Legal Insights
Governing Law and Jurisdiction Clauses: A Comparative Analysis of Türkiye and the United Kingdom
The selection of governing law and jurisdiction clauses is a fundamental aspect of international contracts. These clauses define the legal framework for resolving disputes and help manage risks by providing clarity on the applicable law and the competent forum. This article explores the key issues surrounding the drafting and enforcement of governing law and jurisdiction clauses in Türkiye, comparing them with the approach in the United Kingdom.
Recognition of Governing Law
In Türkiye, courts generally recognise and enforce foreign governing law clauses, in line with Article 2 of the Code on International Private and Procedural Law (“IPPL”). Under Turkish conflict of laws rules, Turkish courts are obligated to apply foreign law when it is clearly stipulated by the parties in a governing law clause. However, in certain instances courts may not uphold the choice of foreign law, particularly when it contradicts public policy or Turkish mandatory law. In practice, the Turkish Court of Appeals has consistently ruled in favour of respecting parties' chosen governing law, often relying on expert testimony to assist in interpreting foreign legal principles.
UK courts also adhere to the parties' choice of governing law, subject to the provision that the chosen law does not contradict English public policy. The UK approach is similar in its recognition of foreign governing law but is generally more flexible in ensuring the law chosen by the parties is enforceable, provided it does not undermine fundamental principles of UK law.
Formal Requirements for Governing Law Clauses
Turkish law does not impose strict formal requirements for a governing law clause to be valid. Under the IPPL, a governing law clause can be valid if it is the law of the place where the transaction was executed or the law chosen by the parties. Exceptions exist, especially in relation to rights concerning immovable property or inheritance matters, where Turkish law may be mandated regardless of the parties' choice.
In the UK, the formal requirements for a governing law clause are also minimal, provided the chosen law is valid under UK conflict of laws principles. UK courts similarly uphold governing law clauses unless there is a clear violation of public policy or statute.
Law Governing Procedural Issues
While the parties may agree on the governing law for substantive issues, procedural matters—such as rules of evidence, burden of proof and limitation of actions—are generally governed by the law of the forum (lex fori) in both Türkiye and the UK. In Türkiye, procedural rules are dictated by Turkish law, regardless of the parties' choice of governing law, unless a bilateral agreement exists between the countries involved. The Turkish courts, however, may sometimes allow the application of the parties' chosen law in relation to damages and limitation periods.
Similarly, UK courts apply their own procedural law, even if a foreign law governs the substance of the dispute. However, in some cases, procedural rules may be influenced by the governing law if it has specific provisions that apply to procedural matters.
Jurisdiction Clauses in Türkiye
Turkish courts recognise both exclusive and non-exclusive jurisdiction clauses, provided there is a sufficient connection to the foreign jurisdiction. A jurisdiction clause must clearly designate the court(s) that will have jurisdiction over disputes. If the jurisdiction clause is valid, Turkish courts will generally respect it, regardless of whether it designates Turkish or foreign courts. However, in cases where the jurisdiction clause is unclear or does not meet formal requirements, Turkish courts may assume jurisdiction based on alternative jurisdiction rules under the IPPL.
In the UK, English courts also respect jurisdiction clauses, but non-exclusive clauses often require careful interpretation. The case of Al Mana Lifestyle Trading LLC v United Fidelity Insurance Company PSC [2023] EWCA Civ 61 demonstrates the importance of clear wording so to distinguish between exclusive and non-exclusive jurisdiction clauses. The principle of forum conveniens underpins the interpretation of jurisdiction clauses by the English court, ensuring litigation occurs in the most appropriate jurisdiction.
Choice of Jurisdiction in Domestic Contracts
In Türkiye, domestic parties can choose a foreign jurisdiction for their contract if there is a relevant foreign element, such as the place of performance, the location of assets or the residence of one of the parties. This flexibility is similar to the UK, where domestic parties can select a foreign jurisdiction, but the choice must comply with UK conflict of laws principles and public policy.
Turkish law places limits on domestic parties’ ability to choose foreign jurisdiction if no foreign connection exists. For example, if the contract does not involve foreign elements, Turkish courts are more likely to assert jurisdiction, disregarding the foreign jurisdiction clause.
Mandatory Rules and Public Policy
In both Türkiye and the UK, mandatory laws can override the parties' choice of governing law. Turkish courts are particularly sensitive to public policy considerations and may refuse to enforce foreign law if it violates fundamental principles of Turkish law, such as the protection of national economic interests or cultural heritage. Similarly, UK courts may refuse to apply foreign law if it conflicts with key public policy principles, particularly in areas such as consumer protection, employment law or competition law.
Statutory provisions that aim to implement Turkiye’s economic, financial and social policies—such as those governing currency protection or cultural assets—take precedence over any choice of foreign law. In cases where the foreign law contradicts Turkish mandatory rules, Turkish law will apply.
Jurisdiction in the Absence of Choice
If a contract lacks a governing law or jurisdiction clause, Turkish courts will determine the applicable law by reference to connecting factors to the contract, typically focusing on where the characteristic performance of the contract occurs. Similarly, UK courts will apply the law most closely connected to the contract, considering factors such as the place of performance or the location of the parties.
Jurisdiction is determined similarly: in the absence of a jurisdiction clause, Turkish courts will apply the rules under the IPPL to decide where the dispute should be heard. This often depends on the residence or location of the parties or the place where the contract is to be performed.
Enforcement of Jurisdiction Clauses and Anti-Suit Injunctions
In cases where one party brings a lawsuit in a jurisdiction contrary to an exclusive jurisdiction clause, Turkish courts do not have a formal mechanism for issuing anti-suit injunctions. However, a party may challenge the jurisdiction of the court at the preliminary stage and the court will examine whether it is competent to hear the case based on the jurisdiction clause.
In the UK, anti-suit injunctions can be issued to prevent a party from pursuing litigation in a jurisdiction other than the one agreed in the contract. UK courts are more proactive in enforcing jurisdiction clauses, particularly exclusive ones, to ensure disputes are resolved in the designated forum.
Conclusion
The application of governing law and jurisdiction clauses are critical to international contracts. Both Türkiye and the UK offer substantial flexibility in this regard. While both countries uphold the principle of party autonomy in selecting governing law and jurisdiction, they also impose certain limitations based on public policy and mandatory legal provisions. Understanding the key differences between these two legal systems is essential when drafting contracts that may involve parties or assets from multiple jurisdictions. By considering the nuances of each system, parties can ensure their contracts are enforceable and disputes can be resolved efficiently in the appropriate forum.
