12 April 2021
Overview of Turkish Commercial Litigation
Mandatory mediation, competent court and territorial jurisdiction, evidence, the appeal and cassation processes, interim measures and obligation of foreigners to provide a security are fundamental issues concerning commercial litigation under Turkish law. In this article, we have provided an overview of commercial litigation under Turkish law.
Article 5/A added to the Turkish Commercial Code No. 6102, as of 1 January 2019, regulates mandatory mediation as a precondition for lawsuits concerning certain commercial disputes. Accordingly, it has become mandatory to seek the resolution of a dispute through mediation prior to filing commercial disputes in which compensation or the payment of a certain amount is sought.
The assessment of whether a dispute shall be considered within the scope of the mandatory mediation should be made in light of current judicial decisions and practices on a case-by-case basis. In addition, the parties may be able to resolve disputes through voluntary mediation.
The mediation process shall be carried out by a mediator appointed by the Mediation Bureau or chosen by the parties to the dispute. The mediator has a duty to remain impartial throughout the mediation process. The mediation process for commercial disputes shall be concluded within six weeks, with a potential of a two week extension. A lawsuit may be filed before the courts in the event the dispute cannot be resolved through mediation.
Competent Court and Territorial Jurisdiction
In the Turkish judicial system, commercial courts of first instance are competent for resolving commercial disputes. In the territories where commercial courts of first instance have not been established, civil courts of first instance shall be competent. The parties cannot alter or determine a competent court by way of agreement.
The territorial jurisdiction of the courts shall be determined according to the Code of Civil Procedure No. 6100 ("CCP"). The legislation states that the territorial jurisdiction of the courts shall be determined according to the domicile of the defendant, the place of the performance of the agreement or the place of the disputed property. Parties to the dispute may alter or determine territorial jurisdiction unless there is a mandatory territorial jurisdiction for the respective dispute. For example, the parties may agree that the courts of Istanbul shall have jurisdiction to settle any dispute, as long as the dispute does not fall within the scope of a mandatory territorial jurisdiction of a court.
The burden of proof lies on the party that will benefit from the fact to be proven. Instruments of proof have been set forth as evidence in the CCP.
As a general principle in commercial disputes (for 2021 where the subject matter of litigation exceeds 4,880-TRY) there is an evidentiary requirement to use deeds as instruments of proof. Exceptions to the requirement to prove by deed have also been regulated in the CCP. In addition, requesting the counterparty to testify under oath, calling witnesses, reports of the court appointed experts, expert opinions submitted by the parties on technical and legal issues and discoveries conducted by the court have also been regulated as evidence in the CCP.
It is possible for the parties to the dispute to execute an evidential contract. The evidential contract shall allow the parties to determine which facts may be proven through which evidence in case of any dispute. An evidential contract must be executed in written form. Usually, evidential contracts are concluded by adding an article to the contracts regulating the commercial relationship between the parties.
The Appeal and Cassation Process
The judicial system in Turkey has a three-tier structure; the first instance courts where commercial cases are heard, the Regional Court of Appeal that examines the appeals against the decisions of the first instance courts and the Court of Cassation that examines the appeals against the decisions of the Regional Court of Appeal. There are also special regulations that state exceptions to the general structure described above.
The legislation determines that some judgments of the first instance court shall be deemed final, in that they cannot be appealed. Apart from these, for the year of 2021, the judgments rendered by the:
- commercial courts of first instance for the claims below TRY 5.880 shall be deemed final and cannot be submitted for an appeal examination to the Regional Court of Appeal.
- Regional Court of Appeal for the claims below TRY 78.630 shall be deemed final and cannot be submitted for an appeal examination to the Court of Cassation.
Interim Measures: Interim Injunction and Interim Attachment
The claimant may request the court to implement interim measures to secure the claim brought forward with the lawsuit. Interim measures may be requested before the initiation of the principal lawsuit, when filing the principal lawsuit or during the litigation procedure. Interim measures may be reviewed under the headings of interim injunction and interim attachment.
Interim measures and interim attachments should be requested from the court which is competent and has territorial jurisdiction. For the courts to grant interim measure requests, the applicant is expected to establish prima facie proof of their claim rather than conclusive proof.
In the event a change in current circumstances will considerably increase the difficulty or the fulfilment of the claim or make it altogether impossible; there will be a disadvantage or considerable damage being borne due to a delay, the court may issue an interim injunction on the subject of the dispute. It is important to note that the main purpose of an interim injunction is to take preventive or protective measures on the subject matter other than money. For example, if the claim is to an immovable property, the court may issue an interim injunction to prevent the transfer of the respective property to a third party.
The claimant is obligated to provide security in order to compensate for potential damages incurred by the counterparty or third parties resulting from the implementation of an interim measure within the scope of a claim which has ultimately not been accepted by the court. However, the court may decide not to take a security if the request is based on an official documentation or conclusive evidence.
Interim attachment may only be granted for monetary claims and aims to secure the timely payment of a monetary claim. An interim attachment may be imposed on the liquid and non-liquid assets of the respondent to secure the monetary claim.
In principle, requests for interim attachments are required to relate to monetary receivables which have become due and not secured through a pledge. However, it is also possible to request an interim attachment for a receivable that is not due if the debtor does not have a certain domicile, is preparing to or has fled in order to evade the fulfilment of his obligations.
The party who requests an interim attachment is obligated to provide a security, as in the case with interim injunctions. The court may decide not to take a security if the request is based on a court decision, a document that qualifies as a court decision or other justified reasons.
Obligation of Foreigners to Provide a Security
According to the Article 48 of the International Private and Procedural Law (“IPPL”), foreign individuals or legal entities who file a lawsuit or intervene in a lawsuit before a Turkish court shall be required to provide a security whose amount shall be determined by the court to cover the expenses of the legal procedures and proceedings as well as losses or damages which may be incurred by the respondent.
The court may decide not to request security in the event there is a bilateral agreement between Turkey and the nationalist/registration country of the claimant, or to provide an exemption based on the principle of reciprocity.
In the event relevant securities are not deposited in the term requested by the court, the lawsuit initiated by the foreign individual or legal entity may be rejected. Legal entities established in Turkey (regardless of having been capitalized by foreign investment) shall not be considered within the scope of this provision.
It is possible to resolve disputes between the parties through arbitration before the arbitral tribunal rather than before the court if the resolution of the dispute through arbitration is not prohibited by the law. There must be a separate arbitration agreement or an arbitration clause in the agreements governing the commercial relations between the parties for a dispute to be resolved through arbitration. It is possible to initiate a lawsuit regardless of a valid arbitration agreement or clause. In such cases, the respondent should invoke the arbitration agreement and raise an objection of arbitration within the term stipulated by legislation. Otherwise, the court may become competent to settle the dispute.
It is necessary to pay attention to the above-mentioned fundamental issues at the stages of the preparation and litigation of commercial cases. If the parties to the dispute approach the relevant matters holistically and pay attention to such issues, they may increase the likelihood of success in lawsuits, as well as prevent delays in the judicial proceedings.