Arbitration of M&A Disputes in Turkey: Purchase Price Adjustments, Earn-Outs and Warranty Claims

Arbitration of M&A disputes in Turkey has become increasingly relevant for foreign investors, private equity funds, strategic purchasers, founders, family-owned businesses and multinational groups involved in the acquisition or disposal of Turkish companies.

A merger or acquisition does not necessarily end when the share purchase agreement is signed or the transaction closes. Many of the most commercially significant disputes arise after closing, when the parties begin applying the purchase-price formula, preparing completion accounts, calculating earn-out payments, investigating alleged warranty breaches or pursuing indemnification claims.

Post-closing disputes may concern millions of euros or dollars and require a detailed examination of financial statements, management accounts, data-room documents, disclosure letters, tax records, customer contracts and operational decisions taken before and after closing.

The parties may disagree over questions such as:

• Whether the buyer correctly calculated net debt;
• Whether an item should be classified as cash, debt or working capital;
• Whether the seller disclosed a material liability;
• Whether the target achieved the earn-out conditions;
• Whether the buyer manipulated the target’s performance after closing;
• Whether a warranty was inaccurate;
• Whether a contractual limitation excludes the claim;
• Whether losses were caused by the breach;
• Whether the buyer may retain money held in escrow;
• Whether several sellers are jointly or individually liable.

International arbitration can provide an effective forum for these disputes. The parties may appoint arbitrators with experience in mergers and acquisitions, accounting, valuation and Turkish company law. They may conduct the proceedings in English, preserve commercially sensitive information and obtain an award capable of cross-border enforcement.

Where Turkey is selected as the seat and the transaction contains a foreign element, International Arbitration Law No. 4686 generally regulates the proceedings. The law applies to qualifying foreign-element disputes seated in Turkey and recognises, among other international elements, foreign investment, cross-border financing and transactions causing capital or goods to move between countries.

This article explains the principal types of M&A disputes, the Turkish legal framework, purchase price adjustments, earn-outs, warranty and indemnity claims, expert determination, evidence, interim protection and the drafting of arbitration clauses for transactions involving Turkish companies.

What Is an M&A Dispute?

An M&A dispute is a disagreement arising from or connected with the acquisition, sale, merger, investment or restructuring of a business.

The dispute may arise under:

• A share purchase agreement;
• An asset purchase agreement;
• A subscription agreement;
• An investment agreement;
• A shareholders’ agreement;
• A disclosure letter;
• A warranty deed;
• A tax deed;
• An escrow agreement;
• A transitional services agreement;
• A management incentive agreement;
• A guarantee;
• A financing agreement.

M&A disputes can broadly be divided into three stages.

Pre-Signing Disputes

These may involve confidentiality, exclusivity, letters of intent, break fees, due diligence and alleged misuse of information.

Signing-to-Closing Disputes

These may concern conditions precedent, regulatory approvals, interim operating covenants, financing, material adverse change clauses and termination rights.

Post-Closing Disputes

These commonly concern:

• Purchase price adjustments;
• Completion accounts;
• Locked-box leakage;
• Earn-outs;
• Warranty breaches;
• Indemnities;
• Tax liabilities;
• Fraud or misrepresentation;
• Deferred consideration;
• Escrow release;
• Post-closing covenants.

The arbitration clause should cover all three stages where the parties intend a single dispute-resolution mechanism.

Why Is Arbitration Suitable for M&A Disputes?

M&A disputes frequently involve commercially sensitive evidence.

The parties may need to disclose:

• Financial models;
• Pricing negotiations;
• Customer and supplier contracts;
• Management reports;
• Tax records;
• Internal investigations;
• Trade secrets;
• Due diligence findings;
• Acquisition financing documents;
• Board materials.

Public litigation may expose the existence and details of the dispute more widely than the parties anticipated. Institutional arbitration can provide a more confidential framework, subject to the applicable rules and any confidentiality agreement.

Arbitration also permits the parties to select decision-makers with relevant experience. An M&A dispute may require knowledge of:

• Share purchase agreements;
• Financial accounting;
• Turkish corporate law;
• Tax;
• Valuation;
• Private equity structures;
• Regulated industries.

