Language Requirement for Arbitration Agreements in Türkiye: Moving Towards More Certainty

The Turkish Court of Cassation previously held that any arbitration agreement concluded in a language other than Turkish was invalid, as it violated “Law number 805 on the Compulsory Use of Turkish Language in Commercial Enterprises” (“Law No. 805”). This has been previously discussed on the blog (here and here).

In recent years, Turkish courts rendered several decisions on the issue, showing that the question is more nuanced: For agreements with a foreign party or foreign element, the Court of Cassation started to consistently uphold arbitration agreements drafted in a foreign language; whereas for agreements between Turkish parties and no foreign element, the consequence of invalidity of arbitration agreements seems to persist. This article, after addressing Law No. 805 (A.), explains the recent decisions of the Court of Cassation (B.) and comments on the outcome of these (C.).

A. Law No. 805

Law No. 805 was adopted in 1926 (three years after Türkiye became a Republic). It aimed to promote the use of the Turkish language in commercial activities during the first years of the Republic.

Article 1 of Law No. 805 makes the use of the Turkish language mandatory for Turkish enterprises for all kinds of transactions, contracts, communication and bookkeeping within Türkiye.

Article 2 draws a distinction for foreign enterprises and regulates that for them, the mandatory use of the Turkish language only applies to transactions and communications (but not to contracts) with Turkish natural and legal persons. In such cases, Article 3 provides that a secondary foreign language can be used with the condition that the Turkish version shall prevail.

Article 4 regulates that if Articles 1-2 of the Law No. 805 are violated, the relevant documents will not be considered for the benefit of the party violating the law.

B. Recent Decisions of the Court of Cassation

In terms of arbitration-related state court proceedings, Law No. 805 was discussed in three different scenarios: (i) ordinary state court proceedings where one party invokes the existence of an arbitration agreement, (ii) proceedings for the enforcement of foreign arbitral awards, and (iii) proceedings for the setting aside of arbitral awards. In all these scenarios, Law No. 805 is discussed in relation to the arbitration agreement’s validity.

In its recent decisions, the Court of Cassation based its analysis on the question of whether the arbitration agreement included a foreign party or a foreign element. The decisions can be differentiated as follows:

I. Arbitration Agreement between a Turkish and a Foreign Party

In 2013, the 11th Civil Chamber of the Court of Cassation, in a case concerning an ordinary court proceeding initiated by a foreign company (decision of 4 March 2013, Docket No: E. 2012/4088, Decision No: K. 2013/3972, findable here), quashed the first instance court decision dismissing jurisdiction in favour of arbitration, stating that the court should have considered whether the arbitration agreement drafted in English was valid in light of the Law No. 805. On remand, the first instance court held that the arbitration agreement was invalid and this finding was confirmed by the Court of Cassation (decision of 26 September 2017, Docket No: E. 2016/5836, Decision No: K. 2017/4720, findable here).

In its subsequent decisions, the Court changed this jurisprudence. Relying on the distinction between Article 1 and 2 of Law No. 805, the Court held that foreign companies did not have to draft their arbitration agreements in Turkish.

In particular, in two decisions, the Court confirmed lower court decisions which stress that Article 1 and 2 of the Law No. 805 had to be understood in a way that arbitration agreement between Turkish parties only needed to be concluded in Turkish, whereas an arbitration agreement with a Turkish party and a foreign party would fall under Article 2 of the Law No. 805 and therefore could be concluded in any other language (11th Civil Chamber, decision of 5 November 2024, Docket No: E. 2023/6163, Decision No: K. 2024/7745, findable here; 6th Civil Chamber, decision of 3 October 2023, Docket No: E. 2022/2792, Decision No: K. 2023/3118, findable here).

In another decision, the Court of Cassation (3rd Civil Chamber, decision of 24 April 2024, Docket No: E. 2023/3245, Decision No: K. 2024/1372, findable here), in a dispute between Turkish parties went even further and upheld an arbitration agreement concluded in a language other than Turkish, as the agreement was part of multi-party contract that was also concluded with a foreign party (even though this party was not part of the dispute).

II. Arbitration Agreement between Turkish Parties

The previous jurisprudence of the Court of Cassation regarding arbitration agreements concluded between Turkish parties in a foreign language was to invalidate them, relying on Article 1 of Law No. 805.

In its recent jurisprudence, the Court of Cassation seems to differentiate between cases involving a “foreign element” and cases without such an element, using Türkiye’s International Arbitration Act (“IAC”).

