Obligation to Use Turkish Language in Contracts Signed by Turkish and/or Foreign Persons
One of the basic principles under Turkish Law of Obligation is “Freedom of Contract”. Freedom of contract includes (i) freedom of concluding a contract or not, (ii) freedom to choose other party of the contract, (iii) freedom to regulate type and content of the contract, (iv) freedom to amend and terminate the contract and lastly (v) freedom of form of the contract.
As per the Article 12 of the Turkish Code of Obligations (“TCO”) freedom of form of the contract is defined as “The validity of the contracts is not dependent any form, unless otherwise stipulated by law and the parties are free to conclude the contract in any form.” Freedom of form of the contract also covers to choose the language of the contract; however, mandatory nature of the provisions enacted in accordance with the Law on the Compulsory Use of Turkish Language in Economic Enterprises No. 805 (“Law No. 805”) limit the freedom of form in relation to the language of the contracts.
Purpose and Scope of the Law No. 805
The Law No. 805 was enacted upon the refusal of using Turkish language by both foreigners and people of subjecthood of Turkish nationality living in the country in the first years of the Republic, although the use of the national language in official business and transactions is mandatory as stated in the preamble of the law draft.[1]
In fact, after the regulations carried out in the Turkish Commercial Code[2] and Tax Law[3], even if the need for such law has decreased, it is still in force and has been criticized for failing to adapt to commercial life.[4]
While, the Article 1 of the Law No. 805 obliges all Turkish companies and institutions to keep all transactions, contracts, communications, accounts and records in Turkish within Turkey, the Article 2 of the Law No. 805 orders foreign companies to use Turkish in their communications, transactions and contacts with Turkish companies and the State.
The concept of enterprise, outside of trading companies, covers public and private legal entities operating a business as well as real persons who operate economic enterprises.[5] Branches of foreign companies and enterprises in Turkey are also covered by Article 2. Moreover, it is stated in the doctrine that other private legal entities (e.g. association, foundation) outside the company are included in the scope of the concept of enterprise.[6]
Consequences of Breach of Law No. 805
The criminal sanction for breach of Law No. 805 is indicated in Article 7. Accordingly, persons who breach the Law No. 805 are punished with a judicial fine which cannot be less than 100 days.
At the same time, legal consequences of breach of Law No. 805 are determined in Article 4. However, Article 4 of the Law No. 805 is unclear and it causes some discussions in the doctrine. According to an opinion, contracts which are not concluded in Turkish language although it is scope of the Law No. 805, are null, on the other hand, according to another opinion, if interpretation of agreement is needed when a dispute arises, it is necessary to interpret against the party using the foreign language.[7] Pursuant to another view, the articles written in a foreign language should be considered as unwritten.[8]
Although all these views are criticized, the majority opinion in the doctrine is that the legal result of the breach of Law No. 805 is regarding in terms of proof. Accordingly, the party who is obliged to use Turkish language in its contracts and uses a foreign language instead cannot assert the contract/ documents prepared in a foreign language and will need other means of proof when it seeks proof to assert a right.[9]
In line with this circumstance, it is stated in the judgement of the 11th Civil Chamber of the High Court of Appeal numbered 2009/2051 E. 2009/5292 K. that “The defendant bank, which is a Turkish national company, rely on the “forward/spot purchase transactions contract” signed between the plaintiff in English, is contrary to the obligation to use the contracts, books, documents and papers stipulated in the Law as Turkish and pursuant to Article 4 of the Law, the defendant cannot rely on the documents and contracts.”
Similarly, in the judgement of the 11th Civil Chamber of the High Court of Appeal numbered 2012/3122 E. 2012/4073 K., it is explained as follows: “… considering that both sides of the case are companies that are the nationality of the Republic of Turkey and the place of performance of the contracts between them is Turkey, while the language of the contract must be in Turkish as per the Article 1 of the Law No. 805, the judgement of the first-instance court that accepted the objection of the defendant, who made an arbitration objection based on the contract drawn up in English, was reversed.”
It can be said that the Article 4 of the Law No. 805 is controversial both in the judgements and in the doctrine, especially in terms of contracts with a foreign element and an arbitration clause. However, it is thought that this situation is largely due to the fact that an arbitration clause in the contract creates a situation in favor of the claiming party. For instance;
In the judgement of the 12th Civil Chamber of the Regional Court of Justice, numbered 2020/19 E. 2020/184 K., it has been concluded that “There is no obstacle for foreign companies and enterprises to rely on the arbitration objection in the contract drawn up only in English with the Turkish company.”
Conclusion
Although the Law No. 805 is old-dated, it is still open to different interpretations in doctrine and judiciary. In order to avoid possible invalidity and loss of rights after signing a contract, the parties should consider the Law No. 805 in every contractual relationship and choose the contract language accordingly.
Bahtiyar, Mehmet. “The Scope of the Law No. 805 on the Compulsory Use of Turkish in Economic Enterprices and the Problem of Sanctions”, Prof. Dr. Gift to Hüseyin Ülgen Vol:2, İstanbul: Vedat Kitapçılık, 2007.
Dinç, İlhan. “Evaluation of Current Judicial Decisions on the Law on the Compulsory Use of Turkish Language in Economic Enterprices”, TAAD, Year:11, No:44, October 2020.
Esen, Emre.“The Effect of the Law on the Compulsory Use of Turkish Language in Economic Enterprises on International Arbitration Agreements”, Istanbul University Press.
[1] İlhan Dinç, “Evaluation of Current Judicial Decisions on the Law on the Compulsory Use of Turkish Language in Economic Enterprises”, TAAD, Year:11, No:44, October 2020, p.130.
[2] Turkish Commercial Code No. 6102, Art. 64 titled Record Keeping Obligation.
[3] Tax Procedure Law No. 213, Art. 215 titled Obligation to Keep Turkish and Use Turkish Currency.
[4] Emre Esen, “The Effect of the Law on the Compulsory Use of Turkish Language in Economic Enterprises on International Arbitration Agreements”, Istanbul University Press, p.207.
[5] Dinç, p.132.
[6] Mehmet Bahtiyar, “The Scope of the Law No. 805 on the Compulsory Use of Turkish Language in Economic Enterprices and the Problem of Sanctions”, Prof. Dr. Gift to Hüseyin Ülgen Vol:2, İstanbul: Vedat Kitapçılık, 2007, p.1735.
[7] Dinç, p.139.
[8] Dinç, p.141.
[9] Dinç, p.147.
