1. Introduction: Why Choice of Law and Jurisdiction Clauses Matter in Turkey
Cross-border business with Turkish companies is no longer an exception; it is the norm. Foreign investors routinely sign distribution, agency, franchise, share purchase, supply, construction and service contracts with Turkish counterparties. When a dispute arises, two deceptively simple questions suddenly become crucial:
- Which law will govern the contract?
- Which court or tribunal will hear the dispute?
If these questions are not clearly answered in the contract, they will be decided by the conflict-of-laws and jurisdiction rules of the forum where the dispute is brought. That often leads to:
- Surprise applications of a law that neither party expected.
- Parallel proceedings in different countries.
- Higher litigation and enforcement costs.
- Serious risks at the enforcement stage in Turkey.
Under Turkish law, parties to an international commercial contract enjoy a high degree of contractual freedom to choose both the applicable law and the competent court or arbitral tribunal, subject to certain limits such as mandatory rules, public policy and protected party regimes (for example, consumers and employees).
This article explains, from the perspective of Turkish law:
- When a contract is considered to have a foreign element.
- How parties can choose the law applicable to their commercial contract.
- How to choose the competent court or arbitral tribunal.
- What limits exist on party autonomy.
- Common mistakes and practical drafting tips, especially for foreign businesses contracting with Turkish companies.
2. Legal Framework in Turkey for Choice of Law and Jurisdiction
2.1. International Private and Procedural Law Code
The main piece of legislation governing choice of law and jurisdiction in international situations is the Turkish International Private and Procedural Law Code (commonly known as the international private law code). It sets out:
- General rules on jurisdiction of Turkish courts in cases with a foreign element.
- General rules on applicable law to contracts and other obligations.
- Recognition and enforcement of foreign judgments and foreign arbitral awards.
For domestic matters without a foreign element, the Turkish Civil Procedure Code and specific substantive codes (for example, the Turkish Commercial Code, Turkish Code of Obligations) apply.
2.2. International Conventions and Arbitration Regime
Turkey is party to various international instruments that may affect jurisdiction or enforcement in commercial disputes, in particular:
- The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which forms the backbone of the enforcement regime for foreign arbitral awards in Turkey.
- Bilateral agreements on legal assistance and recognition/enforcement of foreign judgments with certain states.
For court jurisdiction in purely civil and commercial matters, Turkey is not part of the European Brussels/Lugano regime. Therefore, jurisdiction questions are resolved primarily under Turkish international private law and any applicable bilateral conventions.
3. When Is a Contract “Foreign-Related” under Turkish Law?
The rules on choice of law and jurisdiction in the international private law code apply when there is a foreign element in the dispute. Typical foreign elements include:
- One of the parties has its domicile, habitual residence or place of business outside Turkey.
- The place of performance of the contract is outside Turkey.
- The subject matter of the contract is located abroad (e.g. goods stored in a foreign warehouse).
- The contract or dispute is otherwise closely linked with a foreign legal order.
In practice, most contracts between a Turkish company and a foreign company are considered to have a foreign element. Once a foreign element exists, parties may benefit from broader freedom to choose applicable law and jurisdiction than in purely domestic contracts.
4. Party Autonomy: Choosing the Law Applicable to the Contract
4.1. General Principle: Freedom of Choice
Under Turkish international private law, party autonomy is a central principle. In commercial contracts with a foreign element, the parties are generally free to agree that:
- The contract will be governed by Turkish law; or
- The contract will be governed by the law of another state; or
- Different parts of the contract will be governed by different laws (for example, main obligations by English law, security or guarantees by Turkish law).
This freedom is subject to important limits (discussed below), such as overriding mandatory rules and public policy.
4.2. Requirements for a Valid Choice of Law
Turkish law does not prescribe a rigid formal requirement for choice of law clauses, but in practice, for clarity and enforceability:
- The clause should be express and unambiguous, usually placed in a separate article titled “Governing Law” or “Applicable Law”.
- The chosen law should be identified clearly, e.g. “the substantive law of England and Wales”, “the law of the Republic of Turkey”, “the law of the Federal Republic of Germany”.
- It is good practice to state that conflict-of-laws rules of the chosen law are excluded (“excluding its conflict of laws rules”), to avoid renvoi and circular references.
A tacit or implied choice of law may sometimes be recognized, for example where:
- The parties refer exclusively to provisions of a specific national law in their contract; or
- Standard terms clearly reflect a single legal system.