The ability to enforce an arbitral award internationally is another important consideration. The New York Convention establishes common standards for recognising arbitration agreements and enforcing foreign and non-domestic arbitral awards across contracting jurisdictions.

Turkish Legal Framework for M&A Arbitration

Several areas of Turkish law may apply simultaneously to an M&A transaction.

These include:

• Turkish Commercial Code No. 6102;
• Turkish Code of Obligations No. 6098;
• International Arbitration Law No. 4686;
• Law No. 5718 on Private International Law and International Civil Procedure;
• Competition Law No. 4054;
• Sector-specific regulatory legislation;
• The parties’ contractual provisions.

Turkish contract law recognises the parties’ freedom to determine the contents of their contract within statutory limits. Contractual terms contrary to mandatory rules, morality, public policy or personal rights may be invalid.

This contractual freedom enables parties to establish detailed mechanisms concerning:

• Purchase price calculation;
• Completion accounts;
• Earn-outs;
• Representations and warranties;
• Indemnities;
• Liability caps;
• Claim periods;
• Escrow arrangements;
• Exclusive remedies;
• Arbitration.

Mandatory company-law requirements, however, cannot be eliminated through the transaction documents.

Share Deals and Asset Deals

The legal structure of the transaction affects the dispute.

Share Deals

In a share deal, the buyer acquires shares in the target company. The target continues to own its assets, contracts, employees, licences and liabilities, subject to applicable law and contractual change-of-control provisions.

The buyer therefore acquires the economic benefits and risks associated with the company’s existing legal position.

Share transfer formalities depend on the company type and nature of the shares.

Under the Turkish Commercial Code, registered shares in a joint-stock company are generally transferable unless the law or articles of association provide otherwise. Legal transfer of certificated registered shares may be completed through endorsement and delivery, while statutory or articles-based approval restrictions may also apply.

For a Turkish limited liability company, the share transfer agreement and the transaction creating the transfer obligation must be made in writing with signatures certified by a notary. Unless the articles provide otherwise, general assembly approval is required, and the transfer becomes effective through that approval.

An arbitral tribunal may determine whether a seller breached its contractual obligation to transfer shares. However, the parties must still satisfy mandatory corporate, notarial and registration requirements.

Asset Deals

In an asset deal, the buyer acquires selected assets and potentially assumes specified liabilities.

Disputes may concern:

• Which assets were included;
• Whether a contract was validly assigned;
• Whether liabilities transferred;
• Whether third-party consent was obtained;
• Whether employees or permits transferred;
• Whether inventory met the required condition.

The agreement should identify assets, liabilities, consents and excluded items precisely.

Conditions Precedent and Failure to Close

Many M&A agreements are signed before all closing requirements have been satisfied.

Conditions precedent may include:

• Merger-control approval;
• Sectoral regulatory approval;
• Third-party consents;
• Financing;
• Corporate authorisations;
• Release of security interests;
• Restructuring steps;
• No material adverse change;
• Delivery of closing documents.

Where a transaction is subject to the Turkish merger-control regime, approval may be required before control is transferred under Competition Law No. 4054 and Communiqué No. 2010/4. The merger-control framework, including the applicable notification rules and thresholds, was amended in 2026, so the current official rules should be verified for each transaction.

A failure-to-close dispute may require the tribunal to determine:

• Whether a condition was satisfied;
• Which party was responsible for obtaining approval;
• Whether reasonable efforts were made;
• Whether the condition could be waived;
• Whether a long-stop date expired;
• Whether a termination right was exercised validly;
• Whether a break fee is payable;
• Whether specific performance remains possible.

The agreement should distinguish clearly between a condition precedent, a covenant and a representation. The remedies for breach may differ.

Interim Operating Covenants

Between signing and closing, the seller is often required to operate the target in the ordinary course of business.

The agreement may restrict:

• Significant borrowing;
• Capital expenditure;
• Dividends;
• Hiring or dismissal of senior employees;
• Changes to customer contracts;
• Disposal of assets;
• Related-party transactions;
• New litigation;
• Changes to accounting policies.

Disputes may arise where the seller takes action without buyer consent or where the buyer unreasonably refuses consent required for ordinary operations.

