MANDATORY USE OF TURKISH LANGUAGE IN AGREEMENTS AND OTHER DOCUMENTS AND THE STATUS OF ARBITRATION AGREEMENTS UNDER THE LAW NUMBERED 805
Law numbered 805 on the Compulsory Use of Turkish Language in Commercial Businesses (in Turkish, “İktisadi Müesseselerde Mecburi Türkçe Kullanılması Hakkında Kanun”, the “Law”) was published in the Official Gazette numbered 353 on 22 April 1926 and entered into force as of the same date.
The Scope of the Law
Pursuant to the Law, all Turkish companies and establishments are obliged to keep all kinds of transactions (in Turkish, “muamale”), contracts (in Turkish, “mukavele/sözleşme”), correspondences (in Turkish, “muhabere/yazışma”), records and books (in Turkish, “hesap ve defterler”) in Turkish language.
As for foreign companies and establishments, the compulsory use of Turkish language is limited to:
- the correspondences (in Turkish, “muhabere/yazışma”), the transactions (in Turkish, “muamale”) and the contacts (in Turkish, “temaslar”) to be made with Turkish companies and Turkish citizens and
- the documents (in Turkish, “evrak”) and books (in Turkish, “defterler”) to be presented to the Turkish governmental authorities.
Foreign companies and establishments may use a language other than Turkish language in their transactions, provided that the text in foreign language is added next to the original text in Turkish language. Even if the signature is affixed under the part or copy written in foreign language, the text in Turkish language shall be valid.
Kindly note that the documents which are not issued in Turkish language in violation of the aforementioned provisions of the Law, shall not be used in favor the relevant company and any person committing such breach shall be fined with an administrative penalty.
For instance, according to the judicial precedent of the High Court of Appeal;
- Pursuant to the Decision of the Istanbul Regional Court of Justice dated 2021[1], it was ruled that there is no obligation to use Turkish language in case one of the parties of the agreement is a foreign.
- As per the Decision dated 2009[2], agreements that are drawn up by a bank within Turkey to be sent to the foreign branch for signature shall be issued in Turkish language.
- Pursuant to the Decision dated 2003[3], considering the agreement stipulates that the payment shall be made in foreign currency, the books and records are required to be issued in Turkish language and any request for payment in Turkish Liras shall not be held valid. In other words, the court takes the view that the parties must use Turkish language in their invoice records however the payment may still be made in foreign currency in accordance with the provisions of the agreement.
Kindly note that the documents which are not issued in Turkish language in violation of the aforementioned provisions of the Law, shall not be used in favor of such parties committing such breach shall be fined with an administrative penalty.
Evaluation of the Law in Terms of Arbitration Agreements Comprising Foreign Element
As all agreements between foreign companies and Turkish public institutions are required to be drawn up in Turkish language and the agreements drawn up without complying with this obligation will be deemed invalid as stipulated by the Law, significant arguments have recently arisen in terms of determining the language and validity of arbitration agreements.
In respect thereof, pursuant to the significant decision of the 15th Civil Chamber of the High Court of Appeal numbered E. 2020/1714, K. 2020/2652 and dated 2 October 2020, the arbitration agreements concluded in a foreign language between two Turkish parties shall not constitute a violation of the Law due to the presence of a foreign element in the dispute subject to arbitration.
Pursuant to Article 2 of the International Arbitration Law numbered 4686 which was published in the Official Gazette numbered 24453 on 5 July 2001, the existence of any of the following circumstances demonstrates that the dispute has a foreign element and, under such circumstances, arbitration shall be considered as international if:
- the domiciles or habitual residences or workplaces of the parties of the arbitration agreement are located in different States,
- the domiciles or habitual residences or workplaces of the parties are located in a State other than:
- the place of arbitration, which is determined in, or pursuant to, the arbitration agreement or,
- the place where a substantial part of the obligations arising from the underlying agreement is performed or the place where the dispute has the closest connection with
- a shareholder of the company which is a party to the main agreement that constitutes the basis for the arbitration agreement (“underlying agreement”), has brought foreign capital or if a loan and/or guarantee agreement must be signed for the execution of the underlying agreement,
- In case of transfer of capital or goods from one country to another pursuant to the underlying agreement or legal relationship.
In this respect, the High Court of Appeal has ruled that the conclusion of the contract signed between the two Turkish parties and containing the foreign element as per the Article 2 of the International Arbitration Law numbered 4686 in a foreign language shall not constitute a breach of the compulsory use of Turkish language in commercial enterprises within the scope of the Law.
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