However, relying on implied choice is inherently risky. For predictable outcomes, an explicit choice-of-law clause is strongly recommended.
4.3. Total vs. Partial Choice of Law
Parties may decide that:
- The entire contract is governed by a single law; or
- Specific issues or parts of the contract are governed by different laws.
For example:
- A share purchase agreement may be governed by English law, while the corporate aspects relating to a Turkish company (such as share ledger registrations or corporate approvals) are governed by Turkish law.
- A construction contract may be governed by Turkish law, but the technical standards and warranties might incorporate a foreign law or international standards.
In partial choices, it is important to define:
- Which provisions are governed by which law.
- How conflicts between different laws will be resolved.
Otherwise, Turkish courts may fill in the gaps by applying their conflict-of-laws rules, which could lead to unexpected results.
4.4. Relationship with International Instruments and Trade Usages
Even if the parties choose a national law, other instruments may still apply:
- International sales contracts may be governed by the CISG (UN Convention on Contracts for the International Sale of Goods) if both states are contracting states and the CISG has not been excluded.
- International trade usages such as INCOTERMS® or UCP (for letters of credit) may be incorporated into the contract and interpreted alongside the chosen law.
For foreign-related contracts with Turkish parties, it is therefore good practice to state clearly:
- Whether CISG is excluded or not.
- Which trade usages are incorporated and how they interact with the chosen law.
5. What Happens if the Parties Do Not Choose an Applicable Law?
If the contract is silent on applicable law, Turkish courts will determine the law with the closest connection to the contract under the default conflict-of-laws rules. In broad terms:
- For contracts involving a characteristic performance (such as services, agency, distribution), the law of the country where the party performing the characteristic obligation has its habitual residence or place of business will often be applied.
- In many cases, for example a distribution agreement where the distributor is in Turkey, Turkish law will likely be applied by Turkish courts.
- For contracts concerning immovable property, the law of the place where the property is located usually plays a key role.
The closest-connection test is contextual and fact-sensitive. The outcome is difficult to predict at the drafting stage. This uncertainty is precisely why express choice-of-law clauses are so important in foreign-related commercial contracts.
6. Limits on Party Autonomy: Mandatory Rules and Public Policy
The freedom to choose the applicable law is not unlimited. Turkish law imposes several important constraints.
6.1. Turkish Overriding Mandatory Rules
Certain provisions of Turkish law are considered overriding mandatory rules. They apply irrespective of the chosen law if the situation has a sufficiently close connection with Turkey. Typical examples include:
- Rules on public order, competition, consumer protection, labor law, and certain aspects of agency or distribution.
- Provisions protecting weaker parties (employees, consumers, some forms of commercial agents) where Turkish law insists on minimum standards.
Even if the parties choose a foreign law, a Turkish court may still apply these mandatory provisions directly, or may refuse to give effect to contractual terms that circumvent them.
6.2. Public Policy (Ordre Public)
Turkish courts may refuse to apply a provision of foreign law, or a contractual clause, if the result would be manifestly incompatible with Turkish public policy.
Examples of situations where public policy may be invoked include:
- Clauses that severely restrict fundamental rights of a party, such as extreme penalty clauses or waiver of basic due process rights.
- Provisions that effectively legalize activities that are criminal or strictly prohibited under Turkish law.
Public policy is interpreted restrictively and is not a tool for ordinary correction of foreign law; however, it remains an ultimate safety valve in extreme cases.
6.3. Protected Party Regimes: Consumers and Employees
For consumer contracts and employment contracts, Turkish law significantly restricts party autonomy:
- Consumer and employment contracts are subject to special protective regimes under Turkish legislation.
- Clauses choosing foreign law or foreign jurisdiction that significantly weaken the position of the consumer or employee may be considered invalid or unenforceable before Turkish courts.
- Turkish courts frequently apply Turkish mandatory protective rules even if the contract formally chooses another law.
Therefore, sophisticated choice of law and jurisdiction strategies used in B2B contracts should not be copied into B2C or employment contracts without careful legal analysis.
7. Jurisdiction Clauses: Choosing the Competent Court in International Disputes
7.1. General Jurisdiction Rules
In the absence of a valid jurisdiction clause, the jurisdiction of Turkish courts in international commercial disputes is primarily determined by:
- The general rules of the Civil Procedure Code (for example, domicile of the defendant, place of performance); and
- The special rules of the international private law code for cases with a foreign element.
