WHICH LANGUAGE TO CHOOSE WHEN DRAFTING CONTRACT IN TURKEY

Which Language to Choose?

Options:

Single version in English: Most common solution in international contracts
Bilingual version (French/Turkish or English/Turkish): Each party in their language
Single version in Turkish: If required by law or Turkish party

Our Recommendation: Version in English with clause specifying that in case of dispute, the English version prevails.

Example clause: "This Agreement is drafted in English. In the event of any discrepancy between the English version and any translation, the English version shall prevail."

Beware of Turkish Translations: If a Turkish version is required (Turkish courts, registration), have it translated by a certified sworn translator to avoid interpretation errors.

Common Translation Errors:

Legal terms without exact equivalent
French/English law concepts not existing in Turkish law
Ambiguities created by translation

Structure of an International Contract

Recommended Standard Format

Preamble

Presentation of parties
Context and contract objective
Definitions

Contract Body

Contract subject
Obligations of each party
Price and payment terms
Delivery / Performance
Contract duration
Warranties
Liability and limitations
Intellectual property
Confidentiality
Force majeure and hardship
Termination
Applicable law and dispute resolution
General provisions

Annexes

Technical specifications
Price schedules
Document templates
Contact lists

Definitions: Crucial Section

Precisely define key terms to avoid any ambiguity:

Example:

"Products": means the [precise description]
"Territory": means the Republic of Turkey, excluding [any excluded zones]
"Price": means the price indicated in Annex 1, expressed in [currency], [excluding/including VAT], [Incoterm]
"Delivery": means the transfer of possession in accordance with [precise conditions]
"Intellectual Property Rights": means all patents, trademarks, copyrights, know-how, and other intellectual property rights

Choice of Applicable Law and Competent Jurisdiction

Applicable Law to the Contract

Principle of Party Autonomy

Parties are free to choose the law applicable to their contract (principle recognized by Turkish law and most legal systems).

Common Choices:

Turkish Law: Natural if the contract is mainly executed in Turkey
French Law: If the French party insists
English Law: Very common in international contracts (neutral, predictable)
Swiss Law: Compromise between civil law systems
Vienna Convention (CISG): For international sales

Recommended Choice of Law Clause:

"This Agreement shall be governed by and construed in accordance with the laws of [Country], excluding its conflict of laws provisions and the United Nations Convention on Contracts for the International Sale of Goods (CISG)."

⚠️ Important: Even if you choose foreign law, certain Turkish mandatory rules may still apply (labor law, consumer protection, competition law).

In Absence of Choice: Applicable Default Rules

If parties have not chosen applicable law:

Turkish courts will apply Turkish private international law rules
Generally: law of the country where the characteristic performance is located
For sale: seller's country
For services: service provider's country

Our Recommendation: Always explicitly choose applicable law to avoid uncertainty.

Choice of Jurisdiction: Courts or Arbitration?

Option 1: Turkish Courts

Jurisdiction Clause Example:

"The courts of Istanbul, Turkey, shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement."

Advantages:

Lower cost than arbitration
Enforcement in Turkey easier
Public proceedings (transparency)

Disadvantages:

Proceedings in Turkish (translation costs)
Longer delays (2-5 years)
Less predictable than arbitration
Difficulty enforcing abroad

When to Choose Turkish Courts:

Low-value contracts (< €50,000)
Disputes requiring interim measures in Turkey
Both parties comfortable with Turkish system

Option 2: International Arbitration

Arbitration Clause Example:

"Any dispute arising out of or in connection with this Agreement shall be finally settled by arbitration in accordance with the Rules of the International Chamber of Commerce (ICC). The place of arbitration shall be Istanbul, Turkey. The language of the arbitration shall be English. The arbitral tribunal shall consist of [one/three] arbitrator(s)."

Advantages:

Neutrality: Neither party's home court
Confidentiality: Private proceedings
Expertise: Choice of specialized arbitrators
Enforceability: New York Convention (160+ countries)
Speed: Faster than courts (12-24 months)
Finality: Limited appeal possibilities

Disadvantages:

Cost: €50,000-€500,000+ depending on stakes
No interim measures (must go to courts)
Complexity: Sophisticated process

When to Choose Arbitration:

High-value contracts (> €100,000)
International parties from different countries
Need for confidentiality
Complex technical/commercial disputes
Desire to avoid local courts

Main Arbitration Institutions

ICC (International Chamber of Commerce)

Seat: Paris
Most prestigious
Highest costs
Duration : long

ECAM (European Court of Arbitration and Mediation)

