Litigation and Enforcement 2023 in Turkey - 1

1. What are the main dispute resolution methods used to resolve large commercial disputes?

The main and most commonly used method for resolving large commercial disputes in Turkey is litigation. Civil litigation is based on the principle that the parties to the dispute prepare their case. The judge is bound to hear claims, defences and evidence brought by the parties. However, the judge is entitled to make a legal assessment ex officio. The management of proceedings is at the court's discretion.

Use of alternative dispute resolution (ADR) mechanisms has expanded in recent years. With the foundation of the Istanbul Arbitration Centre (ISTAC), there has been a considerable increase in the number of disputes for which arbitration has been adopted. In the past four years, mediation has become mandatory first for labour law-related disputes, then for commercial monetary claims, and finally for consumer law-related disputes. Voluntary mediation is also among the preferred ADR mechanisms.

Turkish legislation does not provide for online dispute resolution within the court system. However, the National Judiciary Informatics System (Ulusal Yargi Ağı Bilişim Sistemi) (UYAP) is a crucial part of conducting proceedings before courts since 2001. The UYAP allows judicial bodies, administrative units, and parties to litigation to record case documents via electronic communication with the UYAP. Correspondence between judicial bodies, such as requests for review of a file pending before another court, consolidation of cases or transfer of a case to another court due to lack of jurisdiction, are conducted electronically via the UYAP. During the course of the proceedings, all case documents are uploaded to the UYAP. The system also allows lawyers to file cases, submit petitions and evidence, follow up case files, and deposit court expenses electronically.

In addition, at the request of one of the parties or ex officio, hearings can be held remotely via a video and audio platform. This practice was introduced in certain cities and courts as of 15 September 2020 and at the time of the writing, the number of the courts with the infrastructure for remote hearings had reached 2,475 throughout Turkey.

Court Litigation

Limitation Periods

2. What limitation periods apply to bringing a claim and what triggers a limitation period?

The general limitation period is ten years, which applies where the law does not provide a specific limitation period (Turkish Code of Obligations (6098) (sayılı Türk Borçlar Kanunu).

However, the statute of limitation is five years for some claims, such as claims relating to:

• Lease payments.
• Principal interest.
• Salary.
• Professional negligence.
• Agency.
• Commission and brokerage agreements (except commercial brokerage).
• Dispute between a company or its shareholders (arising out of a shareholders' agreement) and its managers.
• Personal representatives.
• Auditors.
• Accommodation fees in hotels.
• Pensions.
• Catering costs in restaurants and similar places.
• Minor artwork and small-scale retail sales.
• Works contracts, except claims that arise out of improper performance or non-performance due to a contractor's gross misconduct.

The statute of limitation for tort claims is two years from the date on which the claimant becomes aware of the tortious act, the damage and the person committing it (subject to a maximum of ten years starting from the date when the tortious act is committed). In cases where a tortious act also gives rise to a crime, the limitation period for the relevant crime will be taken into account.

Court Structure

3. In which court are large commercial disputes usually brought? Are certain types of disputes allocated to particular divisions of this court?

Large commercial disputes are usually brought before the commercial courts. The commercial courts usually consist of a panel of three judges. Certain types of disputes (which can be considered as large commercial disputes) are handled by a panel of three judges, while other disputes are handled by a single judge.

Disputes that are heard by a panel of three judges are those relating to:

• Monetary claims exceeding TRY500,000 (about EUR27,500).
• Declaration, postponement, cancellation and closing of bankruptcy and company reorganisation.
• Cancellation of general assembly resolutions, liability actions against management and supervision boards, dismissal of corporate organs or appointment of temporary corporate organs, and dissolution and liquidation of companies.
• Arbitration, such as enforcement of foreign arbitral awards, cancellation of arbitral awards (actions to set aside), appointment of, or challenge to, arbitrators.

Disputes relating to maritime law are allocated to the specialised Maritime Court and intellectual property disputes are heard by the courts of intellectual and industrial property rights.

The enforcement courts also handle cases in connection with enforcement proceedings.

