose foreign law for neutrality or commercial familiarity. The correct choice depends on the transaction.
14. Special Contract Types
Not every contract should be analyzed only under the general rule of MÖHUK Article 24. Turkish private international law contains special rules for certain contract types, and mandatory protections may apply.
Employment contracts, consumer contracts, insurance contracts, intellectual property-related contracts, real estate-related agreements and agency or distribution relationships may require additional analysis. For example, employee protection, consumer protection or local market regulations may limit the practical effect of a foreign law clause.
Commercial parties sometimes assume that labeling a contract as “international” is enough to avoid Turkish protective rules. This is incorrect. If the contract is closely connected with Turkey or affects protected interests in Turkey, mandatory Turkish law may remain relevant.
15. Practical Drafting Recommendations
A strong choice of law clause in a Turkey-related international commercial agreement should be clear, complete and consistent with the entire contract.
First, the clause should identify a specific national law. Avoid vague references to “international law” unless a specific convention, rule set or instrument is intended.
Second, the clause should define its scope. It should cover formation, validity, interpretation, performance, breach, termination and consequences of termination.
Third, the clause should address the CISG if the contract concerns international sale of goods. The parties should expressly include or exclude the CISG.
Fourth, the governing law clause should be consistent with jurisdiction or arbitration. If arbitration is chosen, the seat, institution, language and number of arbitrators should be clear.
Fifth, the parties should consider overriding mandatory rules. If performance, customs, employment, tax, data, competition or regulatory issues are connected with Turkey, the contract should contain compliance provisions.
Sixth, bilingual drafting should be handled carefully. If the contract is in English and Turkish, the prevailing language should be stated. Translation discrepancies can create serious disputes.
Seventh, the contract should avoid conflicting documents. If purchase orders, invoices, framework agreements and general terms contain different governing law clauses, the hierarchy of documents must be regulated.
16. Sample Choice of Law Clauses
For a Turkish law clause:
“This Agreement, including its formation, validity, interpretation, performance, breach, termination and consequences of termination, shall be governed by and construed in accordance with the laws of the Republic of Türkiye, excluding its conflict-of-laws rules. The United Nations Convention on Contracts for the International Sale of Goods shall not apply.”
For a foreign law clause with Turkish mandatory law reservation:
“This Agreement shall be governed by and construed in accordance with the laws of England and Wales. Nothing in this clause shall prevent the application of overriding mandatory provisions of Turkish law where such provisions are applicable under Turkish private international law.”
For an international sale of goods contract where CISG is intended to apply:
“This Agreement shall be governed by the United Nations Convention on Contracts for the International Sale of Goods. Matters not governed by the CISG shall be governed by the laws of the Republic of Türkiye.”
These clauses are examples only. The correct wording should be adapted to the transaction, parties, dispute resolution mechanism and enforcement strategy.
Conclusion
Choice of law in international commercial agreements under Turkish law is a strategic issue. It determines the legal framework governing the contract and directly affects dispute resolution, enforcement, risk allocation and commercial predictability.
MÖHUK Article 24 recognizes party autonomy and allows express or clearly implied choice of law. The parties may choose the law for the entire contract or only part of it, and they may later change their choice subject to third-party rights. If there is no choice of law, Turkish conflict rules direct the court to the law most closely connected with the contract.
However, party autonomy is limited by Turkish public policy, overriding mandatory Turkish rules, third-state mandatory rules and special legal regimes. In international sale of goods contracts, CISG must also be considered. In arbitration, the governing law clause must be coordinated with the arbitration agreement, seat and enforcement strategy.
For businesses operating in Turkey or contracting with Turkish companies, the safest approach is not to use generic templates. A properly drafted choice of law clause should be clear, transaction-specific and aligned with commercial realities. In international commerce, legal uncertainty often becomes financial exposure. A strong governing law clause reduces that uncertainty and strengthens the enforceability of the agreement.
Frequently Asked Questions
Can parties choose foreign law in contracts involving Turkish companies?
Yes. Under Turkish private international law, parties to a contract with a foreign element may generally choose the law governing their contractual obligations. However, Turkish public policy and overriding mandatory rules may still apply in appropriate cases.
Is an implied choice of law valid under Turkish law?
Yes. MÖHUK Article 24 recognizes implied choice of law where the parties’ intention can be understood without hesitation from the contract or circumstances. However, express choice is much safer.
What happens if the contract has no governing law clause?
If no law is chosen, the contract is generally governed by the law most closely connected with it. In commercial contracts, this often points to the law of the workplace of the party performing the characteristic obligation.
Can Turkish courts apply foreign law?
Yes. Turkish courts may apply foreign law when Turkish conflict-of-laws rules point to it. However, the parties may need to assist the court in determining the content of that foreign law.
Does choosing foreign law exclude Turkish mandatory rules?
No. Turkish overriding mandatory rules may still apply if the case falls within their purpose and scope. Public policy may also prevent application of a foreign law rule in exceptional cases.
Should CISG be excluded in contracts involving Turkish companies?
It depends on the transaction. If the contract is an international sale of goods contract, CISG may apply. Parties who do not want CISG to apply should expressly exclude it.
Is choice of law the same as jurisdiction?
No. Choice of law determines the legal rules governing the contract. Jurisdiction determines which court or tribunal will decide the dispute.
What is the best governing law for Turkey-related commercial contracts?
There is no single best answer. Turkish law may be suitable where performance, assets and enforcement are in Turkey. Foreign law may be preferred for neutrality or international market practice. The decision should be made together with dispute resolution and enforcement planning.
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