ABSTRACT
The Law on the Compulsory Use of Turkish Language in Economic Institutions, numbered 805 (“the Law”) regulates the language to be applied in contracts between Turkish companies and institutions and by foreign companies in Turkey. The law also requires the use of Turkish in transactions carried out between companies and institutions and official institutions. Although the language regulated in the Law is mandatory, very often neither Turkish nor foreign companies exercise due diligence in strictly obeying this rule, which may cause legal conflicts under Law No. 805 regarding the validity of a contract.
As one of the foundations of freedom of contract, Article 26 of the Turkish Code of Obligations (“TBK”) provides that the content of a contract can be determined only “within the limits stipulated by law”.
I. INTRODUCTION
Law No 805 on the Compulsory Use of Turkish Language in Economic Institutions (“the Law”) published in the Official Gazette numbered 353 on 22.04.1926 was one of the revolutionary l aws of that period. It regul ates the mandatory language use for contracts and other related legal documents signed by Turkish and foreign companies in Turkey. This regul ation aims to effectively control commercial activities and to minimize the potential risks of misinterpretation in the event of legal conflict between parties. This study explores the terms and consequences of the regul ation alongside the provisions, and then considers the obligatory nature within the framework of freedom of contract in the light of court decisions.
Although the Law is in force, the fact is that legal entities often do not apply the regulations and administrative bodies fail to impose any sanctions. Thus, public institutions do not enforce the Law on these companies and foreign investors when carrying out international commercial activities, banking or arbitration agreements, and other contracts. This paper highlights this Law that is neglected by executives and the challenges of this regulation.
II. FREEDOM OF CONTRACT: MANDATORY RULES AND THE CONSEQUENCES OF THE LAW
Freedom of contract holds that parties are free to make a contract.1 The will of the parties to determine the form and terms of the contract also falls within the scope of this freedom.2 However, it is possible to state that in the Turkish legal system there are some restrictions on that freedom.3 As one of the foundations of freedom of contract, Article 26 of the Turkish Code of Obligations4 (“TBK”) provides that the content of a contract can be determined only “within the limits stipulated by law”. Article 12 of the TBK states that contracts are not subject to specific form “unless otherwise regulated by law”, and under Article 27 of the TBK, the contract may be null and void if the parties do not oblige by that form. Therefore, mandatory rules set out by law may limit freedom of contract. It is important to distinguish whether the provisions are mandatory or not. The mandatory rules are legal rules that cannot be subjected to contrary agreement by the parties5. The rules protect the overriding public interest rather than the will of the parties. Thus, these cannot be disclaimed by parties6. For these reasons, the Law providing that the language of contracts and any transactions must be Turkish shall be considered as a mandatory rule.
Under Article 27 of the TBK, in the event of a violation of mandatory provisions, contracts shall be void and null. The provision also imposes fine for parties7. However, the invalidity of a contract and sanctions against parties may be in question8. Administrative sanctions can be issued in the event of a violation of these rules, which are regulated in the public interest9. As a result of a violation, a fine can be issued against the parties10. The consequences of the regulation shall be examined in the light of decisions of the Court of Cassation.
III . DECISIONS OF THE SUPREME COURTON THE IMPLEMENTATION OF THE LAW
A. Regulations for Legal Entities Subject to Turkish Law
805 sayılı Kanun’un 1. Maddesi’ne göre, “Türk tabiiyetindeki her nevi şirket ve müesseseler, Türkiye dahilindeki her nevi muamele, mukavele, muhabere, hesap ve defterlerini Türkçe tutmağa mecburdurlar.” 805 sayılı Kanun’un 1926 yılında yürürlüğe girmesinden ötürü kullanılan dil eski olmakla birlikte kullanılan kavramların doğru anlaşılması emredici olan Kanun hükmünün doğru uygulanması açısından önemlidir. Söz konusu düzenleme ile Türk uyruklu her şirket companies or by local companies affiliated to a foreign parent company within Turkey shall be regulated in Turkish11. Interpreting this rule as per argumentum e contrario, Turkish companies are not obliged to sign contracts in Turkish outside Turkey. While commercial and economic relations between countries are growing and this rule can be considered neglected, the Court of Cassation evaluates the scope of the Law more restricted in the case of legal transactions and contracts between Turkish companies. In the judgement of the 11th Civil Chamber of the Court of Cassation dated 26.03.2012 and numbered 2012/3122 E. and 2012/4073 K., the court emphasizes the need to implement the regulation in question:
“also by taking into consideration the fact that the place of performance is Turkey, it is understood from the file that both parties of the proceeding are of Turkish nationality and that the contract(s) between the parties – the existence of which is undisputed – has been executed in English, while as per Article 1 of Law No.805 it must be executed in Turkish.”