The covenant should define:

• What constitutes the ordinary course;
• Materiality thresholds;
• Emergency exceptions;
• The consent procedure;
• The time allowed for a response;
• Consequences of breach.

Purchase Price Adjustment Disputes

Purchase price adjustment disputes are among the most common post-closing M&A claims.

The parties may agree on an estimated price at closing and adjust it later according to the target’s financial position.

The adjustment formula may include:

• Cash;
• Debt;
• Working capital;
• Transaction expenses;
• Capital expenditure;
• Shareholder loans;
• Leakage;
• Other agreed items.

A typical formula may be:

Equity Value = Enterprise Value – Net Debt + Cash ± Working Capital Adjustment – Transaction Expenses

The formula itself is often less controversial than the accounting definitions used within it.

Completion Accounts

Under a completion-accounts mechanism, accounts are prepared by reference to the target’s financial position at closing.

The agreement should specify:

• Who prepares the accounts;
• The preparation deadline;
• Applicable accounting policies;
• The hierarchy between contractual definitions and accounting standards;
• Access to records;
• The review period;
• The objection procedure;
• The treatment of undisputed items;
• The dispute-resolution mechanism.

A common source of disagreement is the accounting hierarchy.

The agreement may provide that completion accounts must be prepared:

1. According to the specific policies in the agreement;
2. Consistently with the target’s past accounting practices;
3. In accordance with a stated accounting framework.

The order matters. A party should not be permitted to rely on general accounting standards to disregard a specific contractual definition.

Net Debt Disputes

Net debt calculations may involve more than bank loans.

Disputed items may include:

• Accrued interest;
• Factoring;
• Leasing liabilities;
• Shareholder loans;
• Unpaid dividends;
• Deferred consideration;
• Customer advances;
• Tax liabilities;
• Employee bonuses;
• Guarantees;
• Transaction expenses;
• Debt-like provisions.

The contract should define debt rather than rely solely on a general accounting meaning.

The same item should not be counted twice. For example, a liability included in working capital should not also reduce the price as debt unless the agreement expressly requires double treatment.

Working Capital Disputes

A working capital adjustment is intended to ensure that the target is delivered with an agreed level of ordinary operating capital.

The parties may dispute:

• The working capital target;
• Inventory valuation;
• Bad-debt provisions;
• Customer receivables;
• Supplier liabilities;
• Seasonal variations;
• Cut-off procedures;
• Related-party balances;
• Abnormal transactions before closing.

A seller may accelerate collections or delay supplier payments before closing to increase apparent cash. A buyer may adopt conservative provisions after closing to reduce the final purchase price.

The agreement should include consistent accounting policies and anti-manipulation provisions.

Locked-Box and Leakage Claims

A locked-box mechanism fixes the equity price by reference to a historical balance-sheet date.

The buyer economically assumes the benefits and risks of the business from the locked-box date, while the seller promises that no unauthorised value will leave the target before closing.

Leakage may include:

• Dividends;
• Management fees;
• Shareholder payments;
• Related-party transfers;
• Waiver of receivables;
• Transaction bonuses;
• Asset transfers below value;
• Seller expenses paid by the target.

The agreement should distinguish between prohibited leakage and permitted leakage.

A leakage claim may require proof of:

• The payment or benefit;
• The recipient;
• The relationship with the seller;
• Whether it was disclosed;
• Whether it was permitted;
• The amount recoverable.

A well-drafted agreement may provide a direct euro-for-euro or dollar-for-dollar repayment obligation without requiring the buyer to prove a broader reduction in company value.

Expert Determination or Arbitration?

Completion-account disputes are often referred first to an independent accountant.

Expert determination and arbitration are different procedures.

An accounting expert may be appointed to resolve:

• Classification of a balance-sheet item;
• Application of accounting principles;
• Mathematical calculations;
• Working capital or net debt.

An arbitral tribunal may be more suitable for:

• Contract interpretation;
• Fraud;
• Breach of covenant;
• Failure to provide documents;
• Jurisdiction;
• Procedural fairness;
• Damages;
• Wider legal claims.

The agreement should define the boundary carefully.

