More than 10,000 financial institutions and corporations in over 200 countries use the Society for Worldwide Interbank Financial Telecommunication (" SWIFT ") to execute international money transfers, making it an integral part of global cross-border banking transactions. Despite its widespread use, banks outside Turkey frequently question whether SWIFT can be used to enter into a valid and enforceable agreement under Turkish law.
Validity and Enforceability of SWIFT under Turkish law
Generally, SWIFT messages are sufficient to form a valid, legally binding agreement or communication under Turkish law. Therefore, common banking transactions such as bank guarantees and letters of credit can be validly entered into through a SWIFT message. However, certain banking and finance transactions are subject to formal requirements and are therefore exceptions to the general rule. For instance:
- surety ( kefalet ) agreements, guarantees issued by individuals, assignment of receivables agreements, and pledge agreements must be in written form ( adi yazılı şekil );
- commercial enterprise pledge agreements must be notarised; and
- commercial enterprise pledge agreements and mortgage agreements require registration,
to create valid, legally binding agreements under Turkish law.
In addition, legal transactions exceeding TRY2,500 (approximately US$800) can only be proven in a Turkish court by a written document signed by the debtor. Although the Turkish Supreme Court of Appeals refers to SWIFT messages in some rulings, it has not formally discussed the evidential nature of them. Since SWIFT messages do not contain the debtor's signature, they can only be relied on as evidence in a Turkish court if one of the exceptions in Turkish civil procedure rules applies. For example:
- evidence agreements : Parties to a transaction are allowed to enter into an evidence agreement which sets out additional evidence to be accepted by the parties, together with statutory evidence. Prior to joining the SWIFT system, banks undertake not to refuse any message sent by them through the SWIFT system. This undertaking may be considered an evidence agreement in respect of their transactions;
- market practice : Legal transactions that are customarily carried out without a written document may be proven by witness statements. Considering that most international interbank transactions are conducted through SWIFT messages, they are considered part of the market practice in interbank transactions. SWIFT messages supported by a witness statement to prove the existence of a legal transaction between banks are, therefore, sufficient; and
- prima facie evidence : Prima facie evidence is evidence issued by the debtor showing with a high probability the existence of a legal transaction. A SWIFT message sent by a counterparty would likely be classified as prima facie evidence. Supported by other evidence, such as a witness statement, SWIFT messages are sufficient to prove the existence of a legal transaction.
Considering the widespread use of SWIFT, the formal and evidential validity of SWIFT messages is an important question throughout the world. Under Turkish law, SWIFT messages can be used to enter into valid, legally binding transactions, provided they do not require certain formal requirements to be satisfied. Having said that, due to the archaic rule requiring transactions over a certain amount to be evidenced by a written document bearing the signature of the debtor, SWIFT messages may create evidential risk in a Turkish court. However, this last issue can be mitigated by a combination of evidence agreements, witness statements and prima facie evidence.