Foreign Element in Crypto Assets: Governing Law and Court

Crypto assets are recorded on an infrastructure that knows no borders, whereas jurisdiction is territorial. In relationships with a platform established abroad, the question of which country's law and which court is the first matter to settle.

🌍 When Does a Foreign Element Arise

A foreign element is present if one of the parties to a legal relationship is resident abroad, the contract was concluded abroad or the performance takes place abroad. In crypto asset relationships this element arises very often.

The platform being established abroad, the servers being located in another country, or the user agreement being made subject to a foreign law all fall within this scope.

📙 Applicable Law

The Law on Private International and Procedural Law (Milletlerarası Özel Hukuk ve Usul Hukuku Hakkında Kanun) regulates how the applicable law is determined for relationships with a foreign element. In relationships arising from contracts, the parties' choice of law is in principle the starting point.

However, the choice of law is not unlimited; there are restrictions in areas where the weaker party is protected, such as consumer contracts, and in matters of public policy. For this reason, the choice-of-law clause in a user agreement may not be decisive on its own.

⚖️ Directly Applicable Rules of Turkish Law

Some rules apply even where a foreign law has been chosen. The provisions of Law No. 6362 on the permission regime can be assessed as being of this nature: activity directed at persons resident in Türkiye raises the question of being subject to the regulatory framework.

Indeed, the Law makes it an offence in Article 109/A to carry out an activity that requires permission without permission. This brings up the debate that the scope of the regulation is not limited to institutions established within the country. For details, see our article on the offence of unauthorised activityTR.

🏛️ Determining the Competent Court

Jurisdiction is a separate question from the applicable law. The contract may specify a competent court, but the validity of such jurisdiction agreements also depends on conditions.

Where there is no jurisdiction agreement, the general rules of jurisdiction and, depending on the nature of the dispute, the special rules of jurisdiction come into play. In relationships where the weaker party is protected, the effect of a jurisdiction agreement may be limited.

🔗 Enforceability of the Decision

In disputes with a foreign element, there is a significant gap between obtaining a decision and enforcing it. Enforcing a decision against an institution resident abroad may require recognition and enforcement (tanıma ve tenfiz) procedures.

For this reason, it is important in a dispute to build the strategy from the start with the enforceability of the decision in mind. For the framework of international standards in this area, see our articles on the FATF standardsTR and the EU MiCA regulationTR.

📌 Related Topics

Proof and electronic evidenceTR · EU MiCA regulationTR · Crypto regulation around the worldTR

❓ Frequently Asked Questions