The Lending and Secured Finance Review: Turkey


i In general

Although 2020 was a tough year for the Turkish financial sector due to currency fluctuations in the Turkish lira against other currencies (e.g., the US dollar and the euro), the Turkish government and other regulatory bodies have been implementing legal and economic countermeasures to minimise the negative effects in the Turkish market.

In recent times, we have witnessed a series of changes in the mandatory reserves that the Central Bank of Turkey (CBRT) is using as a material instrument for making monetary policy in line with its strategy of the last quarter of 2010. Despite changes in the mandatory reserve ratios aiming to support loan growth and financial stability of the Turkish banking sector, liquidity in the market has been affected as the result of the frequent changes introduced by the CBRT throughout 2019 and 2020, which resulted in mandatory reserves to serve as an instrument to avoid potential fluctuations in foreign exchange rates.

Further, in efforts to narrow down adverse effects of the global uncertainty caused by the covid-19 pandemic on the Turkish economy, various temporary amendments have been adopted. While some of these amendments ceased to have effect by the start of 2021, various temporary measures are still being foreseen by national authorities, including measures with respect to policy interest rate (one-week repo auction rate).

ii Legal framework

The CBRT; the Banking Regulation and Supervision Agency (BRSA); the Capital Markets Board and the Financial Crimes Investigation Board are supervisory authorities for banks and financial institutions in Turkey, relating to specific matters such as cross-border lending transactions, money laundering and financing of terrorism, KYC requirements, data protection and Basel compliance.

Further, it should be highlighted that, in addition to the regulations with regard to lending activities within Turkey; foreign exchange transactions involving Turkish residents and the requirements in relation to the lending activities on a cross-border basis is also regulated through the Law Regarding the Protection of the Value of Turkish Currency (Law No. 1,567),2 the Decree No. 32 regarding the Protection of the Value of Turkish Currency3 and the Capital Movements Circular issued by the Central Bank of Turkey (the Foreign Exchange Legislation).

Legal and regulatory developments

The most recent development that should be highlighted is the Regulation on Remote Identification Methods to be Used by Banks and Establishment of a Contractual Relationship in Electronic Environment, which has been published by the BRSA and entered into force on 1 May 2021. The respective regulation brought crucial changes to banking services, which would enable banks to establish contractual relationship with their customers without the need of their physical presence. This is considered as a big step to increase the provision of banking services in an electronic environment, as there have also been further amendments throughout the last year with the same aim but with less impact. Since the respective regulation demonstrates the aim of regulatory authorities to introduce and facilitate remote identification of new customers and electronic contracts for banking services, further regulations in relation to the establishment of contractual relations regarding lending transactions are also expected.

In line with the ongoing efforts to render the Turkish banking legislation compliant with the Basel requirements within the past decade, the BRSA continues to reflect the Basel requirements in local banking legislation by enacting new regulations or amending the currently in-effect legislation to harmonise the Turkish banking system with international banking standards and trends. The BRSA is expected to continue its efforts to implement increasingly stricter regimes in the Turkish banking sector to increase the profitability of Turkish banks and reduce the risks that they may encounter with the aim of establishing a stronger banking system. Although the draft regulation on the determination and calculation of NSFR is available on the official website of the BRSA since January 2018 for this purpose, and the Basel III requirements within this respect have entered into force as of January 2018, the BRSA has yet to enact the relevant draft regulation.

Moreover, enactment of the Regulation on Restructuring of Debts owed to Financial Sector4 represented a first step to the introduction of the financial restructuring opportunity for Turkish companies in financial distress. Subsequently, the Banks Association of Turkey has announced the execution and entry into force of the financial restructuring framework agreement for large scale implementation and the financial restructuring framework agreement for small-scale implementation on 9 October 2019 and 8 November 2019, respectively (collectively referred as the 'Framework Agreements'). As the Framework Agreements, to which foreign financial institutions and international agencies can be party without being subject to the consent of the Turkish resident creditors or any decision quorum, are binding upon financial institutions that have signed them, no financial restructuring process will have an impact on legal remedies of non-signatories of the Framework Agreements.