Questions may arise over whether the accountant acts:

• As an expert;
• As an arbitrator;
• On documents only;
• With power to interpret the agreement;
• Subject to a manifest-error standard;
• With authority to allocate costs.

A poorly drafted clause may generate a preliminary arbitration solely to determine whether the dispute belongs to the accountant or tribunal.

Earn-Out Disputes

An earn-out makes part of the purchase price dependent on the target’s future performance.

Earn-outs may be linked to:

• Revenue;
• EBITDA;
• Net profit;
• Customer retention;
• Regulatory approval;
• Product launch;
• Production volume;
• Expansion into a new market;
• Sale of a business unit;
• Management continuity.

Earn-outs are intended to bridge valuation differences. They may also create incentives for future disputes because the buyer controls the business while the seller remains economically interested in its performance.

Defining Earn-Out Metrics

Terms such as EBITDA or net revenue should not be left undefined.

The agreement should determine:

• Applicable accounting principles;
• Treatment of extraordinary items;
• Group charges;
• Management fees;
• Acquisition costs;
• Transfer pricing;
• Related-party transactions;
• Capital expenditure;
• Restructuring costs;
• Bad-debt provisions;
• Currency conversion;
• Changes in accounting policies.

The formula should also address acquisitions, disposals and reorganisations during the earn-out period.

Buyer Control during the Earn-Out Period

After closing, the buyer ordinarily controls the target. It may legitimately make commercial decisions that reduce the earn-out.

For example, the buyer may:

• Increase investment;
• Change prices;
• Integrate the target;
• Transfer customers;
• Replace management;
• Reallocate expenses;
• Close a business line;
• Sell the target.

The agreement should determine whether the buyer must:

• Operate in the ordinary course;
• Use reasonable efforts to achieve the earn-out;
• Preserve the business as a separate unit;
• Avoid diverting revenue;
• Obtain seller consent for specified actions;
• Provide regular information.

The seller should not rely on a general expectation that the buyer will maximise the earn-out. The relevant operating protections should be written expressly.

Earn-Out Information Rights

The seller should receive sufficient information to verify the calculation.

Information rights may include:

• Monthly management accounts;
• Annual audited statements;
• Customer reports;
• Budget comparisons;
• Access to accounting records;
• Explanation of adjustments;
• The right to appoint an accountant.

The agreement should protect legitimate confidentiality and competition-law concerns while allowing meaningful verification.

Warranty and Representation Claims

Representations and warranties allocate risk between the buyer and seller.

They may concern:

• Corporate authority;
• Ownership of shares;
• Financial statements;
• Tax;
• Material contracts;
• Litigation;
• Employees;
• Pensions;
• Intellectual property;
• Data protection;
• Regulatory compliance;
• Environmental matters;
• Real estate;
• Insurance;
• Anti-corruption;
• Sanctions;
• Related-party transactions.

Common-law transaction documents often distinguish between representations and warranties. Turkish law does not necessarily reproduce every common-law consequence associated with those labels. The governing law, wording of the obligation and agreed remedy are therefore more important than terminology alone.

Under the Turkish Code of Obligations, a party that fails to perform an obligation properly may be required to compensate the resulting loss unless it proves that no fault is attributable to it.

Depending on the transaction’s legal character and the wording of the agreement, statutory sale and defect provisions may also become relevant. Turkish sales law provides that a seller may be responsible where the sold subject lacks promised characteristics or contains material, legal or economic defects reducing its value or expected benefit.

In an M&A transaction, the parties should not leave the interaction between contractual warranties and statutory remedies uncertain.

When Is a Warranty Breached?

A warranty may be given:

• At signing;
• At closing;
• At both signing and closing;
• Continuously during a specified period;
• Subject to seller knowledge;
• Subject to disclosed matters;
• Subject to materiality.

The claim should identify:

• The exact warranty;
• The relevant date;
• The factual inaccuracy;
• Whether disclosure qualifies the warranty;
• The resulting loss;
• Compliance with the claim procedure.

A general allegation that the target was worth less than expected will not necessarily establish a warranty breach.

Disclosure Letters and Data Rooms

The seller may qualify warranties through a disclosure letter.

The agreement should define what constitutes sufficient disclosure.

