Payment Security in Turkish International Commercial Transactions

Introduction

Payment security is one of the most important issues in Turkish international commercial transactions. In cross-border trade, the commercial success of a transaction does not depend only on the quality of goods, delivery timing or price. It also depends on whether the seller can actually collect the price and whether the buyer can protect itself against non-delivery, defective performance or unjustified payment demands.

Turkey is a major commercial jurisdiction for international sale of goods, manufacturing, construction, logistics, distribution, energy, infrastructure, textile, machinery, medical equipment, food, automotive and technology transactions. Turkish companies regularly sell to foreign buyers, foreign suppliers sell to Turkish importers, international contractors work with Turkish subcontractors, and foreign investors enter into shareholder, supply, agency and distribution agreements connected with Turkey. In all these relationships, payment risk must be managed from the beginning.

Payment security in Turkish international commercial transactions is not a single legal instrument. It is a combination of contractual protections, banking instruments, negotiable instruments, personal guarantees, real securities, pledges, escrow mechanisms, documentary payment structures, enforcement planning and dispute resolution strategy. The correct security package depends on the transaction value, counterparty risk, delivery structure, jurisdiction of assets, currency exposure, insolvency risk and bargaining power of the parties.

This article explains the main payment security tools used in Turkey-related international commercial transactions, including letters of credit, bank guarantees, suretyship, guarantee agreements, promissory notes, checks, bills of exchange, movable pledges, mortgages, share pledges, escrow, advance payment structures, retention of title, foreign currency clauses and enforcement mechanisms.

1. Why Payment Security Matters in Turkey-Related International Transactions

Payment security matters because international commercial disputes are often difficult, expensive and slow to resolve after default occurs. If the buyer fails to pay, the seller may need to initiate enforcement proceedings, litigation or arbitration. If the debtor’s assets are in Turkey, the creditor may need Turkish enforcement proceedings. If the creditor has only an invoice and email correspondence, recovery may become more complicated than if it holds a bank guarantee, letter of credit, promissory note, pledge or properly drafted security agreement.

From the seller’s perspective, payment security protects against non-payment, delayed payment, insolvency, currency depreciation, fraudulent conduct, refusal to accept goods, customs delays and bad-faith disputes. From the buyer’s perspective, payment security protects against paying before shipment, receiving defective goods, losing advance payments, fake shipping documents, delayed delivery and supplier insolvency.

In Turkey-related trade, payment security should be integrated into the contract. It is not enough to agree that “payment shall be made after delivery” or “payment shall be made within 30 days.” The contract should answer practical questions: What happens if the buyer does not pay? Can the seller suspend delivery? Is there a bank guarantee? Is payment secured by a letter of credit? Is there a promissory note? Are interest, penalties and collection costs recoverable? Which court or arbitral tribunal will decide disputes? Where are the debtor’s assets?

2. Legal Framework for Payment Security in Turkey

Payment security in Turkey is regulated by different legal sources depending on the instrument. The Turkish Code of Obligations governs general contract law, suretyship, guarantee-related principles, default, interest, damages and termination. The Turkish Commercial Code governs commercial transactions, negotiable instruments, merchants, commercial enterprises and certain trade-related issues. Turkish enforcement law governs debt collection, attachment, foreclosure and bankruptcy procedures. Banking legislation and international banking practice affect letters of credit, bank guarantees and trade finance instruments.

For cross-border transactions, Turkish private international law may also become relevant. The parties may choose governing law, jurisdiction or arbitration, but mandatory Turkish rules may still apply where security interests, enforcement, real property, movable pledges, Turkish bank guarantees or negotiable instruments are involved.

The first practical lesson is that payment security should not be drafted as a generic clause copied from a foreign template. A security clause that works in England, Germany or the UAE may not function properly in Turkey if it ignores Turkish form requirements, enforcement rules, foreign currency restrictions, registry requirements or negotiable instrument formalities.

3. Letters of Credit in Turkey-Related Trade

A letter of credit is one of the most common payment security tools in international trade. It is a banking arrangement under which the issuing bank undertakes to pay the beneficiary, usually the seller, if the beneficiary presents documents complying with the terms of the credit. This structure reduces the seller’s risk because payment depends primarily on compliant documents rather than the buyer’s willingness to pay.

Letters of credit are especially useful in international sale of goods, commodity trade, machinery supply, textile exports, construction material shipments and transactions where the buyer and seller do not have a long commercial history. The seller receives a bank-backed payment mechanism, while the buyer can require documents proving shipment, insurance, origin, inspection or other contractual conditions.

