A Turkish company exporting to the Middle East can secure its receivables through three layers of protection: clearly defining the payment method and governing law at the contract stage, deploying payment instruments such as letters of credit or bank guarantees, and making use of state-backed mechanisms such as Turk Eximbank’s export credit insurance. According to Turk Eximbank’s data for the first half of 2026, total support provided to exporters rose by 26 percent year-on-year to USD 32 billion. Of this amount, USD 16.2 billion came directly from insurance and guarantee support. This growth shows that as trade volume in the Middle East market expands, receivables risk is growing alongside it, and that this risk requires a systematic approach rather than being left to chance.
Why Growing Trade Volume in the Middle East Also Means Growing Receivables Risk
Consider a scenario. An Ankara-based building materials exporter signs a sales contract with a distributor in Saudi Arabia on 90-day payment terms. Once the goods are shipped from the port of Istanbul or Mersin, the risk arises that the distributor may delay payment, pay only partially, or not pay at all. Compared with the European market, this risk becomes more complex because of longer payment terms and a different judicial system.
The real challenge is not the possibility of non-payment itself, but the fact that which legal system and which mechanism will govern collection of the receivable has not been settled in advance. Many exporters only start asking this question after a problem arises, rather than when the contract is signed. This sequencing error weakens the protection from the outset.
Measures to Take at the Contract Stage: Payment Method and Governing Law
The first layer of protection is built before the goods are even shipped. Clearly stating in the contract the governing law, the competent court or arbitration center, and the payment method removes any uncertainty about which rules will apply if a dispute later arises. The United Nations Convention on Contracts for the International Sale of Goods (CISG), to which Turkey has been a party since 2011, applies automatically to international sales contracts unless the parties agree otherwise.
There is an important caveat here, however. Middle Eastern states vary considerably in whether and how they have adopted the CISG. Saudi Arabia, for example, acceded to the Convention in 2023 but excluded the part governing the mutual rights and obligations of buyer and seller (Part III). In practice, this means that even when the counterparty’s country is a party to the Convention, which provisions actually apply can differ from country to country. For this reason, expressly choosing the governing law in the contract remains the most reliable way to eliminate this uncertainty.
Equally important is the dispute resolution method. Rather than submitting to the local courts of the counterparty’s country, inserting an arbitration clause generally offers a more predictable path when it comes to recognizing and enforcing the resulting award in another country. We address this point in more detail below. When drafting commercial contracts, structuring these three elements (choice of law, dispute resolution method, and payment terms) consistently and in tandem is the most critical stage of the contract drafting and review process.
Securing Payment Itself Through Letters of Credit and Bank Guarantees
The second layer consists of instruments that secure the payment itself. A letter of credit (L/C) has the buyer’s bank undertake to pay against presentation of specified documents, shifting the exporter’s risk away from the buyer directly and onto the buyer’s bank. In countries perceived as higher risk, going one step further and requesting a confirmed letter of credit has a Turkish bank also confirm payment, so that the security rests on two banks instead of one.
For example, a food exporter working with a new buyer in Qatar for the first time, lacking any track record of that buyer’s payment behavior, might request a confirmed letter of credit rather than trading on open account terms from the outset. This is how an exporter protects itself before trust has been established. As a payment history develops over time, these terms can be relaxed, but choosing a cautious payment method for initial transactions prevents a collection problem before it can arise.
Bank guarantees (letters of guarantee) serve a similar function. Particularly in long-term supply or project-based contracts, a letter of guarantee issued by the buyer’s bank allows a specified amount to be collected directly in the event of a breach of contract.
Turk Eximbank’s Export Credit Insurance and Other State-Backed Mechanisms
The third layer consists of publicly backed instruments that share risks the exporter would otherwise have to bear alone. Turk Eximbank’s export credit insurance product protects against both commercial risks (the buyer’s insolvency or inability to pay) and political risks (country-level developments such as foreign exchange transfer restrictions, war, or expropriation) in the event the export proceeds cannot be collected, and can cover shipments with payment terms of up to 360 days.
Access to this mechanism is also expanding. On the participation banking side, Kuveyt Turk offers a Participation-Based Export Credit Insurance product through its branches and can accept this policy as collateral for financing extended to the exporter. The ability to use the policy simultaneously as both risk protection and a means of accessing working capital financing is a significant advantage as order volumes grow.
One point deserves particular emphasis: export credit insurance does not replace legal protection at the contract stage, it complements it. Insurance policies typically treat a properly structured contract and payment terms as a precondition for coverage. An exporter who neglects contract preparation and relies on insurance alone risks having a claim denied.
The Legal Path If Payment Is Not Made: Arbitration and Recognition of Foreign Awards
Despite all precautions, payment may still fail to materialize. At this point, the key question becomes: should the claim be brought before the local courts in the buyer’s country, or should arbitration be preferred? Many exporters never ask this question at all, leaving the contract silent on the point, and end up having to litigate on the counterparty’s home turf once a problem arises.
In our assessment, international arbitration offers a more reliable path in most cases. This is because when an award needs to be enforced in another country, recognition and enforcement of arbitral awards among states party to the 1958 New York Convention follows a relatively standardized framework. Most countries in the region, including Turkey, are parties to this Convention. By contrast, recognition of a court judgment from one country in another country can depend on bilateral arrangements between the states concerned and on public policy considerations, making the process considerably less predictable.
From the Turkish side, enforcement of a foreign court judgment or arbitral award in Turkey is possible through a recognition and enforcement action brought under Article 50 et seq. of the Turkish Code on Private International Law and International Civil Procedure (Law No. 5718). In such proceedings, Turkish courts do not re-examine the merits of the award; they only review whether the statutory conditions (such as finality, no conflict with public policy, and respect for the right of defense) have been met. This limited scope of review makes the process more predictable.
Consider a concrete example: in a payment dispute with a buyer operating in Iraq, if an arbitration clause was agreed in advance, the exporter can enforce the resulting award both in the country where the buyer’s assets are located and, if necessary, in Turkey. If there is no arbitration clause and the claim must be brought directly before the local courts, the language, procedure, and duration of the proceedings can become far less predictable for the exporter. This difference illustrates why an arbitration clause needs to be built in at the contract stage, before any problem arises.
A Practical Summary: Pre-Export Checklist
Rather than evaluating the layers described above one by one, it is more useful to treat them as a pre-shipment sequence. The questions an exporter should ask before each new Middle East transaction can be summarized as follows:
- Does the contract clearly specify the governing law and the dispute resolution method, including the arbitration center?
- Has the payment method been chosen in a way that fits the history of the relationship with the buyer and the country risk involved (open account, letter of credit, or confirmed letter of credit)?
- For high-value or long-term transactions, has an additional layer of protection, such as export credit insurance or a bank guarantee, been considered?
- Has the legal course of action in the event of non-payment, including the country in which an arbitral award would be enforced, been clarified in advance?
If these four questions can be answered clearly before the contract is signed, the exporter has secured its receivable before any problem arises, rather than having to defend it after the fact. Readers interested in more detail on the enforcement and litigation process for debt collection and on regional legal coordination can also consult our other articles on commercial disputes between Turkey and the Middle East. Once a dispute actually arises, how the debt collection process unfolds depends largely on the steps taken at the contract stage.
Legal Disclaimer