Tax considerations

i Withholding tax

Interest payments shall be principally subject to withholding tax at rate of 10 per cent, but the withholding tax rate is reduced to zero per cent for the loans extended by foreign banks.

ii Stamp tax

Stamp tax at the rate of 0.948 per cent is regulated under the Stamp Tax Law (Law No. 488)5 (as amended). The Stamp Tax Law also stipulates a ceiling amount to be adjusted annually. However, there is a specific exemption under the Stamp Tax Code provided for the loan transactions and related security documentation. With respect to the terms of the exemption, tax advice based on specific transactions is recommended as there are numerous tax rulings regulating specific cases. Additionally, in order to be subject to stamp tax, either a document shall be signed in Turkey or shall be signed outside of Turkey but undertaken in Turkey.

iii Value added tax

Pursuant to article 1 of the Value Added Tax Code (Law No. 3,065),6 the delivery of goods and the provision of services performed within the scope of commercial, industrial, agricultural or professional services are subject to VAT if the transactions are carried out in Turkey. VAT at rate 18 per cent is applicable to loan to be extended by persons other than banks. However, loans granted by foreign banks to Turkish residents are exempt from VAT.

iv Banking and Insurance Transaction Tax (BITT)

All transactions (except for certain financial leasing transactions) executed by Turkish resident banks and insurance companies, as a result of which the banks and insurance companies acquire monies, are subject to Banking and Insurance Transaction Tax, which is regulated under the Expenditure Tax Code (ETC) (Law No. 6,802).7 In accordance with Article 33 of the ETC, the collection of money either as interest or commission by banks and insurance companies (by cash or on account) shall be subject to the BITT at a rate of 5 per cent. However, if a loan is granted by a non-resident foreign bank, the interest payments and fees in relation to the loans are not subject to the BITT since non-resident foreign banks are not considered as BITT taxpayer.


Foreign currency loans and gold loans (without fiduciary transactions) granted by foreign persons to persons or entities located in Turkey other than banks and financial institutions are subject to RUSF at rates of between zero per cent and 3 per cent depending on maturity periods. The tax base of the RUSF in the case of the foreign currency loan is the capital of the loan (not the interest payment), to be calculated at the disbursement date of the loan.

Credit support and subordination

i Security

The general practice in the Turkish market is to provide collateral either as security over assets or as personal security, or both. While negotiable instruments are also utilised to provide security, they are recognised as debt instruments bearing unconditional payment orders under Turkish law. Therefore, if it is evidenced before a Turkish court that the relevant negotiable instrument has been issued as a security to an underlying relationship, then the holder of the negotiable instrument cannot benefit from the expedited enforcement proceeding applicable to negotiable instruments.

Under Turkish law, securities can be classified as asset collateral and personal securities. In this regard, asset collaterals include:

  1. pledge over movable assets, providing security over movable assets and inventory;
  2. commercial enterprise pledge, providing security over commercial enterprises such as factories and production facilities, movable assets therein and inventory;
  3. pledge over shares; providing security over physical shares or custody accounts in which listed shares or shared registered with the Central Registry Agency in Turkey;
  4. pledge over securities; providing security over securities or securities custody accounts;
  5. pledge over bank accounts, providing security over cash deposits;
  6. mortgage, providing security over real estates, fixtures and integral parts, movable assets that are eligible to be included under a mortgage and similar rights;
  7. aircraft/vessel mortgage, providing security over an air vehicle, movable assets and inventory; and
  8. assignment of receivables, providing security over trade receivables;

Personal securities under Turkish law comprise (1) guarantees; and (2) suretyships, which is explained under Section IV.ii.


Over movables

Under Turkish law, two different types of pledge may be established over movable assets; physical pledge or registered pledge. The procedure of and the difference between the two types of pledges are physical pledges and registered pledges.

