Drafting and Review of Commercial Contracts for Foreign Investors: What to Watch Out For

As of 2026, the number of foreign-capital companies operating in Turkey continues to rise compared to previous years, and alongside this growth, disputes arising from commercial contracts have become more frequent. For foreign investors setting up a company in Turkey or partnering with a local business, one of the most critical stages is the drafting and review of the commercial contract to be signed. So what exactly should be watched out for during this process?

Why Does This Matter So Much?

Suppose an investor from Germany is about to sign a distribution agreement with a software company in Istanbul. The contract is drafted in Turkish and only summarized to them verbally. Months later, when a dispute arises over payment terms, the investor realizes they never actually knew what the text they signed really said.

This scenario reflects one of the most common mistakes foreign investors make. Signing a contract without fully understanding it creates problems that are among the hardest to fix later. While Foreign Direct Investment Law No. 4875 guarantees foreign investors equal treatment with domestic investors, that guarantee does not by itself make the contract favorable to the investor. What actually protects the investor is a carefully drafted contract reviewed by an independent legal eye.

Key Elements to Watch For When Drafting a Contract

There are certain core items that should never be overlooked when drafting a commercial contract. For example, an investor about to sign a supply agreement with a textile manufacturer in Izmir should check each of the following points one by one:

If any of these items is left incomplete or vague, one of the parties may try to interpret it however suits them best. Under the Turkish Commercial Code (No. 6102), parties to a commercial transaction are required to act as a prudent merchant would, which makes it all the more important that the contract be drafted completely and correctly from the outset.

Choosing the Governing Law and Competent Forum

A question that comes up often is: “Should my contract be governed by English law or Turkish law?” This is a choice that should never be overlooked, particularly in cross-border commercial relationships. If one of the parties is established in Turkey and performance takes place in Turkey, applying Turkish law is often the more practical route, though this should be assessed separately for each contract.

Where to bring a dispute matters just as much. The parties may opt for the general courts (the competent court under the Code of Civil Procedure No. 6100) or choose arbitration instead. The Istanbul Arbitration Centre (ISTAC), established in 2015, offers parties, especially in international commercial disputes, a faster and confidentiality based resolution mechanism.

Special Risks in Partnership and Shareholders’ Agreements

It is not only sale or service contracts that matter. For foreign investors setting up a company alongside a Turkish partner, the shareholders’ agreement deserves particular attention. For example, an investor who forms a limited liability company holding a 40% stake with a Turkish partner may end up pushed out of company management later on, if the agreement does not secure their say as a minority shareholder in key decisions.

Agreements of this kind need detailed clauses on preemptive rights, profit distribution policy, exit terms, and non-compete obligations. If the investment also involves acquiring real estate, the points to watch when buying title deed (TAPU) property as a foreigner should be handled with the same level of care.

How Does Contract Review (Legal Due Diligence) Work?

Once a contract has been drafted, or received as a draft from the other party, the next step is to have the text reviewed by an independent lawyer. This process generally runs through the following stages:

For example, if a distribution draft prepared for an investor from Russia is found to contain an exclusivity clause that one-sidedly favors the other party, that clause gets rebalanced during negotiation. Skip the review step, and imbalances like this only come to light once a dispute has already broken out, at which point stepping in is far more costly.

Translation, Notarization, and Official Procedures

For foreign investors, it matters a great deal that the contract is drafted correctly not only in Turkish but in their own native language as well. In bilingual contracts, the parties must clearly state which language constitutes the “governing text”; otherwise, translation discrepancies can become a dispute all on their own.

Certain types of contracts (for example, specific amendments to a company’s articles of association, or transactions involving a power of attorney) may require notarization or execution before a sworn translator. Skipping these procedural steps can leave the contract invalid later on, or unusable before official authorities.

Do I need to consult a lawyer before signing a contract?

It is not mandatory, but for high value or long term commercial relationships in particular, an independent legal review provides real assurance against disputes that could arise later.

Is a contract drafted in English valid in Turkey?

The parties are free to choose a different language, but if the contract is to be used before official authorities, a sworn translation, and notarization where required, will generally be requested.

In short: reviewing a commercial contract matters just as much as drafting it when it comes to protecting an investment. The identities of the parties, the definition of obligations, the governing law, the dispute resolution method, partnership rights, and official procedures should all be reviewed one by one before signing.