Normally, the defendant should be sued in the court of its domicile or place of business. Additional venues may exist for contract disputes (for instance, the place of performance).
7.2. Party Autonomy in Choice of Court Agreements
For contracts with a foreign element, the parties can agree that Turkish courts or foreign courts will have jurisdiction over disputes.
To be valid and enforceable under Turkish law:
- The choice of court clause must typically be in writing or in a form that allows recording.
- The clause should specify clearly which court or courts are competent, e.g. “The courts of Istanbul (Central Courts) shall have exclusive jurisdiction” or “The courts of Paris, France, shall have exclusive jurisdiction”.
Turkey distinguishes between:
- Exclusive jurisdiction: only the designated court may hear the dispute.
- Non-exclusive jurisdiction: the designated court is competent, but other courts may also have jurisdiction based on general rules.
Clarity on the exclusive or non-exclusive nature of the clause is critical to avoid parallel proceedings.
7.3. When Turkish Courts Must Retain Jurisdiction
Even if the parties choose a foreign court, Turkish courts may be required to retain jurisdiction in certain categories of disputes, especially where Turkish law grants mandatory jurisdiction to Turkish courts. Typical examples include:
- Disputes directly concerning immovable property located in Turkey, where Turkish courts have exclusive jurisdiction.
- Many consumer and employment disputes, where Turkish law protects the weaker party and invalidates jurisdiction clauses that would force them to litigate abroad.
Accordingly, a foreign court clause in a contract that is essentially consumer or employment-related may be ineffective in Turkey.
7.4. Effect of a Foreign Court Clause in Turkish Proceedings
If a valid exclusive foreign court clause exists and a claim is nevertheless filed in Turkey:
- The defendant may raise a jurisdictional objection, arguing that Turkish courts lack jurisdiction due to the choice of foreign court.
- If the court accepts the objection, it will dismiss the case on jurisdictional grounds.
- If the court finds the clause invalid (for example, because there is no foreign element or the clause conflicts with mandatory Turkish rules), it may retain jurisdiction and proceed with the case.
Whether a clause is valid depends on the existence of a foreign element, the nature of the dispute, mandatory jurisdiction rules and formal requirements.
8. Arbitration Clauses in Contracts with Foreign Parties
8.1. Arbitration as a Preferred Mechanism in Cross-Border Trade
In international commercial practice, many contracts with Turkish parties now include arbitration clauses rather than choice of court clauses. The reasons are familiar:
- Neutral forum detached from any state court system.
- Flexibility in choice of arbitrators, rules, seat and language.
- Greater ease of international enforcement via the New York Convention.
Turkey has developed a relatively arbitration-friendly legal framework. Arbitrations seated in Turkey are governed by domestic arbitration legislation, while foreign-seated arbitrations benefit from the New York Convention.
8.2. Essential Elements of an Enforceable Arbitration Clause
For contracts with a foreign element, an arbitration clause should:
- Clearly express that disputes will be resolved by arbitration, not state courts.
- Define whether arbitration is institutional (ICC, ISTAC, LCIA, etc.) or ad hoc (e.g. UNCITRAL Rules).
- Specify the seat of arbitration (e.g. Istanbul, London, Geneva, Paris).
- Determine the number of arbitrators and language of the proceedings.
While relatively simple clauses can still be effective, vague or incomplete clauses can lead to jurisdictional challenges, delays and additional cost.
8.3. Relationship between Applicable Law and Arbitration
International contracts often contain multiple layers of law:
- The law applicable to the substance of the contract (governing law).
- The law applicable to the arbitration agreement itself.
- The law of the seat of arbitration (lex arbitri).
Under Turkish law and comparative practice:
- Parties are free to choose the law governing their arbitration agreement.
- In the absence of an explicit choice, courts and tribunals may look to the law of the main contract or the law of the seat.
To reduce uncertainty, it is increasingly common to specify:
- “This Contract shall be governed by the substantive law of [X].
The arbitration agreement in this clause shall be governed by the law of [Y].”
8.4. Recognition and Enforcement of Foreign Arbitral Awards in Turkey
Foreign arbitral awards may be enforced in Turkey under:
- The New York Convention, and
- The relevant provisions of the international private law code.
Enforcement may be refused if, among other grounds:
- The arbitration agreement was invalid under the applicable law.
- A party was not given proper notice or was otherwise unable to present its case.
- The award deals with a subject matter not capable of settlement by arbitration under Turkish law.
- Enforcement would be contrary to Turkish public policy.
