Governing Law in International Commercial Contracts with Turkey: MÖHUK Article 24

1. MÖHUK Article 24 gives contractual parties autonomy to select governing law

International commercial contracts routinely connect more than one legal system: a foreign supplier sells into Turkey, a Turkish distributor markets an overseas brand, a foreign parent licenses technology to a Turkish subsidiary, or a Turkish exporter contracts with a customer abroad. Turkish conflict-of-laws rules answer a threshold question before the merits are analysed: which country’s substantive law governs the contractual obligations?

Article 24 of Law No. 5718 provides the general rule for contractual obligations. Paragraph 1 states that contractual obligations are governed by the law expressly chosen by the parties. It also recognises a choice that can be understood from the provisions of the contract or the circumstances without leaving room for doubt.

This autonomy is commercially important. The parties can select a law whose contract rules they understand and then price risk, warranty, limitation, termination and remedies against that legal framework. A governing-law clause therefore should be negotiated together with the dispute-resolution clause rather than treated as boilerplate at the end of the document.

2. An express governing-law clause is the most reliable route

An express clause should identify the selected legal system directly. A formulation such as “This Agreement and the contractual obligations arising from it are governed by the laws of the Republic of Türkiye” removes the central uncertainty that arises when the contract merely refers to a country in passing.

The clause should select the law, not only the location of a court or arbitration. “Courts of Istanbul have jurisdiction” does not itself say that Turkish substantive law governs. Likewise, choosing Istanbul as the arbitral seat does not, without more, identify the substantive law of the contract.

A foreign party should also understand what “Turkish law” means in the transaction. Depending on the contract, the Turkish Commercial Code, Code of Obligations, competition legislation, consumer rules, intellectual-property legislation, data-protection law, foreign-exchange rules or sector regulations can apply. A general Turkish-law clause does not reduce the contract to one statute.

If the parties select foreign law, the clause should identify it with equal precision. References such as “international commercial law,” “European law” or “generally accepted legal principles” may create avoidable interpretive disputes unless the arbitral framework and intended rules are clearly specified.

3. Turkish law also recognises a choice clearly ascertainable from the contract or circumstances

Article 24(1) does not require the choice always to appear in one sentence. A choice that is clearly understandable from the contract provisions or the circumstances is valid. The statutory threshold is deliberately high: the conclusion must be sufficiently clear that there is no reasonable doubt about the parties’ shared intention.

A party should not plan a transaction around an implied choice if an express clause can be drafted. A Turkish-language contract, payments in Turkish lira, performance in Turkey or an Istanbul forum clause can be relevant circumstances, but none should be assumed automatically to establish a complete choice of Turkish substantive law.

Similarly, using English legal terminology does not by itself prove that English law was selected. International contracts commonly use English as the working language while choosing Turkish, Swiss, German or another national law.

For due diligence on an existing contract without an express clause, all versions, annexes, order forms, framework agreements and dispute clauses should be reviewed together before concluding that an implied Article 24 choice exists.

4. Article 24(2) allows a choice of law for all or part of the contract

The parties may choose the selected law for the entire contract or only part of it. This possibility—sometimes described as dépeçage—can be useful in sophisticated transactions, but it should be used carefully.

For example, parties may intend one law to govern a financing component and another law to govern a separate commercial obligation. If so, the contract should specify exactly which provisions or obligations are governed by each system and how inconsistencies will be resolved.

Fragmenting the applicable law without a genuine commercial reason can increase litigation cost. Questions of formation, interpretation, limitation, remedies and set-off may interact across several provisions. A party may discover that a seemingly narrow law choice creates overlapping analyses rather than certainty.

For ordinary distribution, agency, services and supply agreements, one clearly selected substantive law is usually easier to administer unless the structure genuinely requires different regimes.

5. The parties can choose or change governing law after signing

Article 24(3) states that the parties may make or change their choice of law at any time. A post-contract selection is retroactively effective, but third-party rights remain protected.

