1. Are foreign plaintiffs who wish to initiate legal proceedings in Turkey subject to any bond requirements?
Pursuant to the International Private and Civil Procedure Law, foreign persons or legal entities who initiate or intervene in legal actions or initiate execution proceedings are required to deposit a guarantee to be determined by the court that will be used to bear the judicial expenses as well as to compensate the counterparty for any damages that may occur.
However, if an applicable reciprocity agreement between Turkey and the foreign plaintiff’s country of origin exists, the court may exempt the party who initiated the legal proceedings from such payment.
(For the list of the Convention Countries exempt from the bond requirement, please see: http://www.uhdigm.adalet.gov.tr/yedek/b2-sozlesmeler/sozlesmeler/03-laheysozlesmeleri/laheytaraflar.xls).
2. Does Turkey require foreign court decisions to be domestically ratified or recognized?
An award rendered pursuant to legal (civil) proceedings initiated in a foreign country that becomes final under the laws of that country could be enforced in Turkey only in the presence of an enforcement decision rendered by the competent Turkish Civil court. If a party wishes to enforce a foreign court decision in Turkey, that party should file a lawsuit for enforcement before the Turkish courts.
The conditions of the enforcement are regulated under the International Private and Civil Procedure Law. Pursuant to the Law, the conditions under which the enforcement request can be filed are as follows:
- There shall be an agreement based on the reciprocity principle between Turkey and the state in which the foreign decision has been rendered, or a legal provision or a de facto application of that state which enables the enforcement of the awards rendered by Turkish courts;
- The foreign decision shall not be rendered on a dispute under the exclusive jurisdiction of the Turkish courts; or, (provided that the defendant has opposed to the decision) the decision shall not be rendered by a court which is considered to have jurisdiction despite having no actual relevance with the parties or with the subject of the lawsuit;
- The decision shall not be in explicit contravention of the principles of Turkey’s public order;
- If the person against whom the enforcement request is addressed has not been duly invited to the court according to the laws of the country where the decision has been rendered; or if he has not been represented therein, or if the decision has been rendered unlawfully in his absence as against the provisions of the applicable laws of that country and that person has not opposed to the enforcement request before the Turkish courts, on these same grounds.
Please also note that the conditions above must be met if a foreign decision is to be recognized by the Turkish courts, except for the condition regarding the presence of “a reciprocity agreement concluded between Turkey and the country in which the foreign decision is rendered; or a legal provision or a de facto application of that country enabling the enforcement of the awards rendered by Turkish courts,” namely the applicability of the reciprocity principle.
For the list of the countries that have concluded reciprocity agreements with Turkey, please see: http://www.uhdigm.adalet.gov.tr/ts.htm
3. Does Turkey require foreign arbitral awards to be domestically ratified or recognized?
Foreign arbitral awards which are final and enforceable, or are binding upon the parties concerned, can be ratified in Turkey. Indeed in order to enforce a foreign arbitral award in Turkey, an enforcement decision should be obtained from the Turkish courts.
The conditions in which the Turkish courts would seek to enforce a foreign arbitral award are as follows:
- A valid arbitration agreement shall exist;
- The arbitral award shall be final and enforceable or shall be binding upon the parties concerned (or has not been set aside or suspended by a competent authority);
- The subject matter of the dispute shall be arbitrable;
- The party against whom the arbitral award was rendered shall be notified properly with regards to the arbitration proceedings or the appointment of the arbitrator;
- The arbitral award shall not be in explicit contravention of the principles of Turkey’s public order.
The recognition of the arbitral award is subject to the same provisions as the provisions concerning enforcement.
4. What is the general legal procedure for debt collection?
Pursuant to the Turkish Law, the creditor can directly initiate execution proceedings before the execution offices for the collection of his receivables. Pursuant to the Execution and Bankruptcy Law, in order for the creditor to initiate such proceedings, a court decision or any other document (deed) is not required. However, proceedings initiated in such a manner will only be successful unless the debtor objects to the proceedings. If the debtor files an objection within due course, the execution proceedings will automatically cease.
