Challenging and Enforcing Arbitration Awards: Türkiye - Part 3

40. Are interim measures against assets available in your jurisdiction? Is it possible to apply for interim measures under an arbitral award before requesting recognition? Under what conditions?

Yes, it is possible to obtain a provisional attachment order or a preliminary injunction decision before or during the arbitration proceedings where the seat is in Turkey (IAL, article 6). The requirements to obtain a provisional attachment order are specified in article 257 of the EBL, whereas the requirements for obtaining a preliminary injunction decision are stated in article 389 of the CPL.

Applying for interim measures under a foreign arbitral award before requesting recognition is controversial, and there are conflicting precedents. Recent precedents favour those applications. In this regard, 15^th Civil Chamber of the Court of Cassation took the view that a receivable subject to a foreign judgment cannot be deemed due until enforced by Turkish courts, and therefore foreign judgments cannot be construed as grounds for provisional attachment. On the other hand, 6^th, 11^th and 19^th Civil Chambers of the Court of Cassation have several decisions which assert that an enforcement decision should not be sought for granting a provisional attachment of assets. In parallel to this approach, most scholars acknowledge that interim measures can be applied before or during enforcement proceedings.

41. What is the procedure for obtaining interim measures against assets in your jurisdiction?

A party seeking enforcement may obtain a provisional attachment order pursuant to article 257 et seq of the EBL. The provisional attachment proceedings must be conducted before the competent court at the award debtor’s residence in Türkiye.

To obtain a provisional attachment order, the creditor must establish prima facie that the receivables are matured and unsecured; however, it is also possible to obtain a provisional attachment for unmatured receivables in some circumstances. The creditor must show a clear and present danger that the debtor will lack sufficient assets. In this regard, the applicant is expected to show that:

— the debtor has no domicile in Türkiye; and

— the counterparty is preparing or engaging in bad faith manoeuvres intending to frustrate enforcement of the arbitral award.

The court has the discretion to grant a provisional attachment subject to a deposit. Although the courts have wide discretion in determining the amount, usually 15 to 20 per cent of the awarded compensation is required as a deposit. To protect the interests of the award creditor, Turkish courts regularly grant provisional attachment applications that are filed after an award is rendered but when setting-aside or enforcement proceedings are pending.

For the enforcement of the provisional attachment, the applicant must apply to the competent execution office within 10 days of the decision date; otherwise, the provisional attachment decision is void.

According to article 389 et seq. of the CPL, the creditor may apply for a preliminary injunction decision from the competent court located at the award debtor’s residence in Türkiye.

The award creditor must showprima facie that it would be difficult or impossible to satisfy the right owing to the change that may occur in the current situation in the matter of dispute or that a disadvantage or serious damage will arise in the absence of the decision.

If the court grants the preliminary injunction decision, the applicant must deposit the amount determined by the court and request from the bailiff’s office the execution of the decision within one week of the date of the decision.

The provisional attachment order and the preliminary injunction decision will be valid until the final award is enforceable or the tribunal rejects the claim (IAL, article 6).

42. What is the procedure for implementing interim measures against assets in your jurisdiction?

There are no specific provisions for interim measures against immovable property; therefore, the provisions of the EBL for obtaining a provisional attachment order and the provisions of the CPL for obtaining a preliminary injunction decision apply.

43. What is the procedure for requesting attachment against assets in your jurisdiction? Who are the stakeholders in the process?

The arbitral award must be enforceable to start the attachment proceedings. For instance, for foreign arbitral awards, the enforcement proceedings must be completed, and for the arbitrations seated in Türkiye with a foreign element, the enforceability certificate must be obtained. Since domestic arbitral awards are directly enforceable, no further action is required.

Initially, the award creditor must apply to the bailiff’s office requesting it to issue the payment order and notify it of the judgment to the award debtor. The award debtor has seven days to pay, starting from the service date.

The award creditor can start the attachment proceedings if no payment is made within seven days. In any case, the creditor can initiate the attachment proceedings within one year, starting from the service date of the payment order (EBL, article 78).

The bailiff’s office can attach the immovables, movables (subject to the compulsory registry) and bank accounts electronically if the relevant systems are compatible with the bailiff’s office system.

Attachment proceedings differ depending on the nature of the assets and may be conducted ex parte.

The main stakeholders are the bailiffs’ offices and the enforcement courts.

44. What is the procedure for implementing attachment orders against assets in your jurisdiction?

The award creditor can request the attachment of the immovable property after seven days have passed and, in any case, within one year, starting from the service date of the payment order. On the determination of the immovable property through the asset search, the award creditor can also request the attachment of the property through UYAP. Since the bailiff’s office and the land registry systems are compatible, the attachment is registered to the records instantly. This registration restricts the award debtor’s disposal right on the immovables.

The award creditor must request the compulsory sale of the immovable property within one year of the attachment date; otherwise, the attachment will be removed (EBL, article 106).