1. Cases With A Foreign Element

Article 2 of the IAC enlists that a foreign element of a dispute is indicated by, inter alia, (i) the places of business of the parties, (ii) the shareholding of the parties and (iii) the subject matter of the legal dispute. In upholding the validity of the arbitration agreement, some courts combine the “within Türkiye” requirement in Article 1 of Law No. 805 with the “foreign element” concept regulated in Article 2 of the IAC, holding that if there is a foreign element, the “within Türkiye” requirement in Article 1 of the Law No. 805 is not fulfilled and the arbitration agreement need not be drafted in Turkish.

For example, in a case before the 15th Civil Chamber of the Court (decision of 2 October 2020, Docket No: E. 2020/1714, Decision No: K. 2020/2652, findable here), the Court noted that the dispute between two Turkish parties involved a foreign element as per Article 2 of the IAC and decided that Law No. 805 was not violated. The Court did not elaborate on its reasoning, but it likely considered that the “within Türkiye” criterion under Article 1 of the Law No. 805 was not met. The 6th Civil Chamber of the Court of Cassation (decision of 3 October 2023, Docket No: E. 2023/2930, Decision No: K. 2023/3097, findable here) followed this precedent.

However, it cannot be said that this shift in jurisprudence is shared by all courts in Türkiye. For example, in a case before the 11th Civil Chamber of the Court of Cassation (decision of 24 April 2023, Docket No: E. 2021/8414, Decision No: K. 2023/2361, findable here), the Court held that contracts between Turkish parties should be made in Turkish and that arbitration agreements in a foreign language are invalid. Although the contract underlying the dispute seems to have a nexus to a foreign country (as stated in the decision of the lower court), the Court did not – at least expressly – consider the criterion of a foreign element. This is in line with a previous decision of the 11th Civil Chamber of the Court (decision of 5 February 2019, Docket No: E. 2017/5003, Decision No: K. 2019/842, findable here).

2. Cases Without A Foreign Element

In cases without a foreign element, the 15th Civil Chamber of the Court of Cassation (decision of 5 November 2020, Docket No: E. 2019/3156, Decision No: K. 2020/2913, findable here) held that contracts between Turkish parties should be made in Turkish and an arbitration agreement drafted in a foreign language is invalid. This was also accepted in the 11th Civil Chamber decisions mentioned in the above paragraph.

C. Commentary

In brief, the most recent jurisprudence of the Court of Cassation can be summarized as follows:

• Law No. 805 is not applicable to arbitration agreements with at least one foreign party. This is in line with Article 2 of Law No. 805.

• In terms of cases involving only Turkish parties and a foreign element, the Court’s practice is not entirely consistent. 6th and 15th Civil Chambers of the Court held that Law No. 805 does not apply to cases with a foreign element, whereas the 11th Civil Chamber held vice versa.

• The consequence of the invalidity of the arbitration agreement continues for cases between Turkish parties, where no foreign element is present. Given this, if there is no foreign element, Turkish parties should execute their arbitration agreements in Turkish.

This development is to be welcomed for international cases involving foreign parties or elements (while some more clarity regarding the latter is needed). That said, the inapplicability of Law No. 805 should, in the author’s view, go beyond that for the following reasons:

(i) Law No. 805 should not apply to arbitration agreements

As indicated above, the Law No. 805 is implemented in order to expand the use of Turkish language within the nation. This purpose has been already realized many years ago. Today, Türkiye has a globalized economy, which is attracting businesses from around the world; and commercial agreements are mostly signed in English, due to practical reasons. Thus, the current use of the Law No. 805 for invalidating arbitration agreements is not in conformity with the ratio legis. Therefore, Law No. 805 should not be applicable to arbitration agreements of today, even if the parties are Turkish.

(ii) Other legislation shall prevail in terms of the validity of arbitration agreements

Article 412(3) of the Code of Civil Procedure (applicable in Türkiye-seated arbitrations with no foreign element, dated 2011), Article 4 of the IAC (applicable in Türkiye-seated arbitrations with a foreign element, dated 2001) and Article II of the New York Convention (dated 1958) provide that an arbitration agreement should be in writing, without requiring an additional language condition. These provisions are lex specialis and lex posterior, and should prevail over Law No. 805.

(iii) Test of the good faith principle

Beyond these general considerations, additionally, on a case-by-case basis, the principle of good faith should be accounted for when addressing a Law No. 805 argument. If the party raising such an argument has performed the arbitration agreement without any reservations as to its validity (e.g., without reservations appointed an arbitrator or paid the advance on costs, commenced the proceedings or made a counterclaim or not raised the invalidity of the arbitration agreement throughout the arbitration proceedings), it should be barred from raising such a plea before state courts.