Law On Mandatory Use Of Turkish By Commercial Enterprises Still Applied

Mandatory use of Turkish

Law 805 on the Mandatory Use of the Turkish Language by Commercial Enterprises entered into force in April 1926 and still applies today.

Under the law, all transactions, correspondence and agreements executed in Turkey between Turkish companies, entities and individuals must be in Turkish, and each party must keep their accounts and books in Turkish.

Foreign companies and enterprises must also use Turkish when conducting transactions and corresponding with their Turkish counterparts or business partners. Further, all documentation submitted to Turkish institutions and organizations must be in Turkish. For foreign companies and enterprises, the law does not forbid the use of foreign languages entirely. Bilingual transactions, correspondence and documentation are also allowed, provided that signatures are attached to the Turkish versions. However, the law explicitly states that Turkish versions always take precedence, even if they have not been signed by the respective parties.

Growth of English

Turkey has experienced considerable economic growth in recent years and an accompanying increase in foreign investment, which have transformed the country into a globally significant investment destination. An increasing number of cross-border mergers and acquisitions and the globalization of trade and finance have resulted in substantial changes in the nature of transactions compared to the 1920s. Agreements, transactions and correspondence are increasingly dominated by English. It is common practice for foreign and local companies with foreign capital to use English in their transaction documents, including for:

• corporate law-related agreements, such as:share purchase agreements; and shareholders' agreements;
• commercial law-related agreements, such as: franchise agreements; sales agreements; and 
  service agreements;
• finance related-documents, such as: letters of credit; share pledge agreements; facility agreements; and intercreditor agreements.

Although the law seems outdated, it is still upheld by Turkish courts. Therefore, domestic and foreign investors should be aware of and assess the severe risks of violating the law.

Non-compliance

Non-compliance with the law leads to significant and undesirable legal consequences. The law explicitly states that any documentation in breach of its requirements cannot be considered in favour of the parties included therein. The law has rarely been tested before the Court of Appeals since its entry into force. According to the court, agreements executed in Turkey between two Turkish companies in a language other than Turkish (1) as well as between a foreign company and a Turkish company (2) are deemed to be invalid, and disputes arising in this regard must be resolved as per general rules. Further, failure to comply with the law has civil law consequences and also results in criminal liability. Parties that fail to comply with the law will be subject to a judicial fine of not less than 100 days (3)

Comment

Although it is common practice in Turkish markets to produce and execute transaction documents in foreign languages, the law:

• is still in force;
• is honoured by Turkish courts; and
• has the power to strike down the validity of transaction documents.

Therefore, Turkish and foreign companies must be aware of the legal consequences of non- compliance with the law.

Endnotes

(1) Yargıtay 11HD T November 5 2015 E 2014/15066 K 2015/11597; Yargıtay 11HD T May 5 2015 E 2014/9841 K 2015/6367; Yargıtay 11HD T March 16 2012 E 2012/3122 K 2012/4073; Yargıtay 11HD T May 4 2009 E 2009/2051 K 2009/5292; Yargıtay 11HD T November 30 1979 E 1979/3309 K 1979/5469; and Yargıtay 11HD May 3 1977 E 1977/1651 K 1977/2245, which states that "words and expressions can be used in a foreign language, if so required by the nature and characteristic of transaction and such use does not result in a violation of the law".

(2) Yargıtay 11HD T March 4 2013 E 2012/4088 K 2013/3972.

(3) As of 2016, a judicial fine per day is determined at a minimum of TRY20 and a maximum of TRY100.

This article aims to endow the reader with a general outline about its subject matter. Each individual case should be evaluated according to its circumstances.