45. Are there specific rules applicable to the attachments against sums in bank accounts or other assets deposited with banks?

The principle is to count assets held by banks as movable property, and general rules about the attachment of movables apply to those assets in general; however, currencies, bonds and other commercial papers obtained by way of seizure will be attached directly by the officers and will not be left to the debtor or a third party in any circumstance.

Provided that all the banks operating in Türkiye, whether as branches or subsidiaries, must establish a Turkish legal entity, the creditors’ accounts in those banks could be subject to attachment, irrespective of the bank’s origin. It is not possible to attach bank accounts located outside Türkiye’s jurisdiction.

The attachment of bank accounts is carried out by sending a writ electronically to the relevant banks since their systems are compatible with the bailiff’s office system (EBL, article 89).

46. May a creditor of an award rendered against a private debtor attach assets held by another person on the grounds of piercing the corporate veil or alter ego? What are the criteria, and how may a party demonstrate that they are met?

Piercing the corporate veil is an exceptional measure under Turkish law. The corporate veil will be pierced only if the corporate structure has been used to evade mandatory legal obligations or the enforcement of existing and legitimate third-party rights. This standard generally relates to fraud or other misconduct calculated to avoid or conceal liability through the use of a company structure. Court of Cassation particularly seeks an economic integrity between the corporations as a requirement for lifting the corporate veil.

47. Are there any rules in your jurisdiction that specifically govern recognition and enforcement of arbitral awards against foreign states?

There are no specific rules that govern the recognition and enforcement of arbitral awards against foreign states; therefore, Turkish courts apply the general rules on recognition and enforcement by taking into account the general sovereign immunity principles.

48. What is the procedure for service of extrajudicial and judicial documents to a foreign state?

Service related to acta jure gestionis can be made to diplomatic representatives of the foreign state through diplomatic channels (IPPL, article 49/2); however, if a specific multilateral or bilateral treaty exists between states, this method must be used instead of the general rule. See question 34 above.

49. May a foreign state invoke sovereign immunity (immunity from jurisdiction) to object to the recognition or enforcement of arbitral awards?

Foreign states cannot invoke sovereign immunity in disputes arising from private law relations (IPPL, article 49(1)).

50. May award creditors apply interim measures against assets owned by a sovereign state?

The availability of interim measures against foreign states depends on whether the states acted with acta jure imperii or acta jure gestionis in the underlying dispute. Foreign states cannot claim immunity from jurisdiction in legal disputes arising from private law relations (IPPL, article 49(1)). General rules regarding interim measures apply.

51. Are assets belonging to a foreign state immune from enforcement in your jurisdiction?

Courts must distinguish between assets used for commercial and sovereign purposes. All assets may be subject to attachment except those used for sovereign purposes. For example, assets used for diplomatic and military purposes are protected by state immunity.

Without prejudice to international treaties, in the execution proceeding of a judgment initiated against a foreign state, forced execution may be carried out on the assets belonging to the debtor state (EBL, article 32(2)). It is not possible to initiate an execution proceeding without a judgment against a foreign state (EBL, article 42(2)); therefore, assets belonging to a foreign state and used for commercial purposes are not immune from enforcement if an execution proceeding with a judgment is initiated.

All assets belonging to Turkey are immune from attachment as a matter of principle (EBL, article 82). All kinds of property directly assigned to public services and used for financial benefit can be considered state property, except those disposed of in accordance with private law provisions.

52. Is it possible for a foreign state to waive immunity from enforcement in your jurisdiction? What are the requirements of waiver?

A foreign state can waive immunity from enforcement in Turkey, but there should be an agreement between the parties to waive immunity. Under Turkish law, the agreement to arbitrate is generally understood as a waiver of immunity for the purposes of the arbitration proceedings. A waiver of immunity resulting from an arbitration agreement will not extend to the execution proceedings; a separate waiver is required for execution proceedings.

53. Is it possible for a creditor of an award rendered against a foreign state to attach the assets held by an alter ego of the foreign state within your jurisdiction?

In principle, it is not possible to attach the assets held by an alter ego of a foreign state unless the above criteria are sustained; however, in recent years, there has been a case in which the assets of an alter ego of a foreign state were attached by the award creditor through the bailiff’s office. This practice of the bailiff’s office is atypical and does not reflect the general approach to this controversial matter. The outcome of this case pending before the regional appellate court is important in assessing the Turkish approach.

54. May property belonging to persons subject to national or international sanctions be attached? Under what conditions? Is there a specific procedure?

Property belonging to individuals or entities subject to national or international sanctions may be attached, frozen or seized by the Turkish government. Government bodies have the power to freeze or seize assets, including bank accounts, real estate and other property belonging to sanctioned individuals or entities. The assets subject to the sanction will be specified, and they cannot be attached by a third party until the sanction is removed. Property that is not subject to the sanction can be attached (EBL, articles 82, 83, 83(b) and 83(c)).

First published by Global Arbitration Review in Mar 07, 2024.