With regard to the appeals process, the Code of Civil Procedure (6100) (sayılı Hukuk Muhakemeleri Kanunu) introduced the following three-tier court system:

• First instance courts.
• Regional appellate courts.
• Court of Cassation.

The regional appellate courts were established on 20 July 2016 and started to operate in several cities, such as İstanbul, Ankara, İzmir, Antalya, Erzurum, Gaziantep and Samsun. For decisions rendered before 20 July 2016, the former two-tier system will continue to be applied until these decisions are finalised.

Rights of Audience

4. Which types of lawyers have rights of audience to conduct cases in courts where large commercial disputes are usually brought? What requirements must they meet? Can foreign lawyers conduct cases in these courts?

Rights of Audience/Requirements

Only Turkish nationals who have graduated from a law school and admitted to the Turkish Bar Association can represent clients in the Turkish courts (Advocacy Code (1136) (sayılı Avukatlık Kanunu)). In addition, a party can represent itself in court proceedings, including court hearings. An authorised representative of a legal entity can represent the legal entity.

Foreign Lawyers

Foreign lawyers cannot represent their clients before the Turkish courts and execution offices (Advocacy Code).

Fees and Funding

5. What legal fee structures can be used? Are fees fixed by law?

The Turkish Bar Association (TBA) determines and publishes the minimum rates every year. Currently, the maximum limit for legal fees is 25% of the claimed amount.

Legal fee structures can include hourly rates and task-based billing if agreed by the parties. Contingency fees are not permitted under Turkish Law. However, conditional fees can be agreed on if the agreed fee for the lawyer is not lower than the rates specified in the TBA's minimum fee tariff.

6. How is litigation usually funded? Can third parties fund it? Is insurance available for litigation costs?

Funding

Litigation is funded by the claimant. Third-party litigation funding is not common and there are no provisions regulating third-party funding in Turkey. However, a non-party can finance litigation proceedings under the freedom of contract principle and the general provisions of the Code of Obligations. A claimant whose case is accepted by the court is reimbursed by the defendant for official costs (such as advance payment for filing the case, notification and expert fees) at the end of the proceedings. Where a defendant is successful at trial, the official costs will be borne by the claimant.

Insurance

Legal protection insurance is available under Turkish law. However, according to the general conditions prepared by the Treasury, commercial disputes are not covered by this insurance. The Ministry of Justice has recently included legal protection insurance in the purposes set forth in the Judicial Reform Strategy, therefore further developments are expected in near future.

Court Proceedings

Confidentiality

7. Are court proceedings confidential or public? If public, are the proceedings or any information kept confidential in certain circumstances?

In principle, court proceedings are open to the public. In exceptional cases, the court can decide at the request of one of the parties or ex officio for hearings to be held in private for public morality and/or public security reasons or in cases where the superior interest of a party makes confidentiality absolutely necessary.

Parties and their lawyers can examine the court files and make copies of the documents filed. In addition, lawyers admitted to the TBA can examine court files even if they are not representing one of the parties, in which case they cannot make copies.

Pre-Action Conduct

8. Does the court impose any rules on the parties in relation to pre-action conduct? If yes, are there penalties for failing to comply?

For the first time in 2018, mediation was introduced as a mandatory pre-action conduct for labour disputes, which was followed for commercial monetary claims and consumer law-related disputes in subsequent years. If the parties do not apply for mediation before filing the lawsuit regarding these types of disputes, the case will be dismissed on procedural grounds.

Main Stages

9. What are the main stages of typical court proceedings?

The two types of procedures for civil proceedings are the:

Written procedure. The written procedure is the main procedure and is used for commercial disputes of TRY500,000 (about EUR27,500) or over. Under this procedure, the usual cycle of submissions (such as claim, response, rebuttal, and rejoinder) can be filed by the parties.

Simplified procedure. This is used for disputes of below TRY500,000 (about EUR27,500) and for the following types of dispute:

• labour disputes;
• applications for interim measures, such as preliminary injunction, provisional attachment;
• consumer disputes.

In this procedure, only the claim and response petitions can be filed by the parties and no further exchange of petitions can be carried out.

The main stages of civil proceedings are:

• Exchange of petitions.
• Preliminary proceedings.
• Examination phase.
• Oral proceedings.
• Decision.
• Appeal (if required).

