Dispute Resolution in Turkey
The Questionnaire Covering All Aspects of Legislation and Practices in Dispute Resolution Cases in Turkey.
Dispute Resolution, Trends & Developments in Turkey
The Questionnaire Covering All Aspects of Litigation in Turkey.
2. Litigation Funding
3. Initiating a Lawsuit
4. Pre-trial Proceedings
6. Injunctive Relief
7. Trials and Hearings
9. Damages and Judgment
12. Alternative Dispute Resolution
14. Recent Developments
1.1 General Characteristics of the Legal System
Turkey is a civil law country whose legal system is mostly based on Roman law.
The main source of law is legislation rather than the court precedent. The Grand National Assembly of Turkey is the main legislative authority in Turkey.
Court precedents are not binding for the other Turkish courts, except for the decisions of the General Assembly on the Unification of Judgments of the Court of Cassation. However, the first instance courts and regional courts of appeal are likely to follow the jurisprudence of other chambers of the Court of Cassation. Doctrine is another important source for the interpretation of the law.
The Turkish civil law system follows a largely adversarial model in civil matters unless the law provides that the court shall research the matter ex officio.
The Turkish legal system provides for both written submissions and oral argument; however, written submissions are essential in the Turkish legal system as most of the trials conclude on the basis of the written submissions. The law also allows oral arguments during the trial but the effects of oral argument are not as strong as those of written submissions.
1.2 Court System
The national courts are responsible for adjudicating civil, criminal and administrative matters.
In principle, the Civil Courts of First Instance have general jurisdiction over civil law matters regardless of the value of the claim. In specific matters – such as commercial disputes, family disputes or employment disputes – specialised courts operate. There are also Civil Courts of Peace adjudicating simple matters such as rental disputes and elimination of joint partnerships.
Turkish law provides a two-tiered appeal system. The Regional Courts of Appeal, which are the first tier of the appeal system, have jurisdiction over the appeals in a specified region. The Court of Cassation, the second and last tier of the appeal system, on the other hand, is authorised nationwide. The Court of Cassation consists of various chambers specialised in different types of disputes.
1.3 Court Filings and Proceedings
In principle, the court proceedings are open to the public in civil, criminal and administrative cases. However, the proceedings are not accessible to the public as a whole.
The hearings are mostly open to the public unless otherwise decided by the court.
The case files, however, are confidential since they can contain confidential information regarding the parties. Within this con- text, only the parties and their representatives can examine the case file. Third parties can request access to the file from the judge provided that they have proven their interest in accessing the case file. In addition, lawyers with a valid Bar membership in Turkey can access all case files, unless a confidentiality order is granted.
1.4 Legal Representation in Court
Only lawyers admitted to a Bar in Turkey can be the legal representative before the Turkish courts. No further requirements are needed for lawyers admitted to a Turkish Bar in order to appear before the Regional Courts of Appeals or Court of Cassation. The parties can also represent themselves before the courts as Turkish law does not oblige a party to be represented by a lawyer in any stage of the trial.
Foreign lawyers cannot represent the parties or appear before the courts since being a Turkish citizen is a requisite for being admitted to a Bar in Turkey.
2.1 Third-Party Litigation Funding
Third-party funding is not common in Turkey and there is no legislation regulating it. Parties may draw up a contract regarding third-party funding within the scope of freedom of contract, subject to the Code of Obligations. However, in principle, lawyers are restricted from obtaining any right over the subject matter of the dispute to which they are a representative.
2.2 Third-Party Funding: Lawsuits
There are no restrictions regarding the types of lawsuits that can be funded. All types of lawsuits can be funded by a third- party funder. However, monetary claims and other claims of a monetary nature are more likely to be funded by a third-party.
2.3 Third-Party Funding for Plaintiff and Defendant
Third-party funding is available for both the plaintiff and the defendant. In civil law practice, the plaintiff bears most of the litigation costs during the trial. Defendants usually only bear the costs of litigation required to bringing the evidence declared by them if it is necessary. In this context, plaintiffs are more likely to require funding than defendants.
2.4 Minimum and Maximum Amounts of Third Party Funding
There is no minimum or maximum threshold determined for third-party funding.
2.5 Types of Costs Considered under Third-Party Funding
The third-party funder can fund any of the expenses arising from, or in connection with, a litigation proceeding, including legal fees, counsel fees and expert costs.
2.6 Contingency Fees
Contingency fees are not permitted in Turkey. The official mini- mum attorney’s fee tariff sets the minimum amount for an attorney’s fee, which lawyers are obliged to request from their clients.
