Arbitration in Corporate Law Disputes: Turkey

Validity of Arbitration Clauses in the Articles of Association, Shareholders’ Agreements, and Joint Venture Agreements

In recent years, arbitration in corporate law disputes has become increasingly popular due to the significant advantages it offers over state courts, particularly in commercial matters. Arbitration provides a faster mechanism for dispute resolution, allows parties to appoint arbitrators with specialized expertise, and ensures flexibility and confidentiality throughout the proceedings. It also benefits from the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (“New York Convention”), which enables arbitral awards to be recognized and enforced in all signatory states—an attractive feature in cross-border transactions.

This growing preference for arbitration in commercial matters has naturally extended to company law disputes, given that it can promote both domestic and foreign investment by offering an efficient and specialized dispute resolution method. Nevertheless, despite the various advantages of arbitration, certain corporate disputes—particularly in capital companies—may not be arbitrable.

This article examines the validity of arbitration clauses in several key documents regulating corporate relationships: (i) the articles of association, (ii) shareholders’ agreements, (iii) joint venture agreements, and (iv) share purchase agreements. It also analyzes the notion of “arbitrability” under Turkish law in order to clarify when arbitration constitutes a valid dispute resolution mechanism in corporate law.

I. Distinguishing Characteristics of Corporate Law, Capital Companies, and Ordinary Partnerships

Unlike disputes arising from contracts governed purely by the Turkish Code of Obligations (TCO), corporate law disputes extend beyond the contractual parties to encompass additional stakeholders. For example, the articles of association of a capital company do not merely bind the company’s founders but also subsequent shareholders and board members. Because of this broader impact, company law imposes more restrictive and mandatory rules than typical contract law principles.

In particular, the Turkish Commercial Code (TCC) subjects capital companies (such as joint stock and limited liability companies) to a set of mandatory regulations and allows only limited freedom in tailoring corporate governance rules. Consequently, many shareholders opt to include specific mechanisms or obligations in separate contractual documents—such as shareholders’ agreements, joint venture agreements, or share purchase agreements—rather than in the articles of association. It is important to stress, however, that the decision to use separate agreements does not necessarily render an arbitration clause in the articles of association invalid.

The key point is that each corporate vehicle—capital companies, ordinary partnerships, and joint ventures—has unique legal characteristics governed by different statutes. Similarly, the agreements or founding documents underlying these business forms (e.g., articles of association, shareholders’ agreements, joint venture agreements, share purchase agreements) vary in terms of contractual freedom, the scope of the parties’ autonomy, and the range of affected interests. Accordingly, the validity of an arbitration clause must be assessed separately for each type of agreement.

II. Legal Nature of Arbitration and Arbitratbility

Under Turkish law, arbitration is regulated by two different statutes, depending on whether there is a foreign element. Accordingly, arbitration proceedings without a foreign element and seated in Turkey are subject to the Turkish Code of Civil Procedure (Law No. 6100, “HMK”). Arbitration proceedings with a foreign element and seated in Turkey are subject to the International Arbitration Law (Law No. 4686, “MTK”).

Although two different statutes apply depending on whether a foreign element is present, both include mandatory provisions stipulating that disputes not subject to both parties’ autonomy of will are not arbitrable. Article 1/4 of the MTK states that it “… does not apply to disputes concerning in rem rights on immovable property located in Turkey and disputes that are not subject to both parties’ will.” Article 408 of the HMK similarly provides that “disputes concerning in rem rights on immovable property or matters not subject to the will of both parties” are not arbitrable.

Hence, when considering the validity of arbitration clauses contained in legal instruments (such as articles of association, shareholders’ agreements, joint venture agreements, share purchase agreements) that form the basis of corporate law disputes, one should determine whether the disputes arising from those instruments are subject to the will of both parties.

Indeed, the Court of Cassation has consistently ruled that the essential criterion in determining whether a corporate law dispute is arbitrable is whether the parties can freely dispose of the rights in dispute (see, for instance, Court of Cassation 11th Civil Chamber, 2011/13485E., 2012/19915K).

