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 tribunals.
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 Turkish entity.
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, "reciprocity".
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 bankruptcy procedure.
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