However, the lawyers are allowed to receive premiums proportional to the success rate of the litigation or to draw up alter- native agreements, provided that the minimum attorney’s fee stipulated on the tariff is paid and, furthermore, that the total attorney’s fee cannot exceed 25% of the value of the dispute.
2.7 Time Limit for Obtaining Third-Party Funding
Under Turkish law there is no time limit regarding when a party to litigation should obtain third-party funding.
3.1 Rules on Pre-action Conduct
In general, pre-action conduct is not obliged in Turkish law. The plaintiff can initiate a lawsuit before notifying the other party. However, for commercial disputes, sending notification before initiating a lawsuit is common practice.
The main form of pre-action conduct in Turkish law is an application for mandatory mediation. Most lawsuits regarding employment, commercial and consumer disputes cannot be filed before completing a mandatory mediation process. The plaintiff must submit the minutes of the last mediation meeting, which state that the parties could not reach a settlement, to the court together with the state of claim. Unless the mediation process is carried out, the court will reject the case due to lack of a cause of action, without examining the merits of the case.
3.2 Statutes of Limitations
There are two kinds of statutes of limitations under Turkish law: final term and lapse of time.
A right lapses after the final term expires and cannot be used or enforced. Accordingly, a lawsuit cannot be initiated regarding the right in question after the final term. Final term is a cause of action to be considered by the court ex officio. Most family law matters and individual rights are subject to foreclosure.
Lapse of Time
Lapse of time is a plea allowing the debtor to refrain from performing an obligation after a certain period of time. Lapse of time is not considered by the court ex officio, and must be pleaded against the creditor by the debtor.
The general term for lapse of time is ten years, to which most contractual claims, unless otherwise prescribed by law, are subject. Lapse of time for unjust enrichment is two years from the date at which the plaintiff learned of the unjust enrichment, and in any event ten years from the unjust enrichment. In principle, lapse of time for tort claims is two years from the date at which the plaintiff learned about the damage and the identity of the defendant, and in any event ten years from the tortious act.
3.3 Jurisdictional Requirements for a Defendant
In international disputes, the jurisdiction of the Turkish courts is determined according to the Code on International Private and Procedural Law, which refers to the Code of Civil Procedure regulating the jurisdiction of the courts in domestic cases.
The jurisdiction of Turkish courts differs depending on the nature of the dispute. The main principle is that the competent court is the court of the residence of the defendant. Therefore, defendants residing in Turkey can be subject to a lawsuit in Turkey.
In addition to the general principle, contractual claims can be filed before a Turkish court, if the contract will be performed in Turkey. Tort claims, on the other hand, can also be filed in Turkey, when the plaintiff is residing in Turkey, or the dam- age has been suffered in Turkey. The exclusive forum for claims regarding property, or in rem rights related to a real property placed in Turkey, are the Turkish courts, regardless of the residence of the parties.
As a rule, Turkish law permits jurisdiction agreements to be conducted between merchants.
3.4 Initial Complaint
To initiate a lawsuit, the plaintiff must file a statement of claim to the court submitting the reason for the dispute, relevant facts and events and evidence. The statement of claim must include information regarding the counterparty, the subject of the dis- pute, the value of the claim and its legal basis. A statement of claim can be delivered to the court from the courthouse or can be submitted via the National Judiciary Informatics System.
Any mistakes made in the statement of claim can be corrected by an additional petition provided that the mistakes do not affect the value of the claim, its legal basis or the identity of the counterparty.
In addition, the plaintiff can amend the statement of claim as a whole or in part; however, this can be done only once until the conclusion of the trial. In practice, it is usually the amount of the subject matter in dispute that is amended. It is often increased in partial lawsuits following an expert report in favour of the plaintiff.
3.5 Rules of Service
Serving the statement of claim and other documents subject to service is the responsibility of the court. However, the plaintiff must make an advance payment covering the legal fees and ser- vice expenses while initiating the lawsuit.
Service is made through the post office unless the party is using an electronic service system. Using an electronic service system is an obligation for some legal entities and real persons such as lawyers. Also, persons who are not obliged to use the electronic service system can obtain an electronic service address. The service must be made through the electronic service system to those who have an electronic service address.
The procedures of service to the parties outside the country are regulated by the Hague Civil Procedure Convention, the Hague Convention on Service Abroad and other bilateral treaties to which Turkey is a party. In the absence of a treaty or convention, service abroad will be performed in accordance with the provisions of the Notification Law.
3.6 Failure to Respond
The defendant should respond to the lawsuit within two weeks, as a rule. The court may grant additional time for this response at the request of the defendant (made within two weeks), in cases where it is very difficult or impossible to prepare a respond petition within this period.