Possible standards include:

• General disclosure of public records;
• Specific disclosure against a numbered warranty;
• Fair disclosure with sufficient detail;
• Data-room disclosure;
• Disclosure of the existence and significance of the matter.

A seller may argue that uploading a document to the data room was sufficient. The buyer may respond that the document was obscure, incomplete or did not reveal the nature of the risk.

The transaction documents should identify:

• The final data-room index;
• The cut-off date;
• Whether later uploads qualify;
• Whether public registers are deemed disclosed;
• Whether disclosure must be specific;
• Whether the buyer’s actual knowledge excludes claims.

The final data-room record should be preserved in a secure and verifiable format.

Indemnity Claims

An indemnity allocates a specified risk to one party.

Typical indemnities may concern:

• Identified tax exposures;
• Pending litigation;
• Environmental liabilities;
• Employee claims;
• Regulatory investigations;
• Unpaid social security;
• A specific customer dispute;
• Pre-closing restructuring.

An indemnity claim may differ from a general warranty claim.

The buyer may argue that it needs to prove only that the identified liability occurred. The seller may argue that causation, mitigation, exclusions and claim procedures still apply.

The agreement should specify:

• Triggering events;
• Recoverable amounts;
• Direct and indirect losses;
• Third-party claims procedure;
• Defence control;
• Settlement rights;
• Tax treatment;
• Insurance proceeds;
• Double recovery;
• Liability limitations.

Tax Claims

Tax indemnities and tax warranties frequently produce post-closing disputes.

Issues may include:

• Pre-closing tax assessments;
• Transfer pricing;
• Withholding tax;
• VAT;
• Customs duties;
• Payroll tax;
• Tax losses;
• Tax audits;
• Transaction taxes.

The agreement should determine who controls the defence of a tax assessment and whether the seller may participate.

A buyer should not settle a disputed assessment and demand reimbursement without following the agreed notification and defence process.

Liability Limitations

M&A agreements commonly limit seller liability through:

• De minimis thresholds;
• Baskets;
• Deductibles;
• Caps;
• Claim periods;
• Exclusion of indirect loss;
• Exclusive-remedy clauses;
• Knowledge qualifiers;
• Anti-double-recovery provisions;
• Insurance offsets.

The agreement should state whether the basket is:

• A deductible, under which only the amount above the threshold is recoverable; or
• A tipping basket, under which the full amount becomes recoverable once the threshold is exceeded.

Different caps and time limits may apply to:

• General warranties;
• Tax;
• Title and capacity warranties;
• Fundamental warranties;
• Fraud;
• Specific indemnities.

Turkish contract law generally allows parties to allocate and limit contractual risks within mandatory legal boundaries. Contractual exclusions should nevertheless be reviewed carefully where intentional conduct, gross fault, mandatory rules or public policy are involved.

Claim Notification Requirements

A buyer may be required to notify a claim within a specified period.

The notice may need to include:

• The warranty or indemnity relied upon;
• The relevant facts;
• An estimate of loss;
• Supporting documents;
• Third-party claim details.

The agreement should state whether failure to comply:

• Extinguishes the claim;
• Reduces recovery only to the extent of prejudice;
• Has no effect unless the seller proves harm.

Vague language can turn a procedural notice dispute into the central issue in arbitration.

Fraud and Misrepresentation

Fraud allegations create additional complexity.

The claimant may allege that:

• Information was deliberately concealed;
• Financial records were manipulated;
• Customer contracts were fabricated;
• Liabilities were moved off balance sheet;
• Due diligence questions were answered falsely;
• Data-room documents were altered.

Serious allegations require persuasive evidence.

Relevant material may include:

• Emails;
• Metadata;
• Audit records;
• Board minutes;
• Draft disclosure letters;
• Internal reports;
• Witness testimony;
• Forensic accounting.

Fraud allegations may also affect contractual caps, time limits, exclusive remedies and limitation-of-liability provisions, depending on the governing law and contract wording.

Escrow and Deferred Consideration

Part of the purchase price may be retained in escrow or deferred to secure post-closing claims.

Disputes may concern:

• Whether a valid claim notice was submitted;
• Whether the escrow agent may release funds;
• Whether the claimed amount is excessive;
• Whether only the disputed amount should remain blocked;
• Whether interest belongs to the buyer or seller;
• Whether the claim period expired.