Regarding physical pledges, as regulated under the Turkish Civil Code (Law No. 4,721)8 (the Civil Code), parties may establish physical pledge where the possession (i.e., not title) of the goods is transferred either to the pledgee or a warehouse operator as custodian, by way of executing a written pledge agreement. In this case, a custodian can be determined between the parties, and a separate custodian agreement shall be executed between the parties; the pledgor would not be able to use the pledged assets until the pledge is released.

Regarding registered pledges, the Law on Movable Asset Pledge in Commercial Transactions (Law No. 6,750)9 (the Movable Pledge Law), provides for the perfection of pledge over movable assets without the requirement to transfer the possession of the pledged asset to the pledgee. With this type of pledge, the respective pledgee and the pledgor enter into an ex officio form agreement before Turkish notary public and the respective pledge is registered with TARES (the Movable Pledge Registry).

In particular, as per the Movable Pledge Law, the list of the movables, over which a pledge can be established does not bear a numerus clausus nature. This includes: (1) receivables; (2) intellectual property rights; (3) raw materials; (4) any revenues and income; (5) licences and permits that are not required to be registered with other registries, except for those having a regulatory permit nature; (6) movable enterprise assets including machinery, tools, equipment, motor vehicles and any electronic tools such as electronic communication tools; (7) stocks; (8) agricultural products; (9) trade names or enterprise names; (10) commercial or tradesman enterprises; (11) any other movable assets, rights and jointly owned properties listed under items (1) to (10) in possession of third parties; and (13) any kind of similar movable assets and rights that can be pledged in registered form.

Over commercial enterprises

Pledge over commercial enterprises can be established by following specific procedures set forth under the Movable Pledge Law as per the explanation stated above, subject to general provisions of the Civil Code regarding pledge over movables where the Movable Pledge Law is silent.

Pursuant to the Movable Pledge Law, the following are deemed to be pledged: (1) in the event a pledge is established over a commercial enterprise entirely, any assets allocated to the operation of the enterprise at the time of the establishment of the respective pledge; and (2) in the event a specific movable asset group of a commercial enterprise is pledged as a whole, any assets included in this group. Furthermore, future legal proceeds of the relevant commercial enterprise such as interest accrued thereon, insurance proceeds related thereto, natural products thereof and all substitute good are also covered under the enterprise pledge.

Furthermore, as per the applicable provisions of the Civil Code, the scope of the pledge shall cover the pledged commercial enterprise along with its accessories. Unless otherwise agreed by the respective parties under the relevant pledge agreement, the respective pledgee will be required to return natural products of the pledged enterprise to the respective pledgor, only when these products become separate assets and no longer form part of the respective pledged enterprise.

Over shares

A pledge over the shares of a company can only be established by entering into a written pledge agreement. In order to ensure the legal validity and enforceability of the pledge over the shares, physical possession of share certificates (if any) relating to the pledged shares are required by the pledgee. If share certificates are issued by the company in the name of the respective shareholders (i.e., registered share certificates), shares must be endorsed with pledge or blank endorsement. Although not a perfection requirement, the respective company, the shares of which are pledged, should adopt a corporate resolution for the registration of the pledge with the company share ledger to avoid third party claims based on good faith.

On the other hand, perfection of a pledge over shares of a publicly traded company is slightly different as such shares are in registered (dematerialised) form and kept with the Central Registry Agency. Therefore, the delivery condition for these shares is satisfied, perfecting a pledge over accounts of a custodian that is a member brokerage firm of the Central Registry Agency that will open an account in the name of the pledgee and hold the pledged shares in a sub-account under this account.

Over securities

A pledge over the securities, which are in materialised form, can only be established by entering into a written pledge agreement. In order to ensure the legal validity and enforceability of the pledge over the securities, physical possession of the pledged securities is required via delivery to the pledgee. If the securities are in registered form and kept with the Central Registry Agency, the delivery condition for these securities is satisfied by perfecting a pledge over accounts of a custodian that is a member brokerage firm of the Central Registry Agency that will open an account in the name of the pledgee and hold the pledged securities in a sub-account under this account.

