Recent development

The 11th Civil Chamber of the Turkish Supreme Court ruled in several instances that general references to foreign courts (e.g., "English courts") are null and void, as they do not sufficiently specify the competent court.

Background and decision

Under the Turkish International Private and Procedure Law (the "Law"), parties to an agreement containing a foreign element can choose the courts of a foreign jurisdiction to settle the disputes arising from the agreement, unless the concerned dispute falls within the exclusive jurisdiction of Turkish courts. As the Law only refers to the courts of a foreign jurisdiction and does not require any reference to specific courts in such jurisdiction, the question of which courts in the competent foreign jurisdiction can settle the disputes should be answered in accordance with the laws of the chosen jurisdiction.

However, recent rulings of the Turkish Supreme Court provide that when choosing foreign courts to have jurisdiction to hear and settle the disputes arising out of an agreement, the specific court in the relevant jurisdiction must be precisely referred to, rather than a general reference to the courts of such jurisdiction; accordingly, the jurisdiction clause should not be upheld by the Turkish courts unless there is reference to the specific foreign court.

Conclusion

Although the Turkish Supreme Court's rulings are not binding for the courts of first instance in Turkey until the General Assembly of Civil Chambers (Hukuk Genel Kurulu) rules on the matter, we believe that the Turkish courts will adhere to the Supreme Court's rulings. In case parties to an agreement fail to follow the Supreme Court's approach when agreeing upon the jurisdiction clause, the Turkish courts may rule that they have jurisdiction to hear the dispute or the decision of the concerned foreign court is not enforceable in Turkey.

Accordingly, we recommend consulting Turkish and local counsel from the chosen jurisdiction to ensure that the jurisdiction clause works under the laws of both jurisdictions.

We also recommend that the foreign jurisdiction clauses in the existing agreements be reviewed and adapted for this new approach.