Introduction

Law Numbered 805 on Mandatory Use of Turkish Language by Economic Enterprises ("Law No. 805") has been entered into force in 1926 and is one of the first legal regulations of the Republic of Turkey. Law No. 805 is intended to encourage the use of the Turkish language, especially by commercial companies in Turkey. Although Law No. 805 is still in force today, it should be noted that Law No. 805 is a highly criticized and controversial regulation due to the increase in international transactions in today's conditions.

First of all, it should be noted that, the basic rule is freedom of form principle under the Turkish Code of Obligations. Pursuant to Article 12 of the Turkish Code of Obligations, it is clearly regulated that the validity of agreement is not subject to any form, unless otherwise stipulated by law. Based on this Article, the exceptions to the freedom of form principle are the formal rules which are separately regulated in the laws. One of the exceptions regulated by law is the provisions of Law No. 805.

Regulations of Law No. 805

Pursuant to the Law No. 805, it is separately regulated the obligations of the use of Turkish language by companies and institutions of Turkish nationality and foreign companies and institutions, these regulations are summarized below:

i Mandatory Use of Turkish Language by Companies and Institutions of Turkish Nationality: The first Article of the Law No. 805 is regulated companies and institutions of Turkish nationality. Accordingly, companies and institutions of Turkish nationality should be use of the Turkish Language in their all transaction, agreement, communications, accounts, and books.

It should be stated that, the companies mentioned in the Article are joint stock, limited liability, limited partnership and cooperative companies in accordance with the Turkish Commercial Code. Additionally, despite of there is no definition for the Turkish national companies in the Turkish Commercial Code, in order to be considered these companies as Turkish national company, the headquarter of the company should be in Turkey and the company should be registered at one of the Trade Registry Office and announced in Turkey. Therefore, there is no exception for the mandatory use of the Turkish Language for the companies with the foreign capital.

Also, it should be noted that, this regulation is only applied for the transactions in Turkey. Therefore, in the event that subject of the transaction/agreement is not geographically located in Turkey, the Turkish national companies may be use foreign languages despite of their obligations.

ii Mandatory Use of Turkish Language by Foreign Companies and Institutions: The second Article of the Law No. 805 is regulated foreign companies and institutions. Accordingly, foreign companies and institutions should be use of the Turkish Language in their all transaction, communications and the books and documents to be submitted to the Turkish authorities. As can be noticed, the agreements are not included in Article 2 distinctly to Article 1 of Law No. 805, for this reason there is a debate in the doctrine on the language of the agreements.

Under the above information, Turkish language should be use on the agreements stated at below:

  • Agreements to be executed by and between two or more companies and/or institutions of Turkish nationality within Turkey and
  • Agreements to be executed by and between two or more foreign companies and/or institutions within Turkey.

However, the mandatory use of the Turkish language on the agreements to be executed between the companies and/or institutions of Turkish nationality and foreign companies and/or institutions within Turkey is controversial. Accordingly, since there is no regulation regarding with the agreements in the Article 2; there is opinions arguing that there is no obligation to use Turkish language on agreements; as well as opinions arguing that the transactions also cover agreements and Turkish language should be used on the agreements.

In this scope, there are differences in the decisions of the Court of Cassations as in doctrine opinions. Although some decisions have ruled that it is possible to conclude the agreement in a foreign language since agreements are not included as one of the prohibited legal transactions in the Law No. 8051, another decision has ruled that the arbitration clause in English was not valid since the agreement is drafted in English2.

It should be noted that, since the provisions of Law No. 805 are incompatible with today's economic and international conditions, there has been a tendency in judicial decisions in recent years to recognize agreements as valid. The following decision of the Regional Administration Court is caused to important development for the arbitration agreements. In scope of this decision, the arbitration agreement which written in foreign language and signed by one foreign party is assumed valid:

"...Pursuant to Article 1 of Law No. 805, "All types of companies and enterprises of Turkish origin shall make all transactions, agreements, notifications, and keep records and ledgers within Turkey, in Turkish." Pursuant to Article 2 of the said Law, for foreign companies and enterprises, this requirement is for notifications, transactions, and correspondence with Turkish companies, and documents and ledgers that are to be presented before state agencies. In the case at hand, as Article 1 of Law No. 805 is not applicable, the Claimant's grounds for appeal that have not been brought before the court of first instance shall be rejected..."3

In addition to the above decision of the Regional Administration Court, the Court of Cassation did not evaluate the arbitration agreement in foreign language which was signed by the two companies of Turkish nationality due to involving a foreign element as violation of the Law No. 805:

"...As a result of the review made within the scope of the annulment grounds set forth under Article 15 of the International Arbitration Law, it has been understood that there are no grounds for the annulment of the arbitral award in terms of the prerequisites and applicable law, and in particular, there is no violation of the Law No. 805 as the dispute subject to arbitration proceedings involves a foreign element as per Article 2 of the International Arbitration Law..."4

Penalties for Violation of Law No. 805

Article 4 and Article 7 of the Law No. 805 regulate the penalties to be imposed for the use of a foreign language in cases where the use of Turkish is mandatory, contrary to Law No. 805. Pursuant to the Article 4 of Law No. 805, it is regulated that documents and certificates issued in contradiction with the provisions of the first and second Articles of Law No. 805 shall not be taken into consideration in favor of companies and institutions. It is crucial to state that there are different opinions on its interpretation in practice and doctrine.

One of the opinions within the scope of the Article is that the legislator intended nullity, in other words, the breach of the Law No. 805 shall cause the invalidity of the transaction/agreement. However, in the event that this opinion is defended, in cases where the parties knowingly signed the agreement, Article 2 of the Turkish Civil Code should be evaluated for the specific case. Another dominant opinion is that the contradiction to Law No. 805 is the interpretation of the provision written in a foreign language against the party that violates this prohibition. In this context, it is stated that the obligation to use Turkish language is important in matters of proof and interpretation instead of the validity requirement. In addition to these opinions, there are also opinions that provisions written in a foreign language are deemed to be unwritten and that Article 4 is only a provision of proof. The decisions of the Court of Cassation regarding these views are set out below:

"...Article 1 of the Law No. 805 stipulates that all agreements, accounts and books of companies and enterprises subject to the Republic of Turkey must be drawn up in Turkish. The agreements drawn up without complying with this obligation are invalid according to Article 4 of the same Law. In the concrete case, the agency agreement between the parties, which includes an arbitration clause, is invalid according to the aforementioned law, as it is drawn up in a foreign language. Since the court of first instance should have rejected the defendant's first objection to arbitration, it was not deemed correct to make a decision of lack of jurisdiction with the written justification, and the decision should be reversed for this reason..."5

"...In this case, even if it is considered to be an abuse of right in accordance with Article 2 of the TCC by the court due to the fact that the party companies are of Turkish nationality, the main agreement and the arbitration clause are related to a business within Turkey and signed within Turkey, although it is obligatory to be made and written in Turkish according to Article 1 of the Law No. 805, which is still in force, the fact that it is drawn up and written in English in contradiction with this article, and that the assertion of its invalidity due to the fact that the main agreement has resulted in performance is an abuse of right in accordance with Article 2 of the Turkish Civil Code, since the main agreement and the arbitration clause-agreement are independent - separate agreements and the assertion of the arbitration clause came to the agenda after the filing of this lawsuit, it cannot be mentioned that the arbitration clause resulted in performance and since the plaintiff subcontractor is not the contracting party who ensured that the agreement containing the arbitration clause was made in a foreign language, it would not be an abuse of right to assert the invalidity of the arbitration clause, and according to Article 4 of Law No. 805, since the arbitration clause made in English in a language other than Turkish cannot be taken into account in favor of the defendant contractor who asserts this, the first objection to arbitration should be rejected and a decision should be made in accordance with the result after the merits of the matter are examined, but it was not correct to accept the first objection to arbitration with the wrong evaluation and to dismiss the case procedurally, and it was deemed appropriate to revoke the decision..."[6]

Finally, Article 7of Law No. 805, another violation provision, stipulates that anyone who violates the provisions of Law No. 805 shall be punished with a judicial fine of not less than one hundred days.

Footnotes

1. Decision of Court of Cassation-11. HD., E. 2007/5129 K. 2007/9050 T. 14.6.2007

2. Decision of Court of Cassation-11. HD., E. 2016/5836 K. 2017/4720 T. 26.9.2017

3. Decision of Regional Administration Court-Istanbul BAM, 12. HD., E. 2020/19 K. 2020/184 T. 13.2.2020

4. Decision of Court of Cassation-15. HD., E. 2020/1714 K. 2020/2652 T. 2.10.2020

5. Decision of Court of Cassation-11. HD., E. 2017/5003 K. 2019/842 T. 5.2.2019

6. Decision of Court of Cassation-15. HD., E. 2019/3156 K. 2020/2913 T. 5.11.2020

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