Therefore, when drafting arbitration clauses for contracts with Turkish parties, it is crucial to ensure both formal validity (clear written agreement) and substantive compatibility with Turkish mandatory rules.
9. Practical Drafting Tips for Choice of Law and Jurisdiction in Contracts with Turkish Parties
9.1. Combine Governing Law and Jurisdiction Clauses Consistently
In practice, problems often arise because the contract:
- Chooses law of one country,
- But submits disputes to the courts of another country,
- While performance and parties are primarily located in Turkey.
Such misalignment may increase complexity and cost. A more coherent approach is to:
- Pair the governing law with a predictable forum, such as courts or arbitration in the same legal culture; or
- At least consciously assess the implications of separating governing law and jurisdiction.
9.2. Consider Enforcement in Turkey from the Outset
For foreign businesses contracting with Turkish companies, a key question is:
“If I obtain a court judgment or arbitral award abroad, can I enforce it effectively in Turkey?”
This requires considering, at the drafting stage:
- Whether Turkey has a treaty relationship on recognition and enforcement of judgments with the state of the chosen court.
- If not, whether the international private law code conditions for enforcement of foreign judgments are realistically satisfied.
- Whether arbitration may offer a more reliable enforcement route via the New York Convention.
Ignoring enforcement considerations at the drafting stage is one of the most serious and frequent mistakes in cross-border contracting.
9.3. Draft Dispute Resolution Clauses as a “Mini-Contract”
Dispute resolution clauses should not be an afterthought “copied and pasted” from old templates. For contracts with Turkish parties, it is useful to treat them as carefully negotiated mini-contracts, addressing:
- Governing law (and whether CISG is included or excluded).
- Choice of court or arbitration, including seat, institution, rules and language.
- Exclusive or non-exclusive nature of jurisdiction.
- Multi-tier mechanisms (negotiation, mediation, arbitration/litigation).
- Service of process, notice provisions and contact details.
A clear and carefully structured clause saves time and cost when a dispute arises, and reduces the room for procedural objections.
9.4. Avoid Copy-Pasting Consumer/Employment Clauses into Commercial Deals
Sometimes foreign parties use templates designed for consumer or employment contexts, including extensive waiver clauses that conflict with Turkish protective rules. In commercial B2B contracts, this may create confusion or raise validity concerns.
In the opposite direction, copying aggressive B2B clauses into employee or consumer contracts can backfire in Turkey, since:
- Courts may treat these clauses as invalid,
- Or still apply Turkish mandatory protective provisions notwithstanding the parties’ agreement.
Each contract type (share purchase, joint venture, distribution, franchise, agency, construction, services) should be analyzed on its own merits.
9.5. Clarify Language and Translation Issues
Where contracts are bilingual (for example Turkish–English), it is advisable to:
- Specify which language version prevails in case of inconsistencies.
- Ensure that the choice of law and jurisdiction clauses are translated accurately, without ambiguities that could be exploited later.
In disputes before Turkish courts, the Turkish text will be closely examined. Poor translations can cause interpretative problems and litigation risk.
10. Common Mistakes in Choice of Law and Jurisdiction Clauses
Some recurring issues seen in practice in contracts involving Turkish parties include:
- No governing law clause at all:
Leaving the applicable law entirely to conflict-of-laws rules leads to unpredictability and disputes over preliminary issues. - Contradictory clauses:
For example, one clause choosing Turkish law and another clause choosing English law for the same set of obligations, without clarification of hierarchy or scope. - Invisible foreign element:
Using a foreign governing law and foreign jurisdiction clause in a contract that is in substance purely domestic and lacking a genuine foreign element. Turkish courts may consider such clauses invalid. - Ignoring mandatory rules:
Assuming that a foreign law choice will automatically exclude Turkish mandatory provisions on competition, agency, labor or consumer protection. - Underestimating enforcement stage:
Selecting a foreign court that will produce a judgment difficult or impossible to enforce in Turkey, due to treaty gaps or strict conditions for recognition. - Vague or pathological arbitration clauses:
Referring to non-existent arbitration institutions, omitting the seat, or using ambiguous wording that triggers challenges to the tribunal’s jurisdiction.
Careful drafting and legal review from both Turkish and foreign counsel can prevent most of these problems.
11. Illustrative Scenarios
To demonstrate how Turkish law interacts with choice-of-law and jurisdiction clauses, consider a few simplified scenarios:
Scenario 1: Turkish Distributor – German Manufacturer
A German manufacturer appoints a Turkish company as exclusive distributor in Turkey. The contract states:
- Governing law: German law.