Over deposits/bank accounts

Perfection of a pledge over deposits or a bank account is possible through the fulfilment of the following requirements: (1) entry by relevant parties into a written pledge agreement; (2) a pledge notification to be sent to the relevant account bank; and (3) an acknowledgement from the account bank on the blockage over the respective accounts. Notification and the acknowledgement from the account bank are not conditions for the perfection of the account pledge; however, this would enable the account bank to register the pledge with its records.


A mortgage can be created as security for any kind of debt, present, future or contingent by registering a mortgage over a real property with the relevant title deed register (the Turkish Civil Aviation Registry for an aircraft) where the respective real property is registered. The perfection of a mortgage requires a mortgage agreement in official written form to be entered into between the respective mortgagor and mortgagee before the respective title deed registry and thereafter, registration of the mortgage with the same.

A mortgage securing an existing or future debt, the amount of which is indefinite, can be registered as a maximum amount mortgage. The amount of the mortgage should be agreed upon by the mortgagor and mortgagee and written in the mortgage agreement. If the amount of secured obligations is definite at the time of establishment of the mortgage, a principal mortgage (in the form of ana para ipoteği) may be established. Consequently, repayment of the principal amount as well as any interest to be accrued thereon would be secured by this mortgage.

Assignment of Receivables

An assignment of receivables can be perfected by entering into a written assignment of receivables agreement without any registration requirement. Notification to respective debtors is not a perfection condition but rather a condition for payment of each debtor to the assignee, which would ensure that the respective assignor's debtor cannot raise a good faith claim for the payments made directly to the assignor after the receipt of the said assignment notice.

Under Turkish Law, an assignment of future receivables is possible as long as the receivables are identifiable.

ii Guarantees and other forms of credit support

The main difference between guarantee and suretyship is that suretyship represents a secondary debt whereas a guarantee is in the nature of a principal and independent debt.


Under Turkish law, a suretyship shall only be valid if made in writing by the surety and if the maximum amount of liability is indicated as a definite amount. The amount of liability, the date of the agreement and the nature of suretyship (i.e. joint, several, ordinary) must be written by hand rather than by printing or typing. If surety is married, her or his spouse's consent is required to be obtained prior to or simultaneously with the execution of the suretyship agreement. That being said, there are exceptions to the requirement of the spouse's consent, including, inter alia, where the relevant surety is a shareholder in or a member of the board of directors of the principal debtor.

Suretyship is a secondary obligation linked and dependent on a valid, binding underlying obligation where the surety has the right to state plea as it becomes successor of creditor in proportion of executed liabilities to the creditor by surety.


According to Turkish law, a guarantee is a contract whereby the guarantor promises to the creditor of a third party (i.e., the principal debtor) to be responsible for the payment of the debt of the latter. A guarantor is liable as primary obligor, but not as surety, to pay the amount guaranteed, without any objection and without being subject to any of the terms or conditions of or the performance or obligations of a third party under the agreement that are guaranteed under the guarantee, until such time all of the obligations and liabilities of the third party against the beneficiary have been fulfilled or until the guarantor is waived from its obligations under the guarantee by the beneficiary.

If a guarantee is issued by an individual, the validity requirements of suretyship shall be satisfied.

iii Priorities and subordination


Contractual subordination of claims is not a recognised legal concept under Turkish law and is not enforceable before Turkish courts and execution offices, since the Execution and Bankruptcy Law (Law No. 2,004)10 (EBL), which permits every creditor to pursue its claim through court and execution procedures, would become applicable. In order to give effect to subordination arrangements (even in bankruptcy scenarios), the standard market practice in Turkey is that creditors request the subordinated creditors to assign all their subordinated debts to them through an assignment of receivables agreement.

However, there is also no legal provision expressly prohibiting contractual subordination or ranking of claims between debtors and creditors. Accordingly, contractual subordination or ranking of claims should be valid and binding between the parties of an agreement, providing for subordination or ranking of claims, as contractual obligations only, as per the 'freedom of agreement' principle.