The escrow agent should be bound by a compatible dispute-resolution mechanism or a clear ministerial release process.

Otherwise, the buyer and seller may obtain an arbitral award but still face a separate dispute concerning the escrow account.

Damages in M&A Arbitration

The correct damages method depends on the obligation breached.

Potential methods include:

• Diminution in share value;
• Cost of remedying the breach;
• Reimbursement of a specific liability;
• Lost profits;
• Difference between the warranted and actual position;
• Restitution;
• Contractually fixed compensation;
• Release of escrowed funds.

A claimant should establish:

• Breach;
• Causation;
• The existence of loss;
• The amount of loss;
• Compliance with contractual limitations;
• Reasonable mitigation.

The same loss should not be recovered twice under both warranty and indemnity provisions.

Valuation experts may use:

• Discounted cash flow;
• Market multiples;
• Transaction multiples;
• Asset-based valuation;
• A contractual euro-for-euro method.

The selected method must correspond to the contractual promise and actual loss.

Evidence in M&A Arbitration

M&A arbitration is usually document-intensive.

Important evidence may include:

• Transaction documents;
• Negotiation drafts;
• Due diligence requests;
• Data-room records;
• Disclosure letters;
• Completion accounts;
• Management accounts;
• Audit workpapers;
• Bank statements;
• Tax filings;
• Customer agreements;
• Board minutes;
• Emails;
• Messaging records;
• Expert calculations.

The parties should preserve the data room, including its index, upload dates, access records and final contents.

Witnesses may include:

• Sellers;
• Buyer representatives;
• Founders;
• Finance directors;
• Accountants;
• Due diligence advisers;
• Transaction lawyers;
• Operational managers.

Accounting and valuation experts are frequently central to the dispute.

Multiparty and Multicontract Problems

An M&A transaction may involve:

• Several sellers;
• The buyer;
• The target;
• Founders;
• Management shareholders;
• A guarantor;
• An escrow agent;
• A warranty insurer;
• Parent companies.

Not all of these persons are automatically bound by the arbitration clause.

The share purchase agreement, shareholders’ agreement, escrow agreement, guarantee and tax deed should contain compatible clauses.

ISTAC Rules permit claims arising from more than one contract to be determined in a single arbitration where the contracts refer to ISTAC arbitration and the arbitration agreements are compatible. The Rules also contain a consolidation mechanism for qualifying pending arbitrations.

The parties should address:

• Joint or several seller liability;
• Representative seller powers;
• Service of notices;
• Appointment of arbitrators;
• Consolidation;
• Joinder;
• Counterclaims;
• Allocation of costs.

Interim Measures in M&A Disputes

Urgent protection may be required to:

• Prevent release of escrow funds;
• Prevent disposal of shares;
• Preserve the target’s accounting records;
• Restrict dissipation of sale proceeds;
• Protect confidential information;
• Preserve evidence;
• Prevent breach of a non-compete obligation.

Under International Arbitration Law No. 4686, applying to a Turkish court for an interim injunction or attachment before or during arbitration does not violate the arbitration agreement.

The tribunal may also grant interim protection, but it cannot directly issue measures requiring compulsory state enforcement, action by public authorities or obligations binding third parties.

ISTAC also provides an emergency arbitrator mechanism for urgent relief before the ordinary tribunal receives the case file.

Governing Law

The governing law should be stated expressly.

Under Law No. 5718, contractual obligations are governed by the law expressly chosen by the parties. The parties may choose the applicable law for the whole agreement or part of it. Where no valid choice exists, the most closely connected law is determined under Turkish conflict-of-laws rules.

An M&A agreement may involve:

• The law governing the SPA;
• The law governing the arbitration agreement;
• The procedural law of the seat;
• Mandatory Turkish company law;
• Turkish regulatory rules.

Choosing foreign law for the SPA does not necessarily eliminate mandatory Turkish rules governing a Turkish company’s share transfer, corporate approvals or regulatory authorisations.