This rule can help where a framework agreement omitted the governing law and the parties later want certainty, or where a restructuring changes the transaction’s legal framework. The amendment should be executed with the same level of authority and documentary care as the underlying agreement.

The protection of third-party rights is significant. The parties cannot use a later governing-law amendment to destroy rights already acquired by third parties. Security interests, assignments, guarantees or creditor rights can therefore require separate analysis before a retroactive change is made.

The amendment should also be coordinated with the jurisdiction or arbitration clause. Changing substantive law without checking the forum can leave the tribunal applying an unexpected foreign law and increase the need for expert evidence.

6. Without a valid choice, Article 24(4) applies the law most closely connected with the contract

If the parties have not chosen the governing law, Article 24(4) does not automatically apply Turkish law merely because one party is Turkish or because a lawsuit is filed in Turkey. The statute applies the law most closely connected with the contractual relationship.

Article 24(4) then establishes a presumption to identify that law. In general, it looks to the habitual residence of the party responsible for the characteristic performance at the time the contract was made. For contracts concluded in the course of commercial or professional activity, the relevant place of business of the characteristic performer is used; if there is no such place of business, the person’s residence is considered. If several places of business exist, the one most closely connected with the contract is used.

The statute includes an escape clause: where all circumstances show another legal system is more closely connected, that law applies instead of the presumption. The analysis is therefore structured but not mechanical.

Foreign companies should not leave this determination to a later dispute. A one-sentence governing-law clause is usually cheaper than litigating the characteristic performer and closest connection after performance has failed.

7. “Characteristic performance” normally points to the party supplying the contract’s defining non-monetary performance

Article 24 does not list one characteristic performer for every contract type. The concept identifies the performance that gives the contract its distinctive legal and economic character rather than the generic obligation to pay money.

In a straightforward service contract, the service provider generally supplies the characteristic performance. In many distribution or supply relationships, the seller or supplier’s delivery obligation may form the characteristic performance. Agency, licensing, franchise and mixed contracts can require closer examination of the actual structure.

The analysis must be tied to the position when the contract was concluded and to the relevant commercial establishment. A multinational corporation may have headquarters in one country but perform the specific contract through another branch or place of business; Article 24(4) directs attention to the place of business most closely connected with the contract where several exist.

Because mixed contracts can contain several equally important elements, an express governing-law clause is especially valuable. Otherwise, parties may spend significant time arguing over which obligation should be treated as characteristic.

8. A governing-law clause does not eliminate every mandatory Turkish rule

Party autonomy under Article 24 operates within the wider conflict-of-laws system. Law No. 5718 contains separate provisions on directly applicable mandatory rules and Turkish public policy. A foreign-law clause should therefore not be described as making every Turkish statute irrelevant to a transaction performed or regulated in Turkey.

Article 31 allows effect to be given to directly applicable rules of a third state closely connected with the contract after considering their purpose, nature, content and consequences. Article 6 separately provides that directly applicable mandatory provisions of Turkish law are applied where they fall within their scope, irrespective of the foreign law otherwise governing the relationship.

Article 5 addresses public policy: where application of a foreign-law provision to the concrete case would be manifestly contrary to Turkish public policy, that provision is not applied; where necessary, Turkish law is applied instead.

Competition, sanctions, exchange control, consumer protection, employment, real-estate, data-protection and regulated-sector rules can therefore require separate mandatory-law analysis. A foreign principal should not use the governing-law clause as a substitute for Turkish regulatory compliance.

9. Governing law and dispute forum are different clauses

A governing-law clause answers which substantive law governs the contract. A jurisdiction clause answers which state court will hear a dispute. An arbitration clause sends covered disputes to an arbitral tribunal and normally identifies the seat, rules and tribunal structure. These are related but distinct decisions.

A Turkish court can be required to apply foreign substantive law when Turkish conflict-of-laws rules point to that law. Conversely, an arbitral tribunal seated outside Turkey can apply Turkish substantive law if the parties selected it.