There are no prescribed time limits for the main stages. However, there are time limits for certain procedural actions such as responding to petitions (which must be done within two weeks as of service). In addition, parties must submit objections to an expert report or appeal a final decision within two weeks as of service.

Starting Proceedings

A court claim is commenced when the claimant submits its claim petition to the competent court. It is possible to file a case online via the UYAP.

The date of the court case is deemed the date on which the claim petition is registered in the court file. The claim petition must contain certain elements, such as the:

• Name of the competent court.
• Names and addresses of the parties.
• Turkish ID number of the claimant and passport numbers of non-Turkish claimants.
• Names and addresses of the attorneys, if any.
• Subject matter of the claim and claim amount.
• Summary of the material facts.
• Explanatory notes in relation to evidence, if any.
• Legal grounds.
• Precise explanation of the claim.
• Signature of the claimant, or their attorney.

Notice to the Defendant and Defence

Once the claim petition is submitted to the court, the court will issue the opening minutes and serve the petition on the defendant. Following service, the defendant has two weeks to submit its response petition to the court. The defendant can request an extension of up to one month under the written procedure and up to two weeks under the simplified procedure (see Question 9).

The response petition must comprise the same elements that are required for the claim petition. If the defendant has any preliminary objections (such as an objection to the court's competence), it must include these objections in its response petition.

Subsequent Stages

After the exchange of petitions, the subsequent stages are:

• Preliminary investigation stage, where the court:
  • determines the matter in dispute;
  • evaluates the preliminary objections of the parties;
  • takes necessary actions for the collection and submission of evidence; and
  • invites the parties to settle their case.
  • Examination stage, where the court investigates whether the claims raised by both parties correspond with the material facts and evidence. During this stage, the court can:
  • hear witnesses;
  • conduct on-site examinations; and
  • appoint experts (if required).
• Issuance of the decision, which is made after hearing the final statements of the parties in the oral proceedings stage.
• Appeal, if requested by one of the parties.

Interim Remedies

10. What steps can a party take for a case to be dismissed before a full trial? On what grounds can such applications be brought? What is the applicable procedure?

There is no concept similar to summary judgment under Turkish law. In principle, a case cannot be dismissed before a full trial under Turkish law.

11. Can a defendant apply for an order for the claimant to provide security for its costs? If yes, on what grounds?

The defendant can apply to the court for an order for the claimant to provide security for the litigation costs, provided that either:

• The claimant is a Turkish citizen who does not have their habitual residence in Turkey.
• The defendant can provide evidence of the claimant's financial difficulties (such as insolvency or restructuring proceedings).

In addition, foreign claimants must provide security for costs and damages, unless there is a contractual, de facto or legal reciprocity that enables Turkish claimants to file lawsuits without providing security in the foreign claimant's state.

12. What are the rules concerning interim injunctions granted before a full trial?

Availability and Grounds

The court can grant an interim injunction if either:

• It would be significantly difficult or impossible for the claimant to enforce its rights in the future due to any change in the present status.
• Severe damage or inconvenience is likely to occur due to the delay.

To apply for an interim injunction, the claimant must file a petition with the court, stating the type of claim and the grounds relied on. It must also provide satisfactory evidence to prove that its claim is based on just grounds. The judge can order the claimant to provide security in an amount the court considers proper to account for the damage that may be caused to the defendant.

Standard of Proof

To be granted an interim injunction, the applicant must prove that they have a prima facie case on the merits.

Prior Notice/Same-Day

The court can grant an interim injunction without giving prior notice to the defendant or holding a trial, if the claimant's rights must be protected without any delay.

Although rare in practice, the court can grant an interim injunction on the same day, provided that the claimant proves that its claim is based on just grounds and provides evidence of the urgency of the matter. However, for large commercial disputes, the judges generally prefer to examine the case file in detail, to notify the defendant of the request and hold a hearing to hear their defence.

Prohibitory and Mandatory Injunctions

An interim injunction can be granted to compel a party to do something (mandatory injunction) and to stop it from doing something (prohibitory injunction).

