Türkçe
As a result of the globalizing world and increase in foreign language use; it is commonly seen that Turkish companies prepare and sign their contracts, which are related to their business affairs within Turkey, in foreign languages. Especially; most of the foreign investor companies and subsidiaries of global companies in Turkey show the tendency to sign their contracts in foreign languages. However, is it legally possible for a Turkish party to draft and sign a contract in foreign language?
Law No. 805 on Mandatory Obligation to Use Turkish in Economic Enterprises
In accordance with Law No. 805 on Mandatory Obligation to Use Turkish in Economic Enterprises, which is not a well-known regulation by most of the parties although the same is in force as from 10.04.1926, the Turkish companies, including the foreign invested ones, who will sign their contracts in foreign languages may be subjected to some loss of right due to such application.
Is it Mandatory for Turkish Companies to Sign their Contracts in Turkish?
Pursuant to Article 1 of the Law No 805,
“Any type of companies and enterprises which have Turkish nationality shall use Turkish language in all kinds of transactions, agreements, correspondences, accounts and books within Turkey”.
As may be understood from the above stated Article; it is mandatory for any Turkish companies to execute their contracts and communications in Turkish language regarding their activities within Turkey. Only exclusion for such obligation is the execution of such transactions and communications outside the territory of Turkey.
In that respect, any agreement to be executed between Turkish companies should be prepared and signed in Turkish language, or if it is preferred to be executed in a foreign language, a provision stating that the prevailing version is the Turkish text of such contact should be inserted under the respective contract.
Is it Mandatory for Foreign Companies to Sign their Contracts in Turkish?
Pursuant to Article 2 of the Law No. 805,
“This obligation applies to foreign companies and enterprises only in their communications, transactions and relations with the Turkish institutions and persons and for the documents and books which must be submitted to governmental offices and government officers.”
The legislator has provided an exception under Article 2 of the Law No. 805 and exempted foreign companies from the mandatory obligation to sign their contracts in Turkish language by not including the word of “transactions” under the respective Article 2 above. mentioned Article merely obliges the foreign companies to make their communications with Turkish companies or institutions in Turkish language.
Considering the letter of the article and the majority of doctrine views, it may be concluded that it is possible for foreign companies to sign their contracts with Turkish companies in a foreign language. However, latest decisions of the Supreme Court indicate the opposite. 11th Chamber of Supreme Court declared in its decision dated 04.03.2013 and numbered E.2012/4088, K.2013/3972 that Article 2 of Law no. 805 imposes the execution of the contracts by foreign companies in Turkish. Although the previous decisions of the Supreme Court have indicated that it is not compulsory to use Turkish language in the contracts to be concluded by foreign companies, it would be appropriate to execute such contracts bilingually, by considering the possible problems that may arise in the future due to the latest decisions of the Supreme Court to the contrary. However; in this case, it would be necessary to include a provision in the contracts stating that the prevailing language is Turkish.
Is it Mandatory for Local Companies of Foreign Investors in Turkey to Sign their Contracts in Turkish?
Although local companies of foreign investors in Turkey have a shareholding structure consisting of foreign companies and the capital of such local companies are being founded by such foreign investors, such local companies shall be regarded as “Turkish Companies”, as from their register to the Turkish Trade Registry Offices. The fact that the foreign shareholder owns a small or all shares of the local company would not make a difference in this situation.
In that respect; all the restrictions mentioned above are also valid and applicable for Turkish companies with foreign capital.
Are Contracts Executed in Violation of Law No.805 Invalid?
First of all; it should be stated that the contracts executed in violation of Law No. 805 will not be legally invalid. However, pursuant to Article 4 of Law No. 805, the contracts and the provisions included therein which are not in compliance with Articles 1 and 2 of Law No. 805 shall not be taken into account in favor of the parties of the contract. This would definitely cause serious damages and economic losses for the companies that executed such contracts.
The decisions of the Supreme Court are also in this direction. It is stated by the 11th Chamber of the Supreme Court under its decision no. 2009/2051 E & 2009/5292 K that “… as per Article 4 of the same law, the companies and enterprises cited in Article 1 cannot rely on the said contracts and documents if they do not conduct their transactions in Turkish language…”. In addition; it would also be legally invalid and void to waive in advance from any claim to be made on the basis of contradiction of said document with the Law.
Further; pursuant to Article 7 of Law No. 805 which imposes penal sanction, any person that acts in contradiction with the provisions of this Law shall be imposed with judicial fine that is not less than one hundred days”.
ERKUT LAW OFFICE
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