There are exceptions provided by the law, for example regarding companies subject to Turkish law. The judgement of the 11th Civil Chamber of the Court of Cassation dated 01.12.2016 and numbered 2015/11036 E. and 2016/9260 K. is an example that indicates how the judiciary restricts the scope of the Law and this judgement should be considered an exception. The case arises from the consultancy and legal service agreement regulated in English between parties subject to Turkish law. The court of the first instance evaluates the contract in English as a violation of the mandatory rule regulated by Article 1 and 4 of the Law. The 11th Civil Chamber of the Court of Cassation shares this point in principal. However, the Court points out that in considering the contract terms executed between the parties, the claim on the nullity of contract on the sole grounds of the language shall not allow the claimant to not fulfill the contract terms and escape liabilities regarding payment. Regarding the full performance of the terms and conditions, it can be argued that the Court of Cassation stipulated an exception on the principle of good faith. In considering the claim as a violation of the Law, it may be ruled that the Law is exercised in good faith. Nevertheless, this approach has not been uniformed by the courts yet, so it must be emphasized that it is essential for legal entities subject to Turkish Law to follow the rules.
B. Regulations for Companies and Institutions Subject to Foreign Law
According to Article 2 of the Law, “(f)or foreign companies and institutions, this obligation is relevant in cases of correspondence, transactions, or communications with institutions or natural persons of Turkish nationality or in cases of presentation of documents and books to public officers and institutions.”
As it can be seen from the provision, the Law restricts the mandatory rule to use the language of Turkish for foreign companies as determined in the Law. The exceptions regarding the application of Turkish language for foreign companies is for business, transactions, correspondence and contracts with parties and public institutions of Turkish nationality. It should be noted that Article 2 regulates only “correspondence, transactions or communications” and that the term "contract" was explicitly excluded from the Article. This regulation may raise questions in practice. The term of "transaction" can be argued to cover contracts, or the legislator could consciously avoid including “contracts”. However, the Court of Cassation states that the arbitration clause in contracts regulated in English is a violation of the Law. This approach should avoid such contradictions12.
According to Article 3 of the Law, “(a)lthough the companies and institutions referred to in Article 2 may use a language in addition to Turkish, Turkish text is of primary importance and it is obligatory to put the signatures of authorized persons under Turkish text. Despite this condition, the text in Turkish is binding even if the signature is subject to the other part or copy in another language.”As laid out in the provision above, contracts may be signed in a language other than Turkish. However, regarding legal transactions within the scope of the Article, although texts may be signed in other languages, the text signed in Turkish will prevail. In other words, the text in Turkish remains valid despite other texts signed in another language. In fact, this provision is a guideline for parties required to comply with the rule in contracts signed between foreign companies and Turkish companies. Although the mandatory rule makes it clear that documents signed with Turkish institutions must be in Turkish, the rule may be complicated for contracts formed in other languages. Herein, foreign parties shall sign a contract in Turkish and other languages under Article 2 and 3 of the Law and the text in Turkish shall be applied in the event of legal conflict. This approach is appropriate as contracts in other languages do in effect come under the Law, and then any legal dispute that arises at a later date and any cases arising from that issue may be evaluated otherwise. According to Article 4 of the Law, “(a)fter the enforcement date of this law, documents and records, executed against the first and second articles, will not be taken into consideration in favor of companies and institutions.” According to this Article, texts signed in other languages shall not be taken into consideration in favor of the party. The Court of Cassation evaluated a dispute according to the validity of a contract signed between a bank in Turkey and submitted to a foreign branch of the same bank in another language. Accordingly, the Court emphasizes the importance of Article 4 and ruled that Article 1 and 4 of the Law should be evaluated together13. The Court also draws attention to the fact that parties may forfeit due to the rule that shall not be applied in favor of the party under Article 4 of the Law14. The waiver of the parties from claims under Article 4 of the Law will be invalid in this case since the provision of the Law is mandatory.