The parties should therefore test the clauses as a package: governing law, court or arbitration forum, seat of arbitration, language, service of process, interim measures and enforcement destination. A contract stating “Turkish law, courts of London” may be legally workable in the appropriate circumstances, but it carries different cost and evidence consequences from “Turkish law, Istanbul arbitration.”

Where a foreign court judgment will ultimately need enforcement in Turkey, the recognition and enforcement rules under Law No. 5718 Articles 50–59 become relevant. Where an arbitral award will be enforced, the New York Convention and applicable Turkish arbitration/enforcement legislation should be considered.

10. Special contract categories have their own conflict-of-laws provisions

Article 24 is the general contractual rule, but Law No. 5718 contains specific rules for several contract categories. These special provisions must be checked before relying on the general rule.

Article 25 governs contracts concerning immovable property or its use by applying the law of the country where the property is located. Article 26 contains specific protections for qualifying consumer contracts. Article 27 regulates employment contracts and preserves minimum protection under the employee’s habitual workplace law even where the parties choose another law, subject to the current statutory formulation.

Article 28 regulates intellectual-property contracts, and Article 29 contains a specific rule for contracts for carriage of goods. Article 30 separately addresses representation authority. These provisions show why an “international commercial contract” should first be classified before Article 24 is applied.

A distribution agreement with an embedded trademark licence, a software agreement containing personal-data processing, or a supply contract including installation of machinery on real estate can involve more than one conflict-of-laws question.

11. Choosing national law does not automatically answer whether the CISG governs an international sale of goods

Turkey is a Contracting State to the United Nations Convention on Contracts for the International Sale of Goods (CISG). For a qualifying international sale, the CISG can become part of the applicable sales-law framework when its conditions are satisfied.

A clause choosing “Turkish law” should therefore be reviewed against the CISG rather than assuming that only the domestic Turkish Code of Obligations sales rules will govern. If the parties intend to exclude the CISG, the exclusion should be stated expressly and deliberately. If they intend the CISG to apply, the contract can identify how domestic law will fill matters outside the Convention’s scope.

The CISG does not govern every issue. Matters such as validity and proprietary effects are generally outside its principal scope and can still require the domestic law selected under conflict-of-laws rules.

This issue deserves separate treatment in cross-border goods transactions because inconsistent boilerplate—such as “Turkish law applies” combined with a clause drafted as though the CISG does not exist—can create avoidable disputes.

12. A reliable governing-law clause should be short, express and coordinated with the rest of the contract

The clause should identify the selected law and the contractual scope covered. If the parties intentionally exclude conflict-of-laws rules or the CISG, that decision should be stated only after confirming that the exclusion is legally and commercially appropriate.

The dispute-resolution clause should sit next to the law choice conceptually even if it appears elsewhere in the document. The parties should verify whether the chosen court accepts the jurisdiction clause, whether arbitration is preferable, what language will be used, and where assets are located for enforcement.

Before signing, the foreign party should also check mandatory Turkish rules connected to performance. A law clause cannot legalise an activity that lacks a Turkish licence, circumvent compulsory real-estate form requirements, eliminate statutory consumer protection or erase Turkish competition-law exposure.

For agency relationships, governing law should be reviewed together with TCC Article 122 portfolio compensation. For foreign-company establishment, see 100% Foreign Ownership of a Turkish Company. For cross-border data clauses, see KVKK Article 9 Cross-Border Data Transfers.

Conclusion

MÖHUK Article 24 gives parties substantial freedom to choose the governing law of international commercial contracts connected with Turkey. The choice can be express or clearly ascertainable, can cover all or part of the agreement, and can be made or changed after signing subject to protection of third-party rights.

If the parties make no valid choice, the law most closely connected with the contract applies through the characteristic-performance and place-of-business framework in Article 24(4), subject to a closer-connection override. That general rule must be read with mandatory Turkish rules, public policy and the special conflict-of-laws provisions for real estate, consumers, employment, intellectual property, carriage and representation. A concise law clause drafted together with the forum clause is therefore one of the highest-value risk controls in an international contract.