It is incumbent upon the creditor to reactivate the ceased proceedings. The creditor can continue the proceedings upon the cancellation/removal of the objection which is to be sought by filing a lawsuit either to remove the objection before the execution court or to cancel the objection before the civil court. In those proceedings, if the court confirms the existence of the debt, the courts would cancel/remove the objection and decide for the continuation of the execution proceedings. Furthermore, in cases where the necessary conditions are met, the court may render an additional compensation amounting to 20% of the total receivables in favor of the creditor due to the debtor’s unjust objection to the execution proceedings.
5. Is it mandatory to apply for mediation before initiating an action?
Mandatory mediation for commercial receivables has been recently introduced via the Law on Legal Procedures to Initiate Proceedings for Monetary Receivables arising out of Subscription Agreements with new articles being added to the Commercial Code and the Law on Mediation in Legal Disputes.
In this regard, as of 1 January 2019, an application for mediation has become mandatory for commercial actions listed under Article 4 of the Commercial Code or referred to in other codes before a legal action for compensation or payment of a certain amount can be made. An application for mediation is a condition for bringing a legal action before the courts, meaning that a case will be dismissed by the court on procedural grounds if the claimant in a commercial action fails to fulfil this obligation.
6. Is litigation in Turkey subject to any specific expenses?
Judiciary services in Turkey are subject to certain fees the types, rates and amounts of which are regulated by the Law of Fees. In the most general sense, the judiciary expenses are divided in two categories as application fee and judgment and writ fee.
The application fee is a fixed fee obtained from the applicant in advance as a condition of filing the lawsuit. Depending on the nature of the application, the judgment and writ fee can be either fixed or proportional. Whereas a fixed judgment and writ fee applies for the cases the subject of which concerns a non-monetary claim, the cases which concerns a monetary claim subject to a proportional judgment and writ fee determined over the amount in dispute.
Fixed fees are collected in advance, before the relevant action occurs. One quarter of the relative judgment and writ fees is collected in advance at the time of the filing of the lawsuit, and the remaining three-quarters of the amount is collected once the decision has been rendered. In the case that a lawsuit is dismissed the fixed judgment and writ fees will be collected even though the lawsuit has been subject to the relative judgment and writ fees If any, the excessive part of the judgment and writ fee which has been deposited in advance is refunded upon request. Pursuant to the current legislation, the rate for proportional judgment and writ fees is the 68,31‰ of the requested amount. For further information with regards to the fees and rates, please see:
http://www.resmigazete.gov.tr/eskiler/2016/12/20161227-13.htm
7. What are the conditions of preliminary injunction?
Pursuant to the Code of Civil Procedure, a preliminary injunction decision might be granted in case there is a possibility which makes it materially difficult or impossible to acquire a certain right due to the changes in current conditions or there is a concern for the occurrence of an inconvenient situation or possibility for significant damage due to the delay. However, a preliminary injunction decision resolving the dispute on the merits of the case cannot be granted.
The requesting party must explicitly state the grounds and type of the injunction in its application petition. It is sufficient for the applicant to prove the likelihood of the existence of the conditions required for granting an interim injunction. If the circumstances necessitate an immediate action for the protection of the rights of the requesting party, interim injunction decision might be granted without hearing the other party. In the injunction decision, the court specifies the amount and the type of the security to be deposited by the requesting party. The amount or rate of the security is not regulated under the relevant legislation. However in practice, preliminary injunction decisions are granted in exchange of a security amounting approximately to 15% of the dispute value which will be deposited in cash or in the form of a letter of guarantee.
If the preliminary injunction request is filed before filing of the main lawsuit on the merits of the case, the request should be filed before the court having jurisdiction over the dispute. If the preliminary injunction is requested during the course of a pending lawsuit, then the request should be made before the court which hears the case.
