Turkish Law Blog

Silver Bullet of Mediation? Turkey Implements Mandatory Pre-Litigation Mediation in Commercial Disputes

Gizem Halis Kasap Gizem Halis Kasap/ Wake Forest University
11 January, 2019
1998

On December 6, 2018, Turkey's parliament passed legislation requiring mandatory mediation for commercial disputes as a prerequisite before commencing trial (the ‘Act’).[1] The Act establishes two criteria for assessing whether a particular dispute falls within the scope of the mandatory mediation requirement. First, the dispute must involve pecuniary compensation or debts arising out of obligations. Second, the dispute must either fall within the scope of Article 4 of the Turkish Commercial Code or be a dispute of a commercial nature as prescribed in other Turkish codes. If the party fails to mediate before commencing trial, her claim will be dismissed on procedural grounds.  The articles on mandatory mediation do not become effective until January 1, 2019, and the article regarding the scope of application excludes lawsuits that remain before first instance and second instance courts and the Turkish Court of Cassations on that date.

 

The Holy Grail of Mediation Against Litigation

The “holy grail” of mediation reached Turkey in 2012 when mediation was introduced into the Turkish legal system through the Code on Mediation in Civil Disputes. Yet, the Turkish people remained relatively averse to settling their disputes through voluntary mediation –– perhaps due to the absence of an established ADR culture in Turkey. Unlike the general public, the Turkish legislators has had strong confidence in mediation as the key to the resolution of the congested court dockets. To that extent–as of January 1, 2018–mandatory mediation for employment disputes was adopted as a prerequisite before commencing litigation. This was the first time that mediation became mandatory in any legal field in Turkey and a second major step to attempt to firmly entrench mediation within the Turkish legal system.

Adopting mandatory pre-litigation mediation for commercial disputes can thus be seen as the third major step in consolidating the role of mediation in Turkey. Indeed, the enactment passed —with perfect timing—just five days before the Constitutional Court of Turkey published its decision to uphold the constitutionality of mandatory pre-litigation mediation of employment disputes in the Official Gazette of Turkey.[2] Although it was a majority decision, the mandatory mediation passed the muster of due process under the Constitution of Turkish Republic. Reading these developments together send a significant signal that the recent trend toward mediation in Turkey is here to stay.

 

Mandatory Mediation in Operation

Similar to the method already provided for mandatory pre-litigation mediation of employment disputes, under the new provisions the parties to a commercial dispute must apply to mediation bureaus that are located in the major courthouses. These bureaus will inform the parties of the mediation process and appoint mediators by automated means. Financial penalties—i.e. cost of litigation—can be applied to any party who fails to appear before the mediator even if the court later grants her claim in any subsequent litigation. With the aim of promoting mediation, the Act also provides for financial incentives, such as up to two hours’ of mediation sessions provided free-of-charge for parties in the event that an agreement is not reached. Hence, the structure for mandatory pre-litigation mediation both for commercial disputes and employment disputes are strikingly similar, except that with the enactment of mandatory mediation of commercial disputes, the time frame to complete mediation process has been doubled to six weeks and an additional two weeks when necessary.

One of the questions that practitioners have sought to answer is whether the scope of the mandatory mediation provisions will apply to cases of debt collection in commercial disputes. In Turkey, if the creditor initiates enforcement proceedings before the bailiff’s office without any court judgment, the debtor has a right to file a motion to stay the payment order processed by the bailiff’s office within seven days following the date of service. Upon this objection, if the creditor wishes to proceed with the enforcement proceeding, she must file a motion to remove the stay before an enforcement court. As such, a close reading of the Act reveals that it does not require mandatory mediation in every debt collection process, but only those where debt collection has become a matter to be resolved through litigation. Accordingly, if the debtor objects to the payment order and the proceeding stays, then the parties to a commercial dispute must attempt to mediate before initiating litigation.

 

Turkish Mediators and Mandatory Mediation of Commercial Disputes

The introduction of mediation—even initially, when it was understood that recourse to the process would be voluntary—was strongly opposed by Turkish lawyers. The profession was inclined to believe that mediation would undermine the role of lawyers in litigation and thus reduce incomes. In 2011, the then president of the Istanbul Bar Association and the Board members protested the expected promulgation of the Code on Mediation in Civil Disputes in the International Workshop on Mediation Models by showing a red card. This was followed by the release of a press statement by the Ankara Bar Association opposing voluntary mediation and criticizing it as an attenuation of institutional checks and balances at the expense of the judicial branch.

As of January 2019, it is fair to say that a considerable number of Turkish lawyers have made half a turn in their approach to mediation. According to the statistics offered by the Turkish Ministry of Justice, there are now 9,408 mediators registered, and many more who have passed the required exam but have yet to register. Together, this comprises more than 10% of the total number of Turkish lawyers according to the latest statistics of the Turkish Bar Association.

With the shrinking legal market and inflation in the number of lawyers in Turkey, mediation has undoubtedly come to be seen as a new market that offers lawyers a chance to grab a bigger piece of the pie. To secure lawyers’ place in this new market for mandatory mediation, the Turkish Bar Association has also revived the long dormant provision of Article 35/A of the Attorneyship Law, which entitles Turkish lawyers to conduct negotiations and conciliation. The Istanbul Bar Association as well as other bar associations have offered half-price discounts on mediation training programs for members. As such, the range of options available and the motivation to embrace mediation in general has expanded significantly. Nevertheless, Turkish mediators have had limited time to develop their expertise in mediation and mediation advocacy —specifically for commercial disputes—given the Act became effective on January 1, 2019.

 

Essential Implications of Mandatory Mediation of Commercial Disputes

As touched on above, one of the biggest challenges that mandatory mediation of commercial disputes will face is the issue of whether any given dispute will fall under its scope, and if so, whether there will be a requirement that it be mediated before initiating litigation. This concern arises because one of the main issues that the (specialized) commercial courts of first instance need to answer in each litigation is the prior question of jurisdiction, as their jurisdiction is defined by, and hinges on, commercial disputes that are mainly set forth in Turkish Commercial Code. As of January 1, 2019, the issue of whether the dispute is of commercial nature will instead be determined first by mediators. This alone is enough to indicate that mediation advocacy for commercial disputes requires significant expertise. That being said, the potential of mandatory mediation to plant and nourish a true ADR culture in Turkey and reduce the courts’ caseloads is arguably limited by the lack of an established group of expert mediators in commercial disputes, which will take some time to fully evolve.

Ethical issues surrounding mandatory mediation also need to be addressed because mandatory mediation is a double-edged sword in the Turkish case. Most commercial disputes result from a breakdown in a commercial relationship, but as mediation furthers cooperation between merchants, it offers the substantial benefit of potentially saving an ongoing business relationship. Nonetheless, parties to commercial disputes are not necessarily merchants (who are assumed to be sophisticated actors acting wisely under Turkish law). That is to say, the risk of ethical violations arises when there is a certain power imbalance between the parties and the mediator is not able strike a balance between a merchant and an ordinary person, who may well be at a disadvantage as far as awareness or technical knowledge is concerned.

It remains an open-ended question whether mandatory mediation will produce meaningful reductions in the caseloads of Turkish courts. Yet, it offers great promise as a way to cure congestion and delay in Turkish courts. But only if sanctions for ethical violations are enforced seriously and if mediators with more expertise start to practice in the field.

 

[1] Act No: 7155 Official Gazette, 19 Dec. 2018 No.: 30630 enacted 6 Dec. 2018

[2] Case No: 2017/178 Decision No: 2018/82 dated 11 July 2018, in Official Gazette, 11 Dec. 2018 No.: 30622

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