Seat: Strasbourg
Excellent reputation
Neutral location
Moderate costs
Duration : short, optimized

3. SCAI (Swiss Chambers' Arbitration Institution)

Seat: Switzerland
Excellent reputation
Neutral location
Moderate to high costs
Duration : Medium

Essential Clauses in International Contracts in Turkey

Price and Payment Terms

Currency and Exchange Rate Risk

Challenge: Turkish Lira volatility (significant depreciation in recent years)

Solutions:

Option 1: Hard Currency (EUR, USD, GBP)

Protects foreign party from devaluation
Turkish party bears exchange rate risk
May require Central Bank approval for certain transactions

Option 2: Turkish Lira with Adjustment Clause "The price is set at [X] TRY. If the EUR/TRY exchange rate varies by more than 10% compared to the reference rate of [date], either party may request a price adjustment."

Option 3: Dual Currency "The price is [X] EUR, payable in TRY at the exchange rate published by the Turkish Central Bank on the payment date."

Our Recommendation: For significant long-term contracts, use EUR or USD to avoid exchange rate disputes.

Payment Terms

Common Terms:

Advance Payment: 10-30% upon order
Progress Payments: Based on milestones
Payment on Delivery: COD or against documents
Payment Terms: Net 30/60/90 days

Late Payment Interest: Always specify rate (e.g., "3-month EURIBOR + 5%") and cap it to avoid exorbitant Turkish commercial rates (30-40%).

"In case of late payment, interest shall accrue at the rate of [X]% per annum, not to exceed 15% per annum, from the due date until full payment."

Payment Security

For Turkish Buyer:

Letter of Credit (LC) - irrevocable confirmed
Bank guarantee
Documentary collection
Advance payment

For Foreign Seller:

Payment against documents
Letter of credit
Credit insurance (Coface, Euler Hermes)
Title retention clause

Force Majeure Clause

Purpose: Suspend or terminate obligations when unforeseeable events make performance impossible.

Turkish Law Position: Turkish Code of Obligations recognizes force majeure (Article 136: impossibility of performance releases debtor).

Essential Elements of FM Clause:

Definition of Force Majeure: "Force Majeure means any unforeseeable event beyond the reasonable control of a Party, including but not limited to: acts of God, war, terrorism, riots, strikes, epidemics, pandemics, government actions, embargoes, natural disasters, earthquakes, fires, floods."
Exclusions:

Economic hardship
Lack of funds
Supplier failure (unless FM)
Labor disputes (if controllable)

Consequences: *"Upon occurrence of Force Majeure:

Affected Party's obligations are suspended
Notice must be given within [X] days
Parties shall negotiate in good faith
If FM lasts more than [90] days, either party may terminate"*

Mitigation Obligation: "The affected Party shall use reasonable efforts to mitigate the effects of Force Majeure."

COVID-19 Lesson: After the pandemic, many contracts now explicitly include "epidemic" and "government-ordered lockdowns" in FM definitions.

Hardship Clause (Imprévision / Aşırı Ifa Güçlüğü)

Different from Force Majeure: Performance remains possible but becomes excessively onerous due to unforeseen circumstances.

Turkish Law: Article 138 TBK recognizes hardship - judge may adapt or terminate contract if:

Extraordinary circumstances arose
Unforeseeable at contract time
Not attributable to either party
Performance becomes excessively difficult

Recommended Hardship Clause:

*"If, after conclusion of this Agreement, unforeseeable extraordinary circumstances occur that fundamentally alter the economic balance of the contract (including but not limited to: exchange rate variations exceeding 30%, significant inflation, import/export restrictions, sanctions), making performance excessively onerous for one Party, that Party may request renegotiation.

The Parties shall negotiate in good faith within 30 days. If no agreement is reached, the matter may be submitted to [arbitration/courts] for contract adaptation or termination."*

Practical Application:

Turkish Lira devaluation > 30%
Dramatic commodity price increases
New taxes or customs duties
Import/export restrictions

Limitation of Liability

Purpose: Cap financial exposure in case of breach or damages.

Key Elements:

Cap on Damages: "In no event shall either Party's aggregate liability exceed [X]% of the total contract price, or [€X], whichever is lower."

Typical Caps:

Services contracts: 100-200% of annual fees

Sales contracts: 50-100% of contract price

Technology licenses: 12-24 months of royalties

Exclusions from Cap: Certain liabilities cannot be capped. Ex. Fraud or willful misconduct, personal injury or death, Intellectual property infringement…