Commercial agreements between foreign and Turkish entities often
provide for jurisdiction clauses setting the choice of venue as the
foreign state's court or, increasingly, international arbitral
The reasons for why foreign entities opt for their own
country's courts (or international arbitral tribunals) for
resolution of contractual disputes vary. Foreign entities appear to
feel safer in the knowledge that should any disputes arise, the
case will be handled by a "familiar" court or an
"unbiased" international arbitral tribunal. Though having
its own advantages, appointment of a foreign court could also pose
some problems if the dispute involves payment of a receivable
(arising from the commercial agreement between the parties) by the
Assuming that the foreign entity files payment-related claims in
the foreign court (as required by the jurisdiction clause in the
parties' agreement) and the foreign court decides in favor of
the foreign entity; in order for the foreign entity to collect its
receivable through a collection proceeding pursued against the
Turkish entity in Turkey (based on this foreign court decision),
the court decision must first be enforced according to Turkish law.
There are a number of requirements for enforcement of foreign court
decisions under Turkish law; the trickiest of which is, arguably,
Turkish law states that reciprocity may be based on (i) a
bilateral or international agreement to which both states are
party; (ii) de facto court practice between two countries,
or (iii) a provision of law in the foreign country's
legislation allowing enforcement of Turkish court decisions in that
country. Indeed, the Turkish Court of Appeals overruled a local
court decision which stated that a court decision held in Alabama
could not be enforced in Turkey as there were neither any
reciprocity agreements between Turkey and the State of Alabama, nor
any de facto practice indicating reciprocity. Turkish
Court of Appeals held that the local court should have also
explored whether there were any provisions under Alabama law
preventing or allowing Turkish court decisions to be enforced in
Alabama. Taking into consideration that the outcome of such an
exploration may not always support the venue agreed by the parties;
jurisdiction agreements involving Turkish entities must be drafted
with a view to the enforcement requirements under Turkish law.
In order to overcome this issue at the agreement negotiation
phase, the jurisdiction clause may be designed in a way that
specifically allows filing of payment claims against the Turkish
entity directly in Turkey, whilst requiring all other disputes to
be resolved in the foreign state's court. However, there is
considerable debate among Turkish scholars and Court of Appeals
precedents on whether a jurisdiction agreement providing for
multiple venues are valid.
A different and questionably less risky solution to by-pass the
jurisdiction clause (after the agreement is executed and a
payment-related dispute arises) could be to initiate a bankruptcy
proceeding against the debtor. Turkish law provides for an
exclusive jurisdiction rule regarding bankruptcy proceedings,
stating that they may only be filed in the commercial court where
the debtor's business center is located – thereby
invalidating any jurisdiction agreements made in this regard. An
issue to watch out for in bankruptcy proceedings is that they do
not eliminate the application of parties' chosen foreign law
(as is often the case when parties choose a foreign venue for
dispute settlement) to the substantive issues within the bankruptcy
lawsuit. This may further lengthen the already complicated
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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