Choice of Law

Also known as: Governing Law, Applicable Law, Choice-of-Law Clause, Uygulanacak Hukuk Seçimi, PILPL Article 24

In short

The parties' designation, in a contract with a foreign element, of the country's law that will govern their contractual relationship.

In international commercial contracts, the governing law directly determines the content of rights and obligations. In Turkey this is regulated by Law No. 5718 on Private International and Procedural Law (PILPL).

Choice of Law (PILPL Article 24)

Contractual obligations are governed by the law expressly chosen by the parties. An implied choice clearly demonstrated by the terms of the contract or the circumstances is also valid.
The chosen law may apply to all or part of the contract.
A choice may be made or changed at any time; a later choice is retroactive, without prejudice to third parties’ rights.

Absent a Choice

The law most closely connected with the contract applies. This is deemed to be the law of the habitual residence of the party performing the characteristic obligation at the time of conclusion or, for contracts concluded in the course of commercial or professional activities, its place of business — e.g. the seller’s place of business in a sale, the service provider’s in a service contract. If another law is more closely connected, that law applies.

Limits

Real estate: Contracts relating to real estate or its use are governed by the law of the country where it is located (PILPL Article 25).
Consumer contracts: A choice of law cannot deprive the consumer of the minimum protection of mandatory rules of the law of its habitual residence (PILPL Article 26).
Employment contracts: A choice cannot remove the minimum protection of mandatory rules of the law of the employee’s habitual workplace (PILPL Article 27).
Public order and overriding mandatory rules: Provisions of the chosen foreign law manifestly contrary to Turkish public order are not applied; overriding mandatory rules of Turkish law (e.g. competition, foreign exchange and data protection rules) always apply (PILPL Articles 5-6).

Difference from Jurisdiction and Arbitration

A choice of law does not determine which court hears disputes. A separate jurisdiction agreement or arbitration clause is needed. For enforcing foreign judgments and awards in Turkey see Recognition and Enforcement.

Frequently Asked Questions

Can two Turkish companies choose foreign law?

The freedom to choose law under the PILPL applies to contracts with a foreign element. In a purely domestic relationship, choosing foreign law does not override the mandatory rules of Turkish law. A foreign element arises where, for example, one party is foreign or the place of performance is abroad.

Which law applies if no choice is made?

The law most closely connected with the contract — generally the law of the country where the party performing the characteristic obligation has its habitual residence or, for commercial contracts, its place of business (PILPL Article 24(4)).

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