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FinTech has immense potential to enhance financial efficiency and inclusion across Europe and beyond. By addressing gaps in user needs often overlooked by traditional financial service providers, FinTech solutions cater to both existing demands and emerging needs fueled by the growing digital economy.
In regions with high mobile phone and internet penetration, such as non-European countries, innovative FinTech models present opportunities to address unmet financial service needs. While global trends show an increased adoption of FinTech innovations, regional differences persist, especially between EU and non-EU countries. These differences include levels of digitization, FinTech adoption rates, and regulatory capacities, with non-EU countries generally lagging behind their EU counterparts. Additionally, key drivers for FinTech adoption vary significantly across regions.
This information note focuses specifically only on the validity and enforcement of electronic agreements between Turkish parties (companies and individuals) and European parties (companies and individuals).
Validity of Electronic Agreements
Electronic agreements, including electronic contracts and terms of service, play a vital role in Europe’s fintech ecosystem. Their validity is governed by both regional regulations, such as the EU’s eIDAS Regulation, and national laws. The eIDAS Regulation (Electronic Identification, Authentication, and Trust Services) ensures that electronic signatures and agreements are legally binding across EU member states.
Three types of electronic signatures are recognized under eIDAS: simple electronic signatures, advanced electronic signatures (AES), and qualified electronic signatures (QES). Among these, QES provides the highest level of legal certainty. For electronic agreements to be valid, the following conditions must be met:
- Consent: The parties must clearly agree to the terms.
- Authentication: The identities of signatories must be verified using reliable methods, such as digital IDs or certificates.
- Electronic Signature: Advanced electronic signatures (AES), and qualified electronic signatures (QES) should be used for signing.
- Integrity: Agreements should be tamper-proof and securely stored.
When one party to an electronic agreement is based in Turkey, the enforceability and validity of the agreement will depend on Turkish law, as well as the applicable international and regional regulations. Turkish law recognizes electronic agreements under the Turkish Code of Obligations (TCO) and the Electronic Signature Law (No. 5070). Electronic Signature Law distinguishes between regular electronic signatures and secure electronic signatures. Secure electronic signatures, which rely on qualified electronic certificates issued by accredited Turkish certification authorities, carry the same legal weight as handwritten signatures and are essential for high-stakes agreements. Electronic agreements must also meet general contractual requirements, such as mutual consent, a lawful subject matter, and the legal capacity of the parties.
International Private and Civil Procedure Law
For electronic agreements involving foreign parties, the choice of law and jurisdiction clause determines which country’s laws apply. In the absence of such a clause, Turkish law may govern the agreement if it was executed in Turkey or has a strong connection to Turkey (e.g., the Turkish party’s principal place of business).
Agreements between Turkish and European parties must comply with Turkish regulations for enforceability in Turkish courts and align with EU regulations (e.g., eIDAS) for enforceability in Europe. Additionally, any agreement involving parties from non-European countries, such as the UK, must adhere to their respective national regulations, including consumer protection, data privacy, electronic signatures, and anti-money laundering laws.
Dispute Resolution
If an agreement specifies the application of EU law or another jurisdiction’s law, Turkish courts generally respect the choice unless it conflicts with Turkish public policy. In the absence of governing law clause, Turkish courts may apply Turkish law, or where applicable, the United Nations Convention on Contracts for the International Sale of Goods (CISG).
Enforcement of foreign judgments or arbitral awards in Turkey based on digital agreements is subject to exequatur procedures (recognition and enforcement of foreign judgments). Turkish public policy considerations may limit enforcement in certain cases.
Practical Recommendations for Agreements involving Turkish Parties
To mitigate risks and ensure enforceability, FinTech companies should consider the following:
- Consent: Clearly obtain agreement from all parties.
- Authentication: Verify signatories’ identities using reliable methods such as digital IDs or certificates.
- Electronic signature: Use electronic signatures that meet highest legal standards in both jurisdictions (e.g., QES certified under eIDAS for the EU and SES for Turkey).
- Integrity: Ensure agreements are tamper-proof, securely stored and backed by detailed transaction records.
- Compliance: Adhere to mandatory law and regulations in both jurisdictions, including consumer protection, data privacy, electronic signatures, and anti-money laundering regulations.
- Transparency: Use clear and simple language in terms and conditions.
- Cybersecurity: Maintain robust cybersecurity measures to protect digital agreements and related records.
- Dispute Resolution: Include clear governing law and jurisdiction clause, specifying arbitration or courts in a neutral jurisdiction if appropriate.
By adhering to these principles, fintech companies can reduce legal risks and improve the enforceability of digital agreements under Turkish and EU laws.