Right to Vary or Discharge Order and Appeals

If the injunction is ordered without hearing the defendant, the defendant can object to the decision:

• Within one week from the implementation of the injunction if the party is present during the implementation of the injunction.
• From the service of the minutes of implementation of the injunction if it the party is not present during the implementation of the injunction.

The objection can be based on the conditions of the injunction, the competence of the court or the guarantee deposited to the court. Third parties whose interests are explicitly violated can also object to the conditions of the injunction or to the guarantee deposited to the court within one week of learning of the injunction. The court can vary or discharge the injunction in response to the objection.

Decisions rendered after the examination of the objection can be appealed. The appeal does not suspend the execution of the injunction unless decided otherwise. Decisions rendered following the appeal examination are final.

On a change of circumstances, the parties can request that the injunction be varied or discharged. Further, if the defendant deposits the guarantee to be determined by the court, the court can vary or discharge the injunction.

A decision to dismiss an injunction request and an injunction decision rendered in the presence of the defendant can also be appealed.

13. What are the rules relating to interim attachment orders to preserve assets pending judgment or a final order (or equivalent)?

Availability and Grounds

An interim attachment order can be granted for due and undue debts that are not secured by a pledge. If the debt is due and payable, the claimant must prove that there is a due debt by submitting the relevant documents (such as invoices and written statements of the debtor).

To obtain an interim attachment order for undue debts, the creditor must prove that the debtor either:

• Does not have a certain residence.
• Is preparing to conceal and transfer its assets or flee the jurisdiction.

In practice, the courts will grant an interim attachment order if the debt is evidenced by a negotiable instrument such as a cheque or promissory note.

Standard of Proof

The standard of proof is relatively low for interim attachment orders. The creditor must prove the existence of the receivable and the reasons for the interim attachment prima facie. Therefore, the courts generally grant the interim attachment if the creditor has a commercial document proving the existence of the receivable (other documents such as invoices and delivery notes are not considered sufficient for granting an interim attachment order).

Prior Notice/Same-Day

The court can award an interim attachment order without prior notice to the defendant. The claimant must prove the urgency of the matter and submit evidence in support. In practice, same-day orders are not very common.

Main Proceedings

If the interim attachment order is granted before the main proceedings, the claimant must initiate a complementary procedure within seven days starting from the date when the interim attachment order is enforced or the enforcement minutes are notified to the claimant (if the claimant is not present during the enforcement of the interim attachment order). The complementary procedure can either be an action or an enforcement proceeding against the defendant. An interim attachment order can also be granted during the main proceedings and in support of a substantive proceeding in another country.

Preferential Right or Lien

An interim attachment order does not create a lien or preferential right.

Damages as a Result

The claimant is liable for damages suffered by the defendant arising out of an interim attachment order that was applied against the defendant and found to be unjust.

Security

The court must determine the security to be deposited, unless there is a court order or a document (with the same authority of a court order) ordering this. The amount and form of the security are at the court's discretion. In practice, the courts usually ask for a deposit of 15% of the amount in dispute and bank guarantee letters are accepted.

14. Are any other interim remedies commonly available and obtained?

A determination of evidence is another interim remedy that is commonly available. The parties to a dispute can request the determination of evidence through on-site examination, expert examination or witness statements, to rely on this evidence in an ongoing or possible future action (Article 400, CPC). The applicant must have a legal interest for making an application. A party is deemed to have a legal interest in making an application if either:

• There is a risk that the evidence will be lost.
• It will be significantly difficult to rely on the evidence in the future.

Final Remedies

15. What remedies are available at the full trial stage? Are damages only compensatory or can they also be punitive?

The most common remedy at the full trial stage is an award of pecuniary damages. Damages cannot be punitive, they must be compensatory. Other remedies are available at the party's request, such as:

• Non-pecuniary damages.
• Declaratory judgments.
• Announcement of the verdict in newspapers.
• Rescission of a contract.
• Performance of a contract.
• Cancellation of a transaction.
• Invalidation of a registered right.

First published by Practical Law in 01.12.2022

Tagged with: Gün + Partners, Asena Aytuğ Keser, Beril Yayla Sapan, Dispute Resolution