Under Turkish law, there is no single detailed statute regulating all content and requirements of letters of credit, and Turkish practice generally relies on banking practice and contractual arrangements; legal commentary commonly treats bank letters of credit as security instruments closely related to guarantee concepts. In international trade, letters of credit are often issued subject to the ICC’s Uniform Customs and Practice for Documentary Credits, known as UCP 600; the ICC also promotes eUCP as a digital supplement to UCP 600 for documentary credits in electronic form.

The key risk in letters of credit is documentary discrepancy. Banks deal with documents, not with the physical goods themselves. Therefore, the invoice, bill of lading, packing list, certificate of origin, inspection certificate and insurance document must strictly match the credit terms. A seller may ship conforming goods but still fail to obtain payment if the documents contain discrepancies.

A Turkey-related sale contract should therefore align the letter of credit terms with the commercial contract. The contract should state who opens the letter of credit, by what deadline, whether it must be irrevocable and confirmed, which bank will issue it, which documents are required, whether partial shipments are allowed, whether transshipment is allowed, and what happens if the buyer fails to open the credit on time.

4. Confirmed Letters of Credit

A confirmed letter of credit provides additional security to the seller. In a confirmed credit, a second bank, usually located in the seller’s country or another trusted jurisdiction, adds its own payment undertaking. This protects the seller not only against buyer risk but also against issuing bank risk and certain country risks.

For Turkish exporters selling to foreign buyers in higher-risk jurisdictions, confirmation may be commercially important. For foreign sellers selling to Turkish buyers, confirmation may also be useful if the seller wants payment assurance from a bank outside Turkey or from an internationally rated bank.

However, confirmation increases cost. The parties should regulate who pays confirmation charges, advising fees, amendment fees and bank commissions. If the buyer must pay these charges, this should be written clearly in the contract.

5. Bank Guarantees and Demand Guarantees

Bank guarantees are widely used in Turkish commercial practice. A bank guarantee provides the beneficiary with a bank-backed payment undertaking if the principal debtor fails to perform or if the conditions for demand are satisfied. In international commercial transactions, bank guarantees may secure advance payments, performance obligations, warranty obligations, bid obligations, retention amounts or payment obligations.

A demand guarantee is particularly powerful because the beneficiary may be able to demand payment without proving the full underlying dispute, depending on the wording. For this reason, the exact language of the guarantee is decisive. A guarantee payable “upon first written demand” creates a different risk profile from a conditional guarantee requiring proof of breach, court decision or arbitral award.

International demand guarantees may be issued subject to ICC Uniform Rules for Demand Guarantees, known as URDG 758. These rules apply when the guarantee or counter-guarantee expressly states that it is subject to URDG, and they are designed to reflect international standard practice in demand guarantees.

In Turkey-related contracts, the parties should define whether the bank guarantee is a payment guarantee, performance guarantee, advance payment guarantee, warranty guarantee or bid bond. The contract should also regulate the issuing bank, amount, currency, expiry date, demand procedure, required documents, governing rules, extension mechanism and return conditions.

6. Advance Payment Guarantees

An advance payment guarantee protects the buyer when it pays part of the price before receiving goods or services. This is common in machinery contracts, construction projects, manufacturing orders, customized goods and long-term supply agreements. The buyer pays an advance to finance production or secure production capacity, but the seller provides a bank guarantee securing repayment if the seller fails to perform.

For example, if a Turkish buyer pays 30% advance to a foreign machinery supplier, the buyer may require an advance payment guarantee equal to the advance amount. If the supplier fails to manufacture or deliver, the buyer can demand payment under the guarantee, subject to its wording.

The guarantee should reduce automatically as performance progresses only if the contract and guarantee clearly provide for such reduction. Otherwise, disputes may arise over whether the full guarantee remains valid after partial delivery.

7. Performance Guarantees

Performance guarantees secure proper performance of contractual obligations. They are common in construction, infrastructure, energy, manufacturing, EPC, installation, distribution and long-term supply contracts. If the contractor or seller fails to perform, the beneficiary may call the guarantee.

From the contractor’s or seller’s perspective, performance guarantees can be risky if they are unconditional and payable on first demand. The beneficiary may attempt to call the guarantee even where the underlying breach is disputed. Therefore, the contract should regulate abusive call protections, notice requirements, cure periods and dispute resolution mechanisms.

From the beneficiary’s perspective, the guarantee should be simple enough to call when a real default occurs. A guarantee requiring a final court judgment before payment may provide weak practical security because litigation may take years.