Drafting the Arbitration Clause

A suitable M&A arbitration clause should identify:

• Covered agreements;
• Covered claims;
• Institution;
• Seat;
• Language;
• Number of arbitrators;
• Governing law;
• Arbitration-agreement law;
• Multiparty procedure;
• Consolidation;
• Interim relief;
• Confidentiality;
• Expert determination boundaries.

ISTAC’s official model clause states that disputes arising out of or connected with the contract shall be finally settled under the ISTAC Arbitration Rules and recommends specifying the place, language, number of arbitrators and substantive law.

Sample M&A Arbitration Clause

“Any dispute, controversy or claim arising out of or relating to this Agreement or the Transaction Documents, including their formation, existence, validity, interpretation, performance, breach, termination or post-closing implementation, shall be finally resolved by arbitration administered by the Istanbul Arbitration Centre in accordance with the ISTAC Arbitration Rules.

The seat of arbitration shall be Istanbul, Türkiye. The tribunal shall consist of three arbitrators. The language of arbitration shall be English. This Agreement and the arbitration agreement contained in this clause shall be governed by Turkish law.

The tribunal shall have jurisdiction over disputes concerning completion accounts, purchase price adjustments, net debt, working capital, leakage, earn-out calculations, warranties, indemnities, claim limitations, escrow release and damages.

Accounting matters expressly referred by this Agreement to an independent expert shall be decided through expert determination. The arbitral tribunal shall retain jurisdiction to determine the scope of the expert’s authority, contractual interpretation, procedural compliance, fraud, manifest error and all legal claims connected with the expert determination.

Nothing in this clause prevents a party from applying to an emergency arbitrator or a competent court for interim, protective or conservatory relief. Such an application shall not constitute a waiver of arbitration.”

The clause must be coordinated with every related transaction document.

Setting Aside and Enforcement

A Turkish-seated international award may be challenged only on the limited grounds contained in International Arbitration Law No. 4686.

These include matters such as:

• Invalidity of the arbitration agreement;
• Irregular tribunal constitution;
• Excess of jurisdiction;
• Serious procedural violations;
• Violation of equality;
• Non-arbitrability;
• Conflict with Turkish public policy.

A setting-aside action is not a full appeal concerning the tribunal’s interpretation of EBITDA, net debt, warranties or damages.

Where the debtor’s assets are outside Turkey, the award may be presented for recognition and enforcement under the New York Convention, subject to the local procedure and limited refusal grounds in the enforcement jurisdiction.

Practical Checklist for M&A Transactions

Before signing an M&A agreement involving a Turkish company, the parties should confirm:

• Which entities are parties;
• Whether all sellers are bound;
• Whether guarantors and escrow agents have compatible clauses;
• Whether mandatory share transfer formalities are satisfied;
• Which regulatory approvals are required;
• Whether signing and closing obligations are distinguished;
• How the purchase price is calculated;
• How debt, cash and working capital are defined;
• Which accounting policies prevail;
• Whether the transaction uses completion accounts or locked box;
• What constitutes leakage;
• How earn-out metrics are calculated;
• What operating restrictions apply during the earn-out period;
• Which warranties are repeated at closing;
• How disclosure qualifies warranties;
• Whether data-room disclosure is sufficient;
• Which liabilities receive specific indemnities;
• Whether baskets, caps and time limits are clear;
• What a valid claim notice must contain;
• Whether fraud is carved out;
• How escrow funds are released;
• Which matters go to an accountant;
• Which matters remain with the tribunal;
• Whether related contracts permit consolidation;
• Whether urgent interim protection may be needed;
• Where the respondent’s assets are located.

Frequently Asked Questions

Can M&A disputes involving Turkish companies be resolved through arbitration?

Yes. Contractual disputes concerning purchase price, warranties, indemnities, earn-outs and post-closing obligations are generally suitable for arbitration where a valid written arbitration agreement exists.

Does Turkish law permit parties to choose foreign law for an SPA?

Yes. Parties to an international contract may generally select the governing law under Law No. 5718. Mandatory Turkish company, regulatory and transfer rules may still apply to a Turkish target.

Can an arbitrator order the transfer of Turkish company shares?

A tribunal may order a signatory to comply with its contractual transfer obligations. Mandatory notarial, corporate approval, share-delivery and registration requirements must still be completed.