If the defendant does not respond to a lawsuit within the term above, the claim, events and evidence submitted by the plaintiff will be deemed denied by the defendant. The defendant cannot submit any plea or evidence exceeding the limits of denial.
3.7 Representative or Collective Actions
The class action is not recognised in Turkish law since, according to civil law principles, the results of civil proceedings are only binding for those who are a party to such proceedings.
However, there are actions that can be filed for protecting the rights of a group of people who are not a party to civil proceedings. Turkish law provides “mass actions”, which can be filed by associations and other legal entities, to protect indirectly the rights of their members or the community they represent. Indemnification claims are excluded from the scope of the mass action.
In addition, labour unions can file lawsuits on behalf of their members or inheritors of their members. However, these law- suits cannot be considered as a mass action or class action since they only grant representation authority to the labour unions.
3.8 Requirements for Cost Estimate
Neither the Code on the Legal Profession nor the Code of Professional Conduct impose any explicit obligation to provide clients with a cost estimate of potential litigation at the out- set. However, lawyers are obliged to act with due diligence and secure their clients’ benefits, and the aforementioned is considered as a part of such an obligation.
4.1 Interim Applications/Motions
It is possible to make interim applications before a trial under Turkish law.
Interim applications may be categorised under three groups as:
• injunctive relief;
• provisional attachments; and
• determination of evidence.
A party wishing to apply for an interim application must ask the court to grant interim remedies by indicating the reasons why it is necessary to obtain such interim remedies before the trial.
4.2 Early Judgment Applications
In the Turkish jurisdiction, there is no such mechanism as early judgment. However, the court may decide to dismiss the case on procedural grounds before discussing the merits of the case, as described in 4.3 dispositive Motions.
4.3 Dispositive Motions
Before considering the merits of the case, if the court detects a lack of a cause of action during the preliminary examination, it will dismiss the case on procedural grounds. However, it should be noted that even when there is a lack of a cause of action, the court may offer a certain amount of time to resolve this deficiency.
The procedural defects in causes of action are listed in the Code of Civil Procedure. They include:
• lack of jurisdiction;
• initiating the lawsuit in an incompetent court; and
• lack of legal interest of the plaintiff.
Regarding the timing and procedure, regardless of the parties’ application to assert its absence, the courts must assess whether there is a lack of a cause of action at every stage of the trial. Parties may also claim such absence at every stage of the trial.
4.4 Requirements for Interested Parties to Join a Lawsuit
In order for a lawsuit to be brought by more than one person or against more than one person, there must be a legal connection between those on the same side.
Joinder in Turkish jurisdiction can be grouped under two main headings: compulsory and voluntary.
Regarding voluntary joinder, multiple persons can file a lawsuit together, or have a suit filed against them together, if:
• the right or debt, subject to litigation between the plaintiffs or defendants, is owned together (except for joint ownership which is subject to compulsory joinder);
• a right has arisen for the benefit of all of them through a joint transaction or they enter into joint obligations; and
• the facts and legal reasons underlying the cases are the same or similar to each other.
In cases where a right should be used together by more than one person or put forward against more than one person and a single verdict should be given for all of them, the parties are named as compulsory joinders. Compulsory joinders must only sue together or they must be sued together and have to act together.
4.5 Applications for Security for Defendant’s Costs
As a rule, plaintiffs are not obliged to pay any sum of money as a security deposit for the defendants’ cost while initiating the proceedings. However, in the following cases, where there is a possibility that the plaintiff cannot pay the costs of the proceedings, the plaintiff is obliged to deposit a sum of money as a security for the defendant’s costs.
Under Turkish law, foreign real persons and legal entities who file a lawsuit or participate in an ongoing case or commence an execution procedure in Turkey are obliged to deposit a sum of money that the court will determine. However, if there is a reciprocity principle between the country of the foreign plaintiff and Turkey, the court exempts the claimant from paying such a deposit.
In addition, if a lawsuit is filed by a Turkish citizen who has no habitual residence in Turkey, that plaintiff is obliged to deposit the security amount that the court will determine.
The obligation of depositing a security amount arises from the law and is listed as a cause of action under Turkish law. There- fore, a failure to deposit such an amount obliges the court to dismiss the case ex officio on procedural grounds.
4.6 Costs of Interim Applications/Motions
The party who requests the interim measures must pay the court fees and expenses. A fixed application fee of TRY54.40 must be paid for the interim measures requested before the Civil Courts of First Instance, and a fixed fee of TRY25 for the interim measures requested before Civil Courts of Peace. In addition, the requesting party must pay a fixed decision fee of TRY89.60 to the court. The requesting party must pay court expenses such as notification expense and an expert fee if applicable.