Ranking and priority

In General

The receivables of secured creditors have priority over the sale proceeds of such secured assets after deduction of the relevant taxes in rem (i.e. taxes arising from the use or mere existence of the secured assets such as real estate taxes, motor vehicle taxes and custom duties) and expenses arising from the administration or preservation of the secured assets or from sale auctions.

Ranking and pledges

With respect to pledges, as a general rule, the person who has taken pledge at a date earlier than the others will have a prior ranking. If the asset is registered with a private registry, it is possible to track from the records of the registry as to whether there are any prior ranking security interests.

Ranking and mortgages

With respect to mortgages, through registration in the title deed register, mortgages can be registered in first and continuing degrees. In terms of ranking and priority, where there is more than one mortgage established on the property, the degree indicates the rank of the mortgage and the amount of the security created under the relevant mortgage. The rank and the security amount of a degree are determined in the mortgage agreement.

Legal reservations and opinions practice

Even though legal opinions are addressed to lenders in general, they can be requested by both lenders and borrowers in lending transactions.

i Legal limitations

In addition to general capacity and enforcements checks, the below points should be covered in a legal opinion issued by a Turkish lawyer in accordance with relative legislation under Turkish law.


While stating an agreement is valid and enforceable and in proper legal form, it should also be inserted that the enforceability may be: (1) limited by bankruptcy, insolvency or similar laws affecting the enforcement; and (2) subject to the concept of good faith.

Good standing status

In relation to the good standing status of entities in Turkey, there is no publicly available records at trade registries in Turkey publishing information on a regular basis on whether an entity was terminated, entered into liquidation, declared bankrupt or granted a concordat period. However, Turkish entities (that are registered with a Trade Registry) can obtain a certificate of no insolvency or concordat from the relevant trade registry where they are registered, and legal opinions may rely on the respective certificates of no insolvency or concordat with respect to due diligence of good standing of the respective entity.

Electronic communications

In the event that a dispute or judgment is brought before Turkish courts, electronic communications may not be upheld as conclusive evidence before Turkish courts, and may only be treated as discretionary evidence that gives the competent Turkish court discretion over whether to take or not to take the this evidence into consideration, unless they are signed with a secured electronic signature compliant with the terms stipulated under the Electronic Signature Law (Law No. 5,070).11

Notices of default and termination

Furthermore, notices of default and termination in relation to the agreements concluded by and between merchants should be made by registered mail, telegram or notary public or via registered email bearing a secured electronic signature in accordance with the third paragraph of Article 18 of the Turkish Commercial Code (Law No. 6,102)12 for evidentiary purposes.

Process agent

It should be noted that the concept of 'process agent' is not recognised under Turkish law. Nevertheless the concept of process and security agent is frequently utilised in various cross-border transaction including Turkish residents. However, irrevocable appointment of an agent may be considered as against the public policy rules of Turkey, and therefore the irrevocable quality of the appointment may not be binding under Turkish law. As such, a qualification within this respect should be inserted in legal opinions if an agent is appointed irrevocably.

Compound interest

Pursuant to the Turkish Commercial Code, application of the compound interest on the principal amount is possible only if: (1) the relevant loan is considered a commercial transaction for both parties (i.e., both are merchants); and (2) compound interest is derived for a period not less than three months. Therefore, lenders may not be able to collect compounded interest from borrowers if the competent Turkish court rules that compound interest is not consistent with the public policy of Turkey.

ii Financial assistance

Unlawful financial assistance, which is recognised in global practice, is also regulated under Turkish law. Accordingly, any legal transaction of a Turkish company entered into with any party with the subject matter of the provision of an advance, loan or security for the purpose of the acquisition of its own shares will be null and void. That is to say, any legal transaction entered into by a Turkish company to grant security directly or indirectly in relation to the financings to be procured for the acquisition of the respective Turkish company's shares by a third party shall be null and void.