8. What are the mandatory and optional components of an arbitration agreement?
Pursuant to the International Arbitration Law, arbitration agreement is an agreement under which the parties agree for resolution of all or part of the disputes arising or to be arisen from a present legal relationship, either contractual or not, through arbitration. As validity conditions, the parties must express their intentions to arbitrate explicitly in writing which could be made as either an arbitration agreement or a clause, and their consent must be free of any kind of doubt.
Although being optional, it would be practical for the parties to agree the number and appointment of arbitrators, the language and seat of arbitration and also the applicable law under their arbitration agreements.
9. Is general authorization sufficient for representation in the arbitration in Turkish law?
Pursuant to the Code of Civil Procedure, an attorney must be specifically authorized in order to realize certain actions, which include “concluding an arbitration or arbitrator agreement”. Therefore, the attorney is granted a a general authorization, he/she cannot take any action (including signing an arbitration agreement) on behalf of his/her client unless explicitly authorized otherwise.
On the other hand, persons forming the bodies of the legal entities, which are authorized to act on behalf of the legal entity, do not act as representatives but as the legal entity itself, therefore no specific authority is required.
10. What is the lapse of time to set aside an arbitral award and what are the grounds?
Pursuant to the International Arbitration Law, an action to set aside an arbitral award shall be filed within thirty days. The period starts as of the notification of the arbitral award or the decision regarding amendment, interpretation or completion to the parties. If an action to set aside is filed, the execution proceedings of the arbitral award will automatically cease.
The court can only examine the arbitral award limited to the following grounds which are stipulated in the International Arbitration Law:
- Incompetence of one of the parties to the arbitration agreement, or invalidity of the arbitration agreement as per the applicable law or if there is no such law, as per the Turkish law
- Breach of the procedure agreed for the appointment of the arbitrator or arbitral tribunal under the arbitration agreement or foreseen in the Law
- Exceeding the arbitration time limit in the issuance of the final award
- Arbitrator’s or arbitral tribunal’s incorrect ruling on the competence or incompetence
- Arbitrator’s or arbitral tribunal’s ruling on a matter falling outside of the scope of the arbitration agreement or not ruling for all matters set forth in the claims or exceeding their authority
- Conduct of the arbitration proceeding in contradiction with the procedure agreed under the arbitration agreement, or if there is no such agreement, under the International Arbitration Law, and existence of an effect of such inconformity on the merits of the award
- Breach of the principle of equality of the parties
- Non-arbitrability of the matter of the dispute subject to the arbitral award as per the Turkish law
- Breach of the public order
The action to set aside shall be filed before the competent civil court of first instance which is the court located in the same place as the respondent’s residence or the ordinary domicile or the workplace. If the respondent does not have a residence address, ordinary domicile or workplace in Turkey, the competent court is Istanbul Civil Court of First Instance.
11. What is the time limit to file an action in administrative jurisdiction?
As per the Administrative Procedure Law, the time limit to file an action is sixty days for the actions to be filed before the Council of State and administrative courts, and thirty days for the actions to be filed before the tax courts, unless otherwise stated in the specific laws.
In terms of administrative disputes, the time limit start running from the date on which the notification is made. For tax related disputes, where the accrual is dependent on the collection, the time limit starts running from the date of collection; where there is a notification or another action replacing the notification, it starts running from the date of the notification or the date of the action that replaces the notification. In terms of taxes which are collected by deduction, the start of this time limit is the day following the date of the payment to the right-holder; and in terms of the taxes which requires registration, it is the day following the date of the registration. Finally, in cases where the administration must bring an action, the start of the time limit to file an action is the day following the date on which the relevant decision of the authority or commission arrives to the administration.
Before bringing an action and within the abovementioned time periods, the superior administrative authority, or if there is not a superior authority, the administrative body which has performed the action might be requested to abolish, withdraw or amend the administrative action or to perform a new action. This application shall cease the time limit that has started to run. If no response is given within sixty days, the request shall be deemed to be dismissed. When the application is dismissed or deemed to be dismissed, the time limit to file an action resumes and the period passed until the application date is also added.