8. Suretyship under Turkish Law

Suretyship is another important payment security mechanism. A surety undertakes responsibility for the debtor’s obligation if the debtor fails to perform. In Turkey, suretyship is heavily regulated and subject to strict form requirements, particularly where individuals act as sureties.

Turkish legal scholarship explains that under Article 583 of the Turkish Code of Obligations, suretyship must be in written form, and certain elements such as the maximum liability amount, the date of the contract and, where applicable, the surety’s intention to be jointly liable must be handwritten by the surety. These form requirements are critical. A suretyship that does not comply with Turkish formalities may be invalid or unenforceable.

For international transactions, foreign creditors sometimes obtain “guarantee” language from Turkish individuals or company shareholders without realizing that Turkish law may characterize the document as suretyship. If so, strict form requirements may apply. This distinction is particularly important when the security is given by a real person, shareholder, director or related party.

9. Guarantee Agreements versus Suretyship

Turkish law distinguishes between suretyship and independent guarantee agreements. A suretyship is accessory to the principal debt, meaning that the surety’s liability generally depends on the validity and existence of the principal obligation. A guarantee agreement, by contrast, may create an independent obligation to compensate or pay upon the occurrence of a specified risk.

Legal commentary on Turkish guarantee agreements emphasizes that guarantee agreements are generally discussed under Article 128 of the Turkish Code of Obligations and that their rules are largely shaped by doctrine and court precedent, while suretyship is regulated separately and more strictly.

This distinction has major consequences. If a document intended as an independent guarantee is interpreted as suretyship, it may fail due to missing form requirements. Therefore, payment security documents should use precise wording and should identify whether the obligation is independent, primary, accessory, conditional or payable upon first demand.

10. Promissory Notes, Checks and Bills of Exchange

Negotiable instruments are widely used in Turkish commercial practice. The most common are promissory notes, checks and bills of exchange. They can provide strong payment security because they create an independent written payment obligation and may allow faster enforcement compared to an ordinary contractual claim.

The Turkish Commercial Code regulates negotiable instruments. Article 645 defines negotiable instruments as instruments in which the right embodied in the instrument cannot be claimed separately from the instrument and cannot be transferred independently from it. This means the physical or electronic legal character of the instrument is central to the claim.

Promissory notes are frequently used in domestic and international transactions involving Turkish debtors. A seller may require the buyer to issue promissory notes for installment payments. If the buyer defaults, the creditor may initiate special enforcement proceedings for negotiable instruments, provided that statutory requirements are met.

Checks are also common in Turkish commerce, although they carry specific legal and practical risks. Post-dated checks are frequently used commercially, but creditors should carefully assess presentation periods, bank responsibility, endorsement chain, criminal complaint possibilities and enforcement strategy.

11. Enforcement Advantage of Negotiable Instruments

The main advantage of negotiable instruments is enforcement leverage. Turkish enforcement law provides special procedures for negotiable instruments when the instrument satisfies statutory formal requirements. Recent Turkish enforcement commentary states that creditors holding negotiable instruments such as promissory notes, checks or bills may proceed through a special execution procedure designed for negotiable instruments.

This may give the creditor a stronger procedural position than an ordinary invoice claim. However, the instrument must be formally valid. Missing mandatory elements, unauthorized signatures, defective endorsement chains, alterations, prescription periods or improper completion may create serious objections.

For foreign creditors, promissory notes and checks issued by Turkish debtors can be useful, but they should be reviewed by Turkish counsel before acceptance. A promissory note that looks commercially clear may be legally defective if mandatory elements under Turkish law are missing.

12. Movable Pledge in Commercial Transactions

A movable pledge is a security right over movable assets. In commercial transactions, movable pledges may secure loans, deferred payment obligations, supply debts or other commercial receivables. Turkey modernized this area through Law No. 6750 on Pledges over Movable Property in Commercial Transactions, which was published in the Official Gazette on 28 October 2016 and entered into force on 1 January 2017.

The movable pledge system is important because it allows certain movable assets to be used as collateral without necessarily transferring possession to the creditor. This can be commercially useful for companies that need to continue using machinery, equipment, inventory or receivables while granting security.

Legal commentary explains that movable pledge agreements must be prepared in written or electronic form; written agreements are executed before the Movable Pledges Registry or with notarized signatures, while electronic agreements require electronic signatures. Registry procedures are conducted through TARES, the movable pledge registry system.