III. Evaluating Arbitration in Corporate Law Disputes

Because the nature and legal regime of each corporate document differ, each must be examined individually to ascertain whether a given arbitration clause is valid, especially when implementing arbitration in corporate law disputes. Shareholders’ agreements, for instance, often enjoy broader contractual freedom under the Turkish Code of Obligations (Law No. 6098, “TCO”), whereas the articles of association are subject to more restrictive rules under the Turkish Commercial Code (Law No. 6102, “TCC”). Below is an overview of the main categories of corporate documents and how arbitration clauses may or may not be enforced within each.

a. Articles of Association in Capital Companies

As noted, the articles of association of capital companies are governed by mandatory provisions of the TCC and thus differ from ordinary contracts under the TCO. The core reason for this distinction is that, from the moment a company is incorporated and gains legal personality, the articles of association have a far broader impact compared to ordinary contracts. Indeed, a company’s articles of association bind not only its founding shareholders but also the corporate entity itself, its management bodies, and any new shareholders who may join later. Therefore, the autonomy of will and contractual freedom in the articles of association are much more limited compared to law-of-obligations contracts.

Article 340 of the TCC explicitly provides that the articles of association may diverge from the TCC’s mandatory provisions only if the law expressly permits it. However, it should be stressed that the TCC does not set forth any positive or negative regulation regarding the inclusion of an arbitration clause in the articles of association. In the absence of such a regulation, adding an arbitration clause to the articles of association willnot violate TCC Article 340, and thus one may include arbitration clauses in the articles of association, without violating the mandatory provisions.

Nevertheless, the acceptance that an arbitration clause may be included in the articles of association does not imply that such a clause would be valid for all disputes within the company. Indeed, TCC Article 340 is not the only consideration for companies; provisions such as TCC Article 480, which establishes the single-debt principle for joint stock companies, must also be evaluated, and the arbitration clause must be formulated so as not to conflict with them. Based on Turkish court precedents, the following internal corporate disputes, among others, are typically considered not arbitrable:

Invalidity of Corporate Organ Resolutions
Annulment of General Assembly Resolutions
Invalidity of Board of Directors Resolutions
Dissolution of the Company for Just Cause
Expulsion of a Shareholder
Shareholders’ Statutory Rights to Sue (e.g., liability suits against directors)

b. Shareholders’ Agreements (Shareholders Agreement – SHA)

In some cases, shareholders prefer to conclude a separate shareholders’ agreement governed by the TCO to avoid the TCC’s constraints. Such agreements—entered into by some or all shareholders—define how shareholders will exercise their rights and meet their obligations vis-à-vis one another.

Shareholders’ agreements inherently regulate rights and obligations that shareholders owe each other. Disputes arising from these contracts generally involve matters that parties can freely dispose of. Consequently, arbitration clauses in shareholders’ agreements will usually meet the requirements of HMK Article 408 and MTK Article 1/4, rendering them arbitrable. Indeed, Court of Cassation’s settled case law supports the arbitrability of shareholders’ agreement disputes, holding that arbitration clauses therein are valid so long as they satisfy the other requirements of validity.

c. Arbitration Clauses in Shareholders’ Agreements and Their Impact on the Articles of Association

Although it is well settled that shareholders’ agreements are arbitrable, there remains a question as to whether an arbitration clause in such an agreement also binds the company and produces consequences under corporate law. A school of thought in the legal doctrine maintains that the arbitration clause in a shareholders’ agreement applies only to the signatory shareholders and not to the corporate entity itself. However, recent Regional Court of Appeal judgments suggest a different approach.

A noteworthy decision by the Istanbul BAM 14th Civil Chamber addressed the removal of a limited company manager under TCC Article 630/2. In that case, the two shareholders of a limited company had signed a shareholders’ agreement before the company’s formation, including an arbitration clause stipulating that any disputes concerning the company would be resolved by arbitration. The court reasoned that management of the company was clearly covered by the shareholders’ agreement, thereby bringing any dispute about the manager’s dismissal within the scope of that arbitration clause.

Furthermore, the court held that the arbitration clause—signed by all shareholders before the company’s formation—would be binding on the later-formed company’s articles of association without an additional requirement to insert the same arbitration provision into the articles. The court stated:

“It is not necessary for the arbitration clause to be set out in the company’s articles of association. If, prior to the company’s establishment, the parties have signed a shareholders’ agreement regulating the essence of their partnership, they may insert a clause stipulating that disputes arising between the partners will be resolved through arbitration. There is no obligation to insert this clause into the articles of association afterwards in order for it to be valid.”