- Dispute resolution: state courts in Munich.
If a dispute arises and the Turkish distributor sues in Turkey, the German manufacturer raises a jurisdictional objection based on the Munich courts clause.
Key points under Turkish law:
- The contract clearly has a foreign element (German and Turkish parties).
- The foreign court clause is, in principle, valid for a commercial distribution agreement.
- Turkish courts will assess whether any mandatory jurisdiction prevents them from declining jurisdiction (typically not in a B2B distribution case).
- If the clause is upheld, the Turkish court may decline jurisdiction, expecting the dispute to be heard in Munich.
- At the enforcement stage, the German judgment must satisfy the conditions of the international private law code to be recognized and enforced in Turkey.
Scenario 2: Turkish Employer – Foreign Employee in Turkey
A foreign executive works for a Turkish company in Istanbul. The employment contract provides:
- Governing law: Law of a foreign state.
- Jurisdiction: Courts of that foreign state.
If a dispute arises and the employee sues in Turkey, Turkish courts may:
- Treat the employee as a protected party under Turkish labor law.
- Apply Turkish mandatory labor provisions irrespective of the foreign law choice.
- Consider the foreign jurisdiction clause invalid or ineffective to the extent that it deprives the employee of access to Turkish courts.
This illustrates the importance of distinguishing clearly between commercial B2B contracts and protected party relationships.
Scenario 3: Turkish Company – Foreign Company – ICC Arbitration in Istanbul
A Turkish construction company and a foreign employer sign a contract for a project in Turkey. The contract states:
- Governing law: Turkish law.
- Dispute resolution: ICC arbitration seated in Istanbul, language English.
This setup is often attractive because:
- The governing law matches the location of the project.
- Disputes are resolved by arbitration, offering neutrality and specialized arbitrators.
- Awards are enforceable under the New York Convention in many countries.
- The seat in Istanbul allows for local familiarity, while using an international institution and English as the language of proceedings.
For many complex commercial projects in Turkey, this combination is considered a practical and balanced solution.
12. Checklist for Drafting International Commercial Contracts with Turkish Parties
When negotiating and drafting cross-border contracts involving Turkish parties, it is useful to run through the following checklist:
- Foreign element
- Does the contract clearly have a foreign element (foreign party, performance abroad, foreign subject matter)?
- Governing law
- Is there an explicit choice of law clause?
- Does the choice reflect the commercial and legal interests of both sides?
- Is it clear whether CISG and other instruments are included or excluded?
- Jurisdiction or arbitration
- Have the parties chosen state courts or arbitration?
- Is the choice exclusive or non-exclusive?
- Is the clause clear, workable and free from contradictions?
- Mandatory rules and public policy
- Could Turkish mandatory rules on competition, agency, consumer protection or labor apply despite the chosen law?
- Is there any risk that the result would be contrary to Turkish public policy?
- Protected party regimes
- Is the contract genuinely commercial (B2B), or does it involve consumers or employees?
- If a protected party is involved, are foreign law and jurisdiction clauses drafted in line with Turkish protective rules?
- Enforcement strategy
- If a foreign judgment is envisaged, can it realistically be recognized and enforced in Turkey?
- Would an arbitral award offer a smoother enforcement route?
- Language and translations
- Is there a clear prevailing language?
- Are choice-of-law and jurisdiction clauses accurately reflected in all language versions?
Carefully working through these questions at the negotiation stage significantly reduces legal risk for both Turkish and foreign parties.
13. Conclusion
Choice of law and jurisdiction clauses in international commercial contracts with Turkish parties are far more than standard boilerplate. Under Turkish law, parties have broad autonomy to structure their contractual relationships, but this autonomy operates within a framework shaped by:
- The international private law code,
- Mandatory Turkish rules,
- Public policy and protective regimes for weaker parties, and
- The realities of recognition and enforcement in Turkey.
Foreign investors and Turkish businesses who treat these clauses as strategic tools—rather than footnotes—can:
- Avoid costly jurisdictional battles,
- Reduce uncertainty and forum shopping,
- Design a dispute resolution mechanism aligned with their commercial needs, and
- Maximize the enforceability of judgments and arbitral awards within Turkey.
Well-drafted governing law and jurisdiction clauses, tailored to the specific contract type and parties involved, are therefore a central component of effective risk management in cross-border trade with Turkey.
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