The Court of Cassation considers terms in a foreign language due to the nature of the business as an exception. In that case, the use of terms in a foreign language is permissible in cases where it is necessarium15. According to Article 7 of the Law,16 “Any person who violates the provisions of this Law shall be punished with a fine not less than a hundred days.” Fines can be issued in the event of a violation of the rule. Although the Court of Cassation has not yet applied that sanction, the rule should be taken into consideration by parties on the ground that the mandatory rule protects the public interest
IV. CONCLUSION
The Law covering the use of the Turkish language in documentation has not been the subject of much discussions in the literature. However, it is essential in relation to contracts. International purchases and expenses are expanding as a result of growing commercial relations. The Law is imperative for effectively implementing provisions, but parties often do not take these mandatory rules into account. Since enactment of the Law, the Court of Cassation has arrived at different decisions. However, parties should act prudently and in line with the Law notwithstanding the different views. In considering the Supreme Court Decisions, the rule may be considered under the principle of good faith. This matter may lead to significant issues, in particular in high-cost disputes or arbitration agreements if parties sanction the nullity of contracts. Therefore, companies and institutions subject to Turkish Law should act in absolute compliance with Article 1 of the Law. International companies and institutions must comply with Articles 2, 3, 4 and should take into consideration the judgements of the Court that state that Turkish text must be added to contracts signed between companies and institutions subject to Turkish Law and which take effect in Turkey. In doing so, overseas companies will minimize the risk of fines and, more importantly, nullity of contracts due to violation of this mandatory rule.
BIBLIOGRAPHY
FAHRI ERDEM KASAK, Sozlesme Ozgurluğunun Sınırı Olarak Kanunun Emredici Hukumlerine Aykırılık, Oniki Levha, Istanbul 2019.
KÜBRA DOGAN YENISEY, Is Hukukunun Emredici Yapısı, Beta, Istanbul 2014.
JOSEPH UNGER, System des österreichen allgemeinen Privatrechts, Leipzig 1856. http://dlib-pr.mpier.mpg.de/m/ kleioc/0010/exec/books/%22211488%22.
M. KEMAL OGUZMAN / NAMI BARLAS, Medeni Hukuk, Vedat Publication, 20. Edition, Istanbul 2014.
FOOTNOTE
1 M. Kemal Oguzman / Nami Barlas, Medeni Hukuk, Vedat Publication, 20. Edition, Istanbul, 2014, N. 926.
2 The Court of Cassation 4. CD, 26.10.1978, numbered 1977/13113 E., 1978/12134 K.
3 The General Assembly of the Court of Cassation, 22.05.2013, numbered 2012/11-1601 E., 2013/752 K..
4 The Official Gazette, dated 4.2.2011, numbered 27836.
5 The Court of Cassation 13. CD,. 22.11.2012, numbered 2012/17865 E.,. 2012/26319 K.
6 Kübra Dogan Yenisey, Emredici Yapı, Beta, Istanbul, 2014, p. 394, cited by Fahri Erdem Kasak, Sozlesme Ozgürlüğünün Sınırı Olarak Kanunun Emredici Hukumlerine Aykırılık, Oniki Levha, Istanbul, 2019, p. 287.
7 Kasak, p. 475.
8 Joseph Unger, System des österreichen allgemeinen Privatrechts, Leipzig, 1856. http://dlibpr. mpier.mpg.de/m/kleioc/0010/exec/ books/%22211488%22, naklen, Kaşak, p. 476.
9 Unger, p. 56.
10 The Law numbered 805, Art 7.
11 The Court of Cassation 11. CD., 26.03.2012, numbered 2012/3122 E., 2012/4073 K.
12 The Court of Cassation 11. CD, 04.03.2013, numbered 2012/4088 E., 2013/3972 K.
13 The Court of Cassation, 11. CD, 04.12.2007, numbered 2006/89 E., 2007/15338 D. ve 04.05.2009 dated, numbered 2009/2051 E. and 2009/5292 K.
14 The Court of Cassation 11. H.D., dated 04.05.2009, E. 2009/2051, K. 2009/5292.
15 The Court of Cassation 11. CD, 30.10.19791979/3309 E., 1979/5469 K
16 The relevant provision was updated on 23.01.2008 with the 5th article of the Law No. 5728 and it is in force.