For international creditors, movable pledge can be useful where the Turkish debtor owns machinery, equipment, inventory, commercial receivables or other eligible movable assets in Turkey. However, perfection, registration, asset description, priority and enforcement rules must be handled carefully.

13. Mortgage over Turkish Real Estate

A mortgage is one of the strongest forms of payment security where the debtor or a third party owns real estate in Turkey. It gives the creditor a security right over immovable property and may allow foreclosure if the secured obligation is not paid.

Mortgage security is especially relevant in high-value transactions, real estate investments, construction projects, shareholder financing, long-term supply contracts and loan arrangements. However, creating a mortgage over Turkish real estate requires compliance with Turkish land registry procedures. The mortgage amount, currency, degree, creditor, debtor, secured obligation and property details must be properly registered.

A foreign creditor should conduct title deed due diligence before accepting a mortgage. Existing mortgages, liens, attachments, restrictions, zoning issues and property valuation should be reviewed. A mortgage over overvalued or already encumbered property may provide weak practical security.

14. Share Pledge

Share pledges may be used to secure payment obligations in corporate transactions, acquisition financing, shareholder loans, joint ventures and investment agreements. If a Turkish company’s shares are pledged, the creditor may obtain leverage over the debtor’s equity interest.

The formal requirements differ depending on whether the company is a joint stock company or limited liability company and depending on the type of share. Share pledges should be documented carefully and aligned with the company’s articles of association, share ledger, trade registry filings where relevant and any shareholder agreement.

Foreign investors often use share pledges in combination with parent company guarantees, bank guarantees, escrow arrangements and arbitration clauses. However, enforcement of share pledges may become complex if the debtor resists or if corporate restrictions apply.

15. Escrow Arrangements

Escrow is increasingly used in international commercial transactions connected with Turkey. In an escrow structure, funds, documents, shares or other assets are held by a neutral third party until contractual conditions are satisfied. Escrow may be used in M&A transactions, real estate deals, equipment purchases, software projects, construction settlements and international trade.

Escrow is useful where both parties face risk. The seller does not want to deliver without assurance of payment. The buyer does not want to pay before receiving goods, shares or documents. The escrow agent holds the payment until agreed release conditions occur.

The escrow agreement should define the escrow agent, deposited amount, currency, release conditions, dispute procedure, fees, interest, governing law, documentation, deadlines and what happens if the conditions are not met. Vague escrow terms may create a new dispute instead of solving payment risk.

In Turkey-related transactions, escrow may be structured through banks, lawyers or specialized service providers depending on the transaction type. Tax, anti-money laundering and professional responsibility rules should be considered.

16. Retention of Title

Retention of title means that the seller retains ownership of goods until the buyer pays the price. It can be useful in sale of goods transactions, especially where goods are delivered before full payment.

However, retention of title must be adapted carefully to Turkish law. In practice, the effectiveness of retention of title may depend on formal requirements, type of goods, registration rules, possession, third-party rights and insolvency considerations. For ordinary international sale contracts, a simple clause stating “title remains with the seller until full payment” may not always provide the level of protection the seller expects in Turkey.

Therefore, retention of title should be supported by additional mechanisms such as advance payment, letter of credit, promissory note, bank guarantee, pledge, insurance or controlled delivery documents.

17. Foreign Currency and Exchange Rate Risk

Foreign currency risk is a major issue in Turkey-related commercial transactions. International contracts often use USD, EUR or GBP, but Turkish foreign exchange regulations may restrict or affect certain contracts between Turkish residents.

Recent legal commentary explains that Turkish residents may now agree on and make payments in foreign currency for certain movable property sales contracts, excluding vehicle sales, following amendments to foreign currency payment restrictions. Other commentary notes that foreign currency payment obligations are allowed in certain software, licensing and work contracts involving foreign currency costs, but restrictions still require careful contract-by-contract analysis.

For payment security, foreign currency risk should be addressed expressly. The contract should state the payment currency, whether conversion into Turkish lira is permitted, which exchange rate applies, which date controls conversion, whether exchange losses are recoverable, and whether security instruments are issued in the same currency as the debt.

A creditor may hold a promissory note in Turkish lira while the underlying commercial debt is in euros. This mismatch may create loss if the lira depreciates. Therefore, payment security should be aligned with the commercial currency of the transaction.

18. Interest, Default and Penalty Clauses

A payment security strategy should include default interest and penalty provisions. The contract should define payment deadlines, grace periods, default notice requirements, interest rate, compound interest limitations, collection costs, legal fees, suspension rights and termination rights.

