Is the Enforcement of Foreign Judgements and Arbitral Awards Subject to Mandatory Mediation?
In international business, settling cross-border disputes and enforcing foreign judgements require the use of various and extensive legal procedures. Disputes arising out of international commercial agreements give rise to two types of legal remedies for disputes: going to the national courts of one of the states where the parties are based, or initiating arbitration proceedings, which is an international legal remedy. A crucial component of this procedure, if not the most crucial, is the enforcement procedure, which acts as a means of converting a foreign judgement or an arbitral award into a legally enforceable judgement in a particular jurisdiction.
In this analysis, we will briefly discuss the legal basis for the enforcement of foreign decisions. The primary focus of our analysis is whether mandatory mediation, which is required under Turkish law for commercial disputes, also applies to the enforcement of foreign judgements and arbitral awards.
Legal Nature of Enforcing Foreign Decisions in Turkey
To enforce foreign judgements and arbitral awards in Turkey, enforcement proceedings must be initiated before the court. These proceedings are governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958 (the "New York Convention"), to which Turkey is a signatory, as well as Law No 5718 on International Private and Procedure Law (the "IPPL"). Article 1 of the IPPL and Article 90 of the Constitution of Turkey provide that international treaties duly put into effect have the force of law and override domestic law. As a result, judgements or arbitral awards rendered in non-party states are regulated by the IPPL, while arbitral awards rendered in one of the state parties to the New York Convention are subject to the New York Convention.
In enforcement proceedings, the judge's examination is restricted to determining whether the legal requirements for the enforcement of the foreign decision have been satisfied – known as the "principle of révision au fond". Pursuant to the provisions of the IPPL and the New York Convention, the judge must only examine the following matters, without delving into the merits of the dispute:
- Whether there is legal or de facto reciprocity between Turkey and the state where the decision was rendered;
- Whether the decision was rendered in a matter falling under the exclusive jurisdiction of Turkish courts;
- Whether the decision is compliant with Turkish public order;
- Whether the right of defence of the person against whom the enforcement is sought was violated when the decision was rendered;
- Whether the decision has been finalised;
- Whether the arbitration clause is valid and the parties have capacity;
- Whether the decision was rendered on a matter that was included in the arbitration agreement;
- Whether the appointment of the arbitrators and the conduct of the proceedings were compliant with the arbitration agreement.
The objections that the opposing party may raise during the enforcement proceedings are limited to these issues. If the judge determines that there are no obstacles for the enforcement of the foreign judgement or arbitral award, the claim should be accepted.
Enforcement of Foreign Decisions and Mandatory Mediation
Pursuant to Article 5/A of the Turkish Commercial Code No 6102 (the "TCC"), it is a procedural prerequisite to apply to a mediator prior to initiating a lawsuit for monetary receivables, compensation claims, the annulment of an objection, restitution and negative declaratory action. Lawsuits filed before the court without meeting this requirement are dismissed due to the absence of procedural prerequisites. However, there is no clear legal provision on whether this requirement applies to lawsuits for the enforcement of foreign judgements or arbitral awards, and there are differing opinions in the doctrine and in judicial practice.
According to some authors, even if the dispute concerns one of the matters listed in Article 5/A, mediation should not be mandatory before filing a lawsuit for the enforcement of a foreign judgement or arbitral award.1 Mediation is a pre-litigation stage and, since the merits of the dispute have been settled before the foreign court or arbitral tribunal, it can no longer be discussed during the enforcement proceedings. It is undeniable that these opinions are in line with the principle of révision au fond, because the examination to be conducted by the judge should not be on the merits of the dispute, but only on whether there are any obstacles to enforcing the decision. According to these authors, as the purpose of mandatory mediation is to provide an opportunity for the parties to amicably settle the dispute without bringing it before the court, it would go against the legal nature of the lawsuit for the enforcement of a foreign decision to require a mandatory mediation phase beforehand, given that the dispute has in fact already been resolved by arbitral or court proceedings in another country.2
According to another view, even though the action for the enforcement of foreign decisions is not listed in the TCC as one of the actions with a mandatory mediation prerequisite, if the foreign decision itself was rendered in a lawsuit that is listed in TCC, then, albeit indirectly, it should be subject to mandatory mediation.
An analysis of the court decisions on this matter reveals that certain first instance courts have come to the conclusion that mediation is not a prerequisite before filing a lawsuit for the enforcement of a foreign judgement or arbitral award.3 There are also several Court of Cassation decisions where the applicant has applied for mediation prior to initiating an action for the enforcement of a foreign decision, although neither the first instance court nor the Court of Cassation discusses whether it was mandatory or not.4
All in all, mandatory mediation in commercial disputes serves the purposes of amicably resolving the dispute between the parties and reducing the load on judicial authorities. While the TCC specifies the types of commercial lawsuits that are subject to mandatory mediation, there is some hesitation when it comes to enforcement proceedings. Considering the legislative framework surrounding the enforcement proceedings and the principle of révision au fond, we believe that mediation should not be a prerequisite to initiate an action before the court for the enforcement of a foreign decision.
That being said, in order to avoid any risk, it is common practice to apply for mediation before initiating enforcement proceedings for a foreign judgement or arbitral award. Indeed, in order to prevent the opposing party's objections resulting in delays, it is recommended to apply for mediation as a precaution before filing a lawsuit for the enforcement of a foreign decision. This way, the parties will be able to settle the disagreement peacefully once more without going through the court.
It is worth noting that, before applying to mediation to eliminate the risks that might arise from the uncertainty surrounding this matter, one of the points to bear in mind is the limitation periods. As stated in paragraph 15 of Article 18/A of Law No 6325 on Mediation in Civil Disputes ("Law No 6325"), which regulates mediation as a prerequisite, the application for mediation suspends the limitation period to file a lawsuit until the final report is issued. Voluntary mediation, on the other hand, does not suspend the limitation period.
It is possible that mediation be considered mandatory before filing an enforcement action by the court of first instance, but the court of higher instance might view it as voluntary. In such a case, applying to the mediator would not suspend the limitation period. Therefore, if mediation is to be applied before filing a lawsuit for the enforcement of a foreign decision, the time left for initiating the action should be carefully determined, bearing in mind that the mediation process may take up to eight weeks pursuant to Article 5/A of the TCC.
Footnotes
1. Tarman, Z. D. "Yabancı Mahkeme Kararlarının Tanınması ve Tenfizinde Sıklıkla Karşılaşılan Hukuki Sorunlar Ve Çözüm Önerileri". Journal of Inonu University Faculty of Law 14 (2023): 85
2. Ekşi, N "Tenfiz Davalarında Dava Şartı Arabuluculuk Aşamasının Tüketilmesinin Zorunlu Olup Olmadığı Meselesi". Journal of International Trade and Arbitration Law, 11(1) (2022) 3 - 92.
3. Bakirkoy 3rd Commercial Court decision numbered E. 2019/6, K. 2019/743, dated 20 November 2019
4. Court of Cassation 11th Civil Chamber decision numbered E. 2020/7196, K. 2022/2796, dated 4 April 2022
* First published by Mondaq.
** You can access the Turkish version of this article via this link.
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