However, it should be highlighted that financial assistance restrictions shall not apply to (1) transactions concluded by banks and other financial institutions in the normal course of business, or to (2) transactions effected with a view to the acquisition of shares by or for the target company's employees or the employees of an associate company. Both exceptions shall only be applicable provided that the transactions do not reduce reserves of the target companies below the indicated levels in the Turkish Commercial Code.

iii Choice of governing law and jurisdiction

Pursuant to Article 24 of the Private International Law, the law governing contractual rights and obligations may be freely chosen by its parties, provided there is a foreign element to the subject transactions and relationships.

Pursuant to Article 47 of the International Private Law, a Turkish individual or legal entity may agree to submit disputes arising from a private law contract providing contractual rights and obligations entailing a foreign element (such as one of the parties to the transaction not being Turkish) to the jurisdiction of foreign courts unless this is clearly against the public policy rules of Turkey or is related with a matter that falls within the exclusive jurisdiction of Turkish courts.

It should, however be noted that, in order for jurisdictional agreements to be valid under Turkish law, these agreements must refer exclusively to a specific court by name to which the relevant parties wish to submit disputes.

iv Enforcement of a foreign judgment

Under the International Private Law, a judgment of a court established in a country other than Turkey may not be enforced in Turkish courts, unless (1) there is in effect a treaty between the country and Turkey providing for the reciprocal enforcement of judgments, or (2) there is de facto reciprocity in the field of enforcement of judgments between the country and Turkey, or (3) there is a provision in the law of this country that provides for the enforcement of judgments of the Turkish courts.

Additionally, the following conditions should exist for the enforcement of foreign court judgments pursuant to Article 54 of the International Private Law: (1) the decision of the foreign court must be given on a subject that is not in Turkish courts' exclusive jurisdiction or (provided that the defendant objects) the judgment is not issued by a self-authorised court without any relation to the subject matter or the parties of such dispute; (2) the decision of the foreign court shall not be clearly against Turkish public policy; and (3) in the decision of the foreign court, the party against whom execution is sought must be duly summoned to, or represented, the foreign court.

v Hardening periods

As far as Turkish courts and execution offices are involved, the EBL setting forth the three different hardening periods as one year, two years and five years may become relevant and applicable.

The one-year hardening period applies to security interests if (1) the security interest is created after a debt is incurred, in order to secure such existing debt; (2) payments are made via instruments other than cash or ordinary payment instruments; and (3) payments are made before their due date.

The two-year hardening period applies to donations or gifts.

The five-year hardening period applies to preferential and fraudulent transfers. Under Turkish law, any transaction that is not made on an arm's-length basis or that is not in accordance with the market or is made without any consideration may be construed as a preferential and fraudulent transaction.

Loan trading

Secondary loan trading constitutes primary lending in Turkish law unless the loan has been fully drawn, as transfer of a loan will be considered as a change in the creditor of the respective loan. Article 26 of the Capital Movements Circular allows for the amendment of loan agreements wherein a Turkish resident obtains loans from abroad, for the change of the respective lender with another foreign lender.

It should also be noted that there is no explicit provision under Turkish law specifically regulating participation agreements to be entered into between financial institutions in secondary market loan trading transactions as the relevant participant does not become a party to or acquire rights directly under the relevant loan agreement subject to participation; therefore, with regard to the participation agreements, general provisions and principles of law apply. As such, participation agreements are recognised under Turkish law (and commonly used in the market) subject to the principle of freedom of contract, once the mutual intention and acceptance of the parties to the relevant participation agreement on the participation are exchanged.

As Turkish residents may freely obtain loans from abroad provided that, when the loan is denominated in a foreign currency, the provisions of the Turkish Foreign Exchange Legislation are followed, sale of loans would not trigger any licensing requirements.

On a separate note, Turkish law allows for the grant of security over a receivable either by way of: (1) assignment of receivables; or (2) pledge over receivables. The characterisation of the security as assignment of receivables is frequent in the Turkish market for this type of transaction, as this kind of security transfers the title of the receivable to the assignee provided that the relevant law governing the assignment provides a similar consequence to assignments under Turkish law, which will be the legal owner of the respective receivable upon the execution of the respective assignment agreement.