In Turkish commercial practice, interest clauses must be drafted carefully, especially when linked to negotiable instruments. Recent legal commentary notes that interest clauses in negotiable instruments are regulated differently depending on whether the instrument is a promissory note, bill of exchange or check.

Penalty clauses may also be used, but excessive penalties may be subject to judicial reduction under Turkish law in certain circumstances. The clause should be commercially reasonable and connected to actual risk.

For international contracts, default interest should be enforceable under the governing law and should not violate public policy or mandatory rules in the enforcement jurisdiction.

19. Enforcement Planning in Turkey

Payment security is valuable only if it can be enforced. Turkish enforcement law provides several mechanisms for debt collection, including ordinary enforcement proceedings, enforcement based on judgment, special enforcement for negotiable instruments, foreclosure of pledged or mortgaged assets, and bankruptcy proceedings in eligible cases.

Turkish enforcement commentary describes the main categories of debt enforcement as proceedings without judgment, proceedings with judgment and foreclosure proceedings, carried out through enforcement offices. In ordinary enforcement without judgment, a creditor may initiate proceedings through the enforcement office, and the debtor may object within the statutory period; if the debtor objects, the creditor may need further legal action to remove the objection.

For payment security planning, the creditor should ask before signing: Can this security be enforced directly? Does it require litigation? Is there a registry? Is there a bank undertaking? Are Turkish assets identifiable? Can interim attachment be obtained? Is arbitration useful? Is the debtor likely to object?

20. Insolvency Risk and Priority

A payment security instrument should be assessed in light of insolvency risk. If the debtor becomes insolvent, unsecured creditors may face long delays and low recovery. Secured creditors, depending on the type and validity of security, may have priority over certain assets.

Bank guarantees and letters of credit may protect the creditor from the debtor’s insolvency because the payment obligation belongs to the bank, subject to the instrument wording. Pledges and mortgages may provide priority over secured assets. Promissory notes may give procedural leverage, but they do not by themselves create asset priority unless supported by collateral.

Therefore, for high-value transactions, a layered security structure is often preferable. For example, a seller may require advance payment, a confirmed letter of credit for the balance, a parent company guarantee, and retention of title or pledge for certain assets.

21. Payment Security in Construction and Infrastructure Projects

Payment security is especially important in construction and infrastructure projects. Contractors may require advance payment guarantees, performance guarantees, payment bonds, employer guarantees, milestone payment structures, retention accounts and escrow arrangements. Employers may require performance guarantees, warranty guarantees, delay liquidated damages and advance payment guarantees.

In Turkey-related construction projects, disputes often arise from delayed payment, variation orders, additional works, retention release, guarantee calls, termination and project delay. The contract should define when payments become due, what documents must be submitted, whether certified progress payments are binding, how objections are made, and when guarantees may be called.

For contractors, unjustified guarantee calls are a major risk. For employers, weak guarantees may create recovery problems if the contractor abandons the project. Both sides should draft payment security clauses with dispute scenarios in mind.

22. Payment Security in Distribution and Agency Agreements

In distribution relationships, the supplier may sell goods to the distributor on deferred payment terms. Payment security may include bank guarantees, promissory notes, credit insurance, retention of title, personal guarantees by shareholders, credit limits, advance payment, or suspension rights.

The supplier should avoid unlimited open account sales without security, especially where the distributor is newly established or financially weak. The contract should include a credit limit and allow suspension of deliveries if outstanding debt exceeds the limit.

In agency relationships, payment security may focus on customer payment, commission calculation and collection authority. If the agent collects payments from customers on behalf of the principal, the contract should impose strict segregation, reporting and transfer obligations.

23. Payment Security in International Sale of Goods

In international sale of goods contracts involving Turkey, the strongest payment structures usually combine documentary control and banking security. The seller may use a confirmed letter of credit, cash against documents, advance payment, bank guarantee, credit insurance or promissory note. The buyer may use escrow, inspection certificates, advance payment guarantee or performance guarantee.

The contract should align payment with Incoterms, delivery documents and risk transfer. For example, payment against bill of lading may be suitable for sea shipment, but only if the bill of lading is properly issued and controlled. Payment after arrival may expose the seller to non-payment if the buyer refuses to clear customs.

The safest structure depends on whether the seller or buyer has greater bargaining power and whether the goods are standard, customized, perishable, high-value or easily resold.

24. Practical Drafting Checklist

A Turkey-related payment security clause should answer the following questions:

What is the exact payment amount and currency?