In the same ruling, the court addressed the Court of Cassation precedent holding that annulment of general assembly resolutions is not arbitrable and distinguished its reasoning by noting the difference in legal framework pre- and post-adoption of the new TCC. Specifically, it pointed out the TCC’s legislative intent, reflected in the explanatory notes to TCC Article 561, demonstrating a more arbitration-friendly approach in certain company disputes. The relevant section from the Court’s decision is as follows:

“In the aforementioned decision of the 11th Civil Chamber of the Supreme Court (File No. 2011/13485E., Decision No. 2012/19915K., dated 05.12.2012), it was held that the arbitration clause in the company’s articles of association was invalid and thus the annulment of a General Assembly resolution could not be decided by arbitration. However, that dispute arose under the former Turkish Commercial Code No. 6762.

Indeed, it is evident that the legislator expressed an intention that corporate disputes could be arbitrable in the rationale for Article 561 of the Turkish Commercial Code No. 6102. This provision concerns the jurisdiction over liability actions against company founders, executives, auditors, and liquidators, and in its justification, it is stated that the third paragraph of Article 309 of the former Law No. 6762 has been turned into an independent provision”

Whether this line of reasoning will ultimately lead the Court of Cassation to shift its stance on annulment of general assembly resolutions or the broader arbitrability of corporate law disputes remains to be seen. At present, no definitive precedent on these specific issues has emerged.

d. Share Purchase Agreements

Share purchase or share transfer agreements are also contracts governed by the TCO. As such, they involve matters that the parties can generally freely dispose of, and any resulting dispute would typically be arbitrable under HMK Article 408 and MTK Article 1/4.

Turkish Court of Cassation decisions reinforce that an arbitration clause in a share purchase agreement is valid if properly drafted, as the agreement itself does not implicate public policy. However, it is critical to emphasize that any arbitral award resulting from such an agreement will bind only the contracting parties. It does not extend to, or bind, the corporate entity whose shares are being transferred if that entity is not a party to the arbitration clause.

e. Ordinary Partnership Agreements and Joint Ventures

Under Turkish law, ordinary partnerships (governed by Articles 620 et seq. of the Turkish Code of Obligations) are agreements by which two or more persons combine their assets or labor for a common goal. Although Turkish legislation does not explicitly define “joint venture” agreements, they are generally treated as a type of ordinary partnership.

Because ordinary partnerships and joint ventures arise from the free will of the contracting parties, they are not subject to the restrictive framework that applies to capital companies. Accordingly, they fall within the ambit of contractual freedom. Thus, including an arbitration clause in such agreements—and resolving any related disputes through arbitration—raises no particular legal obstacle.

IV. Conclusion

Arbitration in corporate law disputes is increasingly regarded as a viable and efficient method for resolving corporate law disputes. However, its applicability and effectiveness hinge on the nature of the dispute, the type of agreement involved, and the provisions of the relevant statutes. Whether in articles of association, shareholders’ agreements, joint venture agreements, or share purchase agreements, the validity of arbitration clauses depends on both the legal framework governing the agreement and whether the rights at stake are subject to the parties’ free disposition.

The dynamic nature of this field is evident in recent court decisions, which continue to reshape the boundaries of arbitrability in corporate disputes. Parties wishing to benefit from arbitration’s advantages—speed, flexibility, expertise, and confidentiality—must carefully draft and structure their arbitration clauses. This involves clarifying the scope of arbitrable issues, excluding any matters governed by mandatory provisions, and ensuring that the chosen arbitral mechanism is appropriate to the dispute at hand.

For businesses and investors seeking to capitalize on the efficiency, specialized expertise, and enforceability that arbitration offers, careful attention to arbitration clauses in corporate law documents is critical. While the Turkish Commercial Code places certain restrictions on the arbitrability of specific internal corporate matters, a well-drafted arbitration clause—tailored to exclude non-arbitrable issues—can still deliver significant advantages. This proactive approach not only mitigates the risk of protracted litigation but also fosters continuity in commercial relationships, reinforcing trust and stability among shareholders, partners, and investors alike.