The Guide to Challenging and Enforcing Arbitration Awards in Turkey - Third Edition / Part 3

Procedure for interim measures

41. What is the procedure to apply 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 Turkey.

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 Turkey; and
• the counterparty is preparing or engaging in bad faith maneuvers 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 Turkey. The award creditor must show prima 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).

Interim measures against immovable property

42. What is the procedure for interim measures against immovable property within 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.

Interim measures against movable property

43. What is the procedure for interim measures against movable property within your jurisdiction?

There are no specific provisions for interim measures against movable 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.

Interim measures against intangible property

44. What is the procedure for interim measures against intangible property within your jurisdiction?

There are no specific provisions for interim measures against intangible 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.

Attachment proceedings

45. What is the procedure to attach 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 Turkey 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.

Attachment against immovable property

46. What is the procedure for enforcement measures against immovable property within 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).

Attachment against movable property

47. What is the procedure for enforcement measures against movable property within your jurisdiction?

Movable property can be attached through seizure (EBL, Article 102). The applicant requests the bailiff’s office to attach specific objects covering the amount of the receivable; however, specific movables listed in Article 82 of EBL (i.e., movables necessary for family members) are not subject to attachment. The bailiff’s office can attach the movables required to be registered (i.e., motor vehicles). Since the bailiff’s office and the motor vehicle registry systems are compatible, the attachment is instantly recorded. It is possible to bring claims against third parties. Accordingly, an award creditor can compile a list of natural or legal persons whom the award creditor believes are third parties with debt against the award debtor. The bailiff’s office will send a notice of attachment to all those on the list, asking them to pay their debts to the bailiff’s office to be sent to the award creditor. The bailiff’s office will inform the third-party debtors that if they do not pay their debts to the award creditor and instead pay the award debtor, they will be liable to make the same payments to the bailiff’s office (EBL, Article 89). If the award debtor is a party to other court or enforcement proceedings as a creditor, these cases can also be detected through the asset search, and the award debtor’s receivables arising from these case files can be attached. The award creditor can request the compulsory sale of the movable within one year of the attachment date; otherwise, the attachment will be removed automatically (EBL, Article 106).

Attachment against intangible property

48. What is the procedure for enforcement measures against intangible property within your jurisdiction?

Pursuant to Article 148 of the Industrial Property Code No. 6769 (the IP Code), IP rights can be attached. Neither the EBL nor the IP Code set specific procedures for the attachment of IP rights, and since they are not classed as movables or immovables, there are different views on which procedure should be applied. Nevertheless, the attachment would be effected by sending an electronic writ to the records of the Turkish Patent and Trademark Office, and the sale of the IP rights must be requested within one year. The attachment registered on the registry records restricts the award debtor’s disposal right on the IP rights.

Attachments against sums deposited in bank accounts or other assets held by banks

49. Are there specific rules applicable to the attachment of assets held by banks? Is it possible to attach in your jurisdiction sums deposited in bank accounts opened in a branch or subsidiary of a foreign bank located in your jurisdiction or abroad? Is it possible to attach in your jurisdiction the bank accounts opened in a branch or subsidiary of a domestic bank located abroad?

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 Turkey, 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 Turkey’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).

Piercing the corporate veil and alter ego

50. 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.

Recognition and enforcement against foreign states

Applicable law

51. 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.

Service of documents to a foreign state

52. What is the procedure for service of extrajudicial and judicial documents to a foreign state? Should they be served through diplomatic channels? Is it necessary to serve extrajudicial and judicial documents together with a translation in the language of the foreign state? When is a document considered to be served 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.

Immunity from jurisdiction

53. 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)).

Availability of interim measures

54. 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.

Immunity from enforcement

55. Are assets belonging to a foreign state immune from enforcement in your jurisdiction? Which classes of assets belonging to states are immune from enforcement as a matter of principle? Are there exceptions to immunity? How can it be proven whether an asset is immune from enforcement?

Provide practical examples of assets belonging to states that were successfully attached 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.

Waiver of immunity from enforcement

56. 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.

Piercing the corporate veil and alter ego

57. 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? What are the criteria, and how may a party demonstrate that they are met?

Provide practical examples of assets held by alter egos that were successfully attached by a state’s creditor in your jurisdictions. 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. 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.

Sanctions

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

Turkish law does not have a clear rule preventing the attachment of property belonging to persons subject to national or international sanctions. The EBL lists the properties that cannot be attached (EBL, Articles 82, 83, 83(b) and 83(c)), and properties of sanctioned persons are not listed therein; however, the scope and details of the sanction decision are important, especially when the assets are being liquidated, as the applicable procedures may differ.

First published by Global Arbitration Review in 08.06.2023.