When is payment due?

Is payment conditional on documents, delivery or inspection?

What security instrument will be provided?

Who issues the security?

Is the security independent or accessory?

What is the expiry date?

Can the security be extended?

What documents are needed to call the security?

Who pays bank charges?

What happens if the buyer fails to provide security on time?

Can the seller suspend performance?

Is default interest payable?

Are collection costs recoverable?

Is the security governed by Turkish law or foreign law?

Which court or tribunal resolves disputes?

Where are the debtor’s assets?

Is enforcement possible in Turkey?

These questions should be answered clearly in the contract and supporting security documents.

25. Common Mistakes in Payment Security

Common mistakes include:

Accepting an unsigned or unauthorized guarantee.

Using a defective promissory note.

Failing to verify signatory authority.

Not matching the security amount with the debt.

Using a security expiry date that is too short.

Accepting a conditional guarantee when an on-demand guarantee is needed.

Ignoring Turkish suretyship form requirements.

Failing to register a movable pledge.

Not aligning payment currency with security currency.

Using vague escrow release conditions.

Failing to address foreign currency regulations.

Not preserving invoices, delivery documents and correspondence.

Relying only on litigation after default.

These mistakes can turn a strong commercial claim into a difficult collection case.

Conclusion

Payment security in Turkish international commercial transactions requires careful legal and commercial planning. The main tools include letters of credit, confirmed letters of credit, bank guarantees, demand guarantees, advance payment guarantees, performance guarantees, suretyship, independent guarantees, promissory notes, checks, bills of exchange, movable pledges, mortgages, share pledges, escrow arrangements and retention of title.

No single security instrument is perfect. A letter of credit protects the seller but requires strict document compliance. A bank guarantee is powerful but depends on wording and bank reliability. A suretyship may be useful but is subject to strict Turkish form requirements. A promissory note may provide fast enforcement but must be formally valid. A pledge or mortgage may provide asset-based priority but requires proper establishment and enforcement. Escrow balances both parties’ risks but must have clear release conditions.

For international businesses trading with Turkey, payment security should be designed before the contract is signed. The parties should assess counterparty risk, currency risk, documentary risk, insolvency risk, enforcement risk and asset location. A properly structured payment security package can prevent disputes, improve negotiation power, protect cash flow and increase recovery chances if default occurs.

Frequently Asked Questions

What is the best payment security instrument in Turkish international trade?

There is no single best instrument. Letters of credit, bank guarantees, promissory notes, pledges, mortgages and escrow arrangements each serve different purposes. The best option depends on transaction value, counterparty risk, delivery structure, currency, asset location and enforcement strategy.

Are letters of credit regulated by Turkish law?

Turkey does not have one comprehensive statute regulating all content and requirements of letters of credit. In practice, letters of credit are commonly structured under banking practice and may be subject to ICC rules such as UCP 600.

Are bank guarantees common in Turkey?

Yes. Bank guarantees are widely used in Turkish commercial transactions, especially for advance payments, performance obligations, tenders, construction contracts, warranty obligations and payment security.

What is the difference between suretyship and guarantee under Turkish law?

Suretyship is generally accessory to the principal debt and is subject to strict form requirements. Independent guarantees may create a primary obligation depending on wording. The distinction is important because a document intended as a guarantee may be treated as suretyship if poorly drafted.

Are promissory notes enforceable in Turkey?

Yes, promissory notes are commonly used and may be enforced through special procedures for negotiable instruments if they satisfy statutory formal requirements.

Can movable assets be pledged in Turkish commercial transactions?

Yes. Law No. 6750 allows movable pledges in commercial transactions and introduced a registry-based system for certain movable pledge rights.

Can payment be agreed in foreign currency in Turkey?

It depends on the parties and contract type. Some foreign currency restrictions apply to contracts between Turkish residents, but recent amendments allow foreign currency payments in certain movable property sale contracts, excluding vehicle sales.

Is escrow used in Turkey-related international transactions?

Yes. Escrow is used in M&A, real estate, international sale of goods, software, settlement and project transactions. The escrow agreement must clearly define release conditions, dispute procedure, currency and governing law.

What is the biggest mistake in payment security clauses?

The biggest mistake is using generic wording without checking Turkish validity and enforcement rules. Security must be legally valid, properly issued, enforceable and aligned with the payment obligation.

Should payment security be reviewed before signing the contract?

Yes. Payment security should be negotiated before performance begins. Once the buyer defaults, obtaining security is usually much harder.