In a series of recent decisions, the 11th Civil Chamber of the Supreme Court ruled that a Turkish defendant is barred from raising a motion for lack of jurisdiction on the grounds that a foreign court has jurisdiction by agreement by application of the good faith principle enshrined under Article 2 of the Turkish Civil Code. The recent decisions, Nos. 2015/11534-2016/8512, 2015/9758-2016/4646 and 2015/5517-2015/12591 dated 31.10.2016, 25.04.2016 and 25.11.2015 respectively, mirror the 11th Civil Chamber’s criticized ruling on the same issue back in 2009.
The Supreme Court’s general stance on the application of the good faith principle to questions of “personal jurisdiction”
All three of the recent decisions revolve around the same settings: A perfectly valid forum selection clause conferring jurisdiction on foreign courts and a foreign claimant suing a Turkish defendant in Turkey despite the existence of a valid forum selection clause in favor of foreign courts. In each case, the first instance courts dismissed the case for lack of jurisdiction upon a motion submitted by the Turkish defendants. In all cases, however, the 11th Civil Chamber held on appeal that the Turkish defendants’ motions to dismiss for lack of jurisdiction were incompatible with the good faith principle, as a Turkish defendant is in a better position to defend itself before the courts of its own territory. While quashing the first instance decisions for overlooking the incompatibility with the good faith principle, the 11th Civil Chamber made a reference to the Supreme Court’s Civil General Assembly Decision of 9 May 1984, which provided that the principle of good faith is also applied for personal jurisdiction issues. The dispute in 1984 was between two Turkish parties, and the defendant was pursued before the execution offices located in the territory of its own headquarters. The General Assembly ruled that the defendant was acting in bad faith by raising a motion to dismiss for lack of jurisdiction solely to delay the proceedings. Parallel to this reasoning, the 11th Civil Chamber’s decision No. 2008/5454-2009/2604 dated 6 March 2009 also held that, as the Turkish defendant was in a better position to defend itself before the courts of its own territory; its motion to dismiss for lack of jurisdiction was dismissed regardless of the forum selection clause empowering Bremen courts. Although this decision attracted criticism from legal scholars, the recent decisions solidify the previous decisions and show that the 11th Chamber is consistent with its stance on the issue.
A hint on validity of asymmetrical forum selection clauses
In Decision No. 2015/9758-2016/4646, the 11th Civil Chamber confirmed the validity of a unilateral (asymmetrical) forum selection clause, which provided the claimant with an additional option to sue the defendant in its own territory, an option that was not available to the defendant. Unilateral jurisdiction agreements are frequently contained in distribution and loan agreements, and there have been discussions on whether unilateral jurisdiction agreements are valid under Turkish law and the Turkish Supreme Court’s opinion on the subject. These recent decisions could take us one step closer to obtaining an established precedent on the validity of unilateral forum selection clauses.
Foreign claimants may consider suing their Turkish-headquartered debtors in Turkey as suing a debtor in the country where enforcement against assets will take place provides a much quicker remedy, despite a valid forum selection agreement excluding the jurisdiction of Turkish courts being in force. However, these recent decisions do not provide sufficient precision as to the successful outcome of such pursuit, and each case requires separate assessment. These decisions also reveal the 11th Civil Chamber’s inclination to consider unilateral forum selection clauses valid, and with one decision even going as far as enforcing such a clause. Although still not sufficiently persistent to take the form of a precedent, these decisions in general are thought to provide guidance to practitioners on the Supreme Court’s stance on the validity of unilateral forum selection clauses.