With respect to novation, it should be noted that under Turkish law, following a transfer of a right/debt by novation, that previous right or debt is extinguished and a new right or debt is created. Additionally, under Turkish law, a security interest has an accessory nature to the underlying debt. In this respect, in the event of a transfer by way of novation, the previous debt is extinguished as per Turkish law; and any security that is accessory to the same also is also extinguished automatically. However, in a transfer by way of assignment, the existing security interests will automatically follow the assigned rights. Bearing in mind that the hardening periods with respect to rights, debts and securities in relation thereto restart following the cessation of the same as a result of novation, this method is not beneficial, and lenders in the Turkish market do not prefer novation as a method of loan trading.

Other issues

i Foreign exchange controls

It should be highlighted that the Turkish Foreign Exchange Legislation has been subject to various amendments with a view to re-regulate ability of Turkish residents to obtain foreign currency loans in recent years. The tendency is to regulate foreign currency transfers from or into Turkey more strictly, in particular cross-border lending activities. While the general rule is that Turkish resident legal entities with foreign currency income may obtain foreign currency loans from abroad or within Turkey, the conditions and exemptions in relation thereto have been regulated depending on various qualities of cross-border transactions.

Furthermore, based on the above approach, the latest market trend in relation to reverse solicitation favours relying on documentation demonstrating an unsolicited request from a client/potential client for cross-border lending activities.

ii Restriction on factoring

Upon the BRSA's recently adopted conservative approach, there is a restrictive trend in the factoring sector with respect to cross-border factoring transactions to be conducted between foreign factoring institutions and Turkish residents. It should, however, be noted that due to the BRSA's restrictive approach on supplier finance programmes, foreign banks and financial institutions have recently tended to conduct draft purchase programmes.

iii Jurisdiction/arbitration clauses

It is important to note that in the context of provisions enabling the submission of disputes to both arbitration and to a court, submission to arbitration may not be enforceable under Turkish law.

Further, with respect to validity of arbitration clauses, the Turkish Court of Cassation has recently rendered certain judgments wherein it has concluded that arbitration clauses, executed by and between a foreign and a Turkish party in a foreign language shall be deemed invalid based on the Turkish language requirement for commercial enterprises set out under the Law regarding the Mandatory Use of the Turkish Language among Business Enterprises (Law No. 805).13 Thus, in order to avoid this invalidity risk, arbitration clauses should be drawn-up in both related foreign language and Turkish, and the Turkish version should be stipulated to be the prevailing version in case of any discrepancies.

Outlook and conclusions

Despite swiftly taken measures by the BRSA, the CBRT and the Banks' Association of Turkey, the Turkish market has been gravely affected by the covid-19 pandemic and rapid fluctuations in the Turkish lira against other currencies and thus, borrowing capacity within the Turkish market has decreased while financial restructuring transactions became more frequent throughout 2020 and the first half of 2021.

Further, throughout 2021 there have been legislative amendments regarding cryptocurrencies, and the legislative authorities' are showing an intent to regulate cryptocurrencies in a more restrictive approach.


1 Eda Beltan is a senior partner, Göksu Gökay is a senior associate and Beril Çetin is an associate at Pekin & Pekin Law Firm.

2 Published in the Official Gazette dated 25 February 1930, No. 1,433.

3 Published in the Official Gazette dated 11 August 1989, No. 20,249.

4 Published in the Official Gazette dated 15 August 2018.

5 Published in the Official Gazette dated 11 July 1964, No. 11,751.

6 Published in the Official Gazette dated 2 November 1984, No. 18,563.

7 Published in the Official Gazette dated 23 July 1956, No. 9,362.

8 Published in the Official Gazette dated 8 December 2001 and numbered 24,607.

9 Published in the Official Gazette dated 28 October 2016 and numbered 29,871.

10 Published in the Official Gazette dated 19 July 1932, No. 2,128.

11 Published in the Official Gazette dated 23 January 2004, No. 25,355.

12 Published in the Official Gazette dated 14 February 2011, No. 27,846.

13 Published in the Official Gazette dated 22 April 1926, No. 353.

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