How are limited liability company shares transferred?

The transfer agreement must be in writing with notarised signatures. Unless the articles provide otherwise, general assembly approval is required, and the transfer becomes valid through that approval.

What is a purchase price adjustment dispute?

It is a dispute over the final price calculated after closing, commonly involving cash, debt, working capital, transaction expenses or another agreed financial metric.

Should completion account disputes go to an accountant or an arbitrator?

Narrow accounting calculations may be referred to an independent expert. Contract interpretation, procedural disputes, fraud and damages are generally more suitable for arbitration. The agreement must define the boundary expressly.

What causes earn-out disputes?

Common causes include unclear financial metrics, changes in accounting policies, integration of the target, allocation of group costs, diversion of revenue and disagreement over the buyer’s obligation to operate the business during the earn-out period.

Are representations and warranties the same under Turkish and English law?

Not necessarily. Turkish law does not automatically attach every common-law consequence to those labels. The wording, governing law and agreed remedy should be analysed.

Can uploading a document to the data room defeat a warranty claim?

It depends on the agreed disclosure standard. The agreement should state whether data-room disclosure is sufficient and whether the matter must be disclosed specifically and in adequate detail.

Can a buyer recover both under a warranty and an indemnity?

Potentially, but the agreement should prevent double recovery for the same loss.

Can the buyer freeze escrow funds during arbitration?

Potentially. The buyer may seek relief under the escrow agreement, from an emergency arbitrator or from a competent court, depending on the parties bound and the nature of the requested measure.

Can ISTAC administer an M&A dispute?

Yes. ISTAC administers commercial disputes where the parties agree to use its Arbitration Rules. Its Rules also address claims arising from multiple contracts and consolidation of qualifying arbitrations.

Can an M&A arbitration be conducted in English?

Yes. The parties may choose English as the language of a Turkish-seated international arbitration.

Can an M&A award be enforced abroad?

Yes. A qualifying award may be recognised and enforced in New York Convention jurisdictions, subject to local procedure and limited refusal grounds.

Conclusion

Arbitration of M&A disputes in Turkey requires an integrated understanding of contract law, company law, accounting, valuation and international arbitration.

The most frequent post-closing disputes concern purchase price adjustments, completion accounts, net debt, working capital, earn-outs, warranties, indemnities, disclosure and escrow arrangements.

These disputes are rarely resolved by reading a single clause in isolation. The tribunal may need to interpret the SPA together with accounting schedules, disclosure letters, data-room records, tax deeds, guarantees and related agreements.

Careful drafting is therefore essential.

Purchase price definitions should classify disputed items expressly. Accounting hierarchies should be clear. Earn-out provisions should regulate how the buyer operates the business. Warranty and indemnity regimes should define disclosure, loss, claim procedures, limitations and remedies.

The agreement must also distinguish expert determination from arbitration. An accountant may resolve narrow accounting calculations, while the tribunal should retain authority over legal interpretation, procedural fairness, fraud and damages.

The arbitration clause should bind all necessary parties and remain compatible across the entire transaction structure. Sellers, guarantors, founders, escrow agents and target companies should not be assumed to be bound merely because they are commercially involved.

Where a Turkish company is being acquired, mandatory transfer formalities and regulatory approvals must also be incorporated into the closing plan. An arbitral award cannot replace every notarial, corporate, registry or regulatory requirement.

Once a dispute becomes foreseeable, the parties should preserve the data room, completion records, emails, accounting files and management reports. Accounting and valuation experts should be instructed early.

A properly structured arbitration process can provide confidentiality, specialist decision-makers and an internationally enforceable result. Its effectiveness, however, depends on the quality of the underlying transaction documents.

M&A dispute prevention begins during negotiation. Clear purchase price formulas, workable earn-out protections, precise warranty language and coordinated arbitration clauses can substantially reduce the risk that a successful transaction becomes a prolonged post-closing dispute.

Legal Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. M&A disputes depend on the transaction structure, company type, share-transfer formalities, governing law, accounting provisions, regulatory approvals, arbitration clause and intended enforcement jurisdiction. Transaction-specific Turkish legal advice should be obtained before signing, closing or commencing arbitration.