Dispute Resolution, Trends & Developments in Turkey
Orcun Cetinkaya,Pelin Karan,Ural Ozbek
To Mediate or Not to Mediate…
Mediation is often preferred over other methods of ADR due to the ability of the parties to be actively involved in the process and the presence of an impartial third party. In addition to these features, mediation costs less than a lawsuit, the parties can get results in a shorter time, and it is a consensual form of dispute resolution within the framework of the win-win principle. In mediation, there are principles that both the mediators and the parties should follow. According to these principles:
Despite the voluntary principle, the legislature has made mediation mandatory in some disputes in order to relieve the burden on the courts.
Mediation, which is defined in Article 2 of the Code on Mediation in Civil Disputes, came into force as an alternative method to the exercise of Turkish judicial power in 2013. It is not possible to resolve every dispute that may arise between parties through mediation. The legislature restricted the matters eligible for mediation to private law disputes arising from business or transactions of which the parties can freely dispose. In addition to this restriction, it is mandatory to apply mediation when it is a precondition to litigation. Applying mandatory mediation is, as a rule, a prerequisite to litigation in labour disputes, commercial disputes and consumer disputes.
In Turkey, a considerable percentage of legal disputes are related to labour law since there are high numbers of recorded employees. The main struggle in the judicial process was the limited time available to resolve the disputes. Mediation was often the preferred method of parties to a dispute and the authorities decided to use it in order to reduce the burden on courts.
Mediation became mandatory in labour disputes in 2017, through the new Code on Labour Courts, where the dispute arises from monetary claims, individual or collective employment contracts or reinstatement claims. If the parties do not apply for mandatory mediation before filing a lawsuit, the case is dismissed by the court on procedural grounds due to lack of a cause of action. If the parties cannot reach a resolution through mediation, a report, which is issued by the mediator stating that no agreement could be reached, is sent to the Mediation Department of the Ministry of Justice within one month. After that, parties can start the judicial process.
With Article 5/A added to the Turkish Commercial Code, mediation became mandatory for commercial disputes over certain monetary receivables and compensation claims, and is accepted as a cause of action in these cases. However, this regulation does not cover most non-contentious judicial affairs. The mandatory mediation process must be completed within six weeks and can be extended for a maximum of two weeks. The procedure to be applied where mediation is a condition to bringing a lawsuit in commercial cases is regulated by Article 18/A of the Code on Mediation in Civil Disputes.
As of July 2020, it is mandatory, in principle, to apply for mediation in cases to be filed before the Consumer Courts. The amendment on mediation as a condition precedent for consumer disputes litigation includes:
Mediation has become a method that is frequently used because of its voluntary nature. After it was enacted as a mandatory condition in disputes arising from labour law and commercial law, the burden on courts decreased significantly. In disputes arising from consumer law, the use of the mediation as a precondition to litigation within the framework of these principles will achieve the same purpose.
As in the rest of the world, the Turkish legal system and legal relationships have been affected during the COVID-19 pandemic. The effects were felt first in contracts, particularly rental contracts, employment issues and legal proceedings.
As a consequence, this led the authorities to make new arrangements for protecting public health, such as electronic hearings and the development of court practice in a manner that aims to minimise the effects of the pandemic on the financial status of the public. Some arrangements have also been made with regard to employment issues to protect employees during the pandemic.
The main area of controversy regarding contracts is whether COVID-19 can be considered as a force majeure event. This question has been asked frequently, especially with regard to rental contracts since many business owners could not continue their business during COVID-19 because of the restrictions and failed to meet their financial obligations regarding rental contracts. Consequently, many lessees in Turkey faced the danger of being evicted from their homes and workplaces.
To avoid these consequences the Grand National Assembly of Turkey prohibited the termination of rental contracts and eviction due to non-payment of rent with Code 7226. According to this enactment, lessees who did not pay the rent between 01 March 2020 and 30 June 2020 cannot be evicted from the relevant property and the rental contract cannot be terminated because of such default. This prohibition protected persons whose workplaces were closed because of the restrictions, who were unable to continue to conduct their businesses because of the pandemic or who became unemployed during COVID-19.
Although the above enactment was beneficial for the lessees for a period of time, the Grand National Assembly of Turkey did not extend this prohibition since the restrictions regarding the COVID-19 pandemic ended, as a result of which the prohibition expired on 30 June 2020. While the financial impact of COVID-19 continues, lessees started to seek a different legal remedy to protect their financial status and started to initiate lawsuits and requests for interim injunction regarding the revision of rental prices.
One of these lessees, a restaurant owner who could not pay the shop rent, applied to the court and requested that it reduce the rental price as an interim measure. The Regional Court of Appeal accepted the request of the lessee and reduced the rental price, stating that some sectors were particularly affected by the pandemic and that the food and beverage sector was one of them. For this reason, it decided to implement an interim measure to reduce the rent. The court indicated in its decision that there was hardship, in other words, excessive difficulty regarding the performance of the contract.
Although the Regional Courts of Appeal are not the final appeal authorities in Turkey, the approach taken may lead other courts to grant similar decisions and accept that COVID-19 causes hardship.
The financial bottleneck caused by COVID-19 and the ensuing restrictions also put business owners in a situation where many were unable to fulfil their financial obligations to their employees. This situation created the danger of an increase in unemployment in Turkey.
In order to prevent such a situation, an additional article was enacted to the Code on Employment, restricting the termination of employment contracts. According to this enactment, employers cannot terminate an employment contract unless:
In addition to the above, the Article also allows employers to give unpaid leave to their employees provided that the term of the unpaid leave does not exceed three months. Taking unpaid leave cannot be considered as a cause for rightful termination of the contract by the employee.
The Article aims to prevent potential detrimental effects of COVID-19 on the employment status of persons while ensuring the financial well-being of employers during the financial difficulties they have been going through.
The additional Article has been in force as of 16 April 2020 and the effective term has been extended for two more months as from 17 November 2020.
In order to prevent the further spread of COVID-19 in Turkey, many precautions and measures were taken immediately by the government and administrative authorities. New arrangements for legal proceedings were also introduced.
The most significant change is an online hearing system introduced similar to the Court of Arbitration of Sport or the Italian Trial Online, allowing the parties to participate in the hearings remotely.
The online hearing procedure was expected to be introduced even before the COVID-19 pandemic. However, the pandemic accelerated the process in order to prevent further spread of the disease. Besides, in cases of travel restriction, hearings can still be conducted this way.
The Ministry of Justice has completed the pilot implementation of the "e-Hearing", which is included in the Judicial Reform Strategy Document, which enables lawyers to participate in court hearings, through videoconferencing, and the pilot applications began on 15 September 2020.
Regarding online hearings in court proceedings, lawyers will be able to send an online hearing request by providing the reason for the request in writing at least 24 hours prior to the hearing. The online system can be accessed through the National Judiciary Informatics System, which is the system already used for conducting court proceedings, by authentication via secure electronic signature. In the later stages, the level of security will be increased by providing controls such as face and fingerprint scanning.
The Istanbul Arbitration Centre has also introduced online hearings during its arbitration proceedings.
This article was first published on Chambers and Partners Practice Guides in December 2020. See the article here.