4.7 Application/Motion Timeframe
Requests are fulfilled in a reasonable time by the courts in accordance with the principle of procedural economy; however, there is no specific timeframe for the courts to decide on such requests. Therefore, the court is not bound by a specific time period even upon the urgent request of the parties.
5.1 Discovery and Civil Cases
Discovery is not available in Turkey.
However, there is an exceptional provision provided under the Turkish Industrial Property Law which stipulates that before initiating a legal proceeding for compensation due to unlawful use of an industrial property right, the right-owner may ask the court to order the other party to submit related documents regarding the infringement of the industrial property right, in order to determine the evidence for compensation beforehand.
Also, the Code of Civil Procedure allows parties to ask for determination of evidence through on-site inspection, expert examination or witness statements before commencing the lawsuit in order to depend on the said evidence in an ongoing or potential case.
5.2 Discovery and Third Parties
Since there is no discovery mechanism under Turkish law, par- ties cannot obtain discovery from a third party. However, courts may order third parties or institutions to submit the necessary documents and information. If a court asks third parties or institutions to disclose documents and information, they will, in principle, be obliged to do so.
5.3 Discovery in This Jurisdiction
There is no rule governing disclosure and discovery mechanisms under Turkish law and there are no certain documents that parties must disclose. In this context, the court is bound by what parties have declared to the court freely, and must render its decision based on only the existing evidence in the case file.
5.4 Alternatives to Aiscovery Mechanisms
Unlike full and frank disclosure in US and UK proceedings or the discovery mechanism, there is no such rule under Turkish law. Parties are not obliged – and cannot be forced – to submit evidence that does not support or help their cases. In this con- text, parties only submit what they will rely on in their petitions as evidence of the facts they assert. In principle, the courts can- not decide on their own to gather evidence unless the parties request the courts to do so.
5.5 Legal Privilege
Turkish law recognises attorney–client protection in a very strict way. Lawyers are not allowed, and cannot be forced, to disclose privileged information or documents that they have obtained in the scope of an attorney–client relationship, as per the Code on the Legal Profession.
Regarding the rules governing in-house counsel–client privilege, the Turkish Competition Board has decided that documents and correspondence between an independent lawyer and a client are assumed to be within the scope of professional relations and that their confidentiality is protected. However, since an in-house attorney and their “client” have an employ- ee–employer relationship without true independence, documents and correspondence between an in-house counsel and their employer will not be considered privileged and will not be protected.
5.6 Rules Disallowing Disclosure of a Document
Besides attorney–client privilege, the records and information regarding a patient obtained during healthcare services must be kept confidential and should not be disclosed.
In addition, as a rule, banks are also obliged to keep all information and documents regarding their customers confidential.
Also, it is worth noting that independent auditors and financial consultants are obliged to keep their clients’ commercial information confidential and should not be forced to disclose such information and records.
6.1 Circumstances of Injunctive Relief
According to the Code of Civil Procedure, the judge may order any type of interim measure pre-trial, which covers changes in existing circumstances that will result in severe difficulty in, or the impossibility of, exercising a right, or if a delay would cause an inconvenience or serious damage.
A party must file a petition before the court to request interim remedies, specifying the type of interim measure required and the reasons justifying it.
6.2 Arrangements for Obtaining Urgent Injunctive Relief
As described in 4.7 application/Motion Timeframe, injunctive relief requests are fulfilled in a reasonable time by the courts in accordance with the principle of procedural economy; how- ever, there is no specific timeframe for the courts to decide on such requests.
6.3 Availability of Injunctive Relief on an Ex Parte Basis
Under Turkish law, the court may decide interim remedies ex parte if the applicant’s rights need to be immediately protected or if informing the other party may decrease the effectiveness of interim relief. In such circumstances, the other party is notified of the decision and may object to the terms of the interim measure, the court’s jurisdiction or the security. The objecting party must specify the reason and submit any evidence relating to the objection. Following consideration, the court may decide to change or remove the interim remedies.
6.4 Liability for Damages for the Applicant
The party requesting an interim measure must provide security. This security is provided in order to cover the potential loss of the counterparty, or of third parties, that may occur because of an unjustified request for injunctive relief. The court will determine the amount of the collateral. Although the court may decide not to demand any security if the request is based on an official document or any other similarly strong evidence or as the conditions require.
After a final substantive decision is rendered in the proceedings rejecting the claim, or after a decision of the court discontinuing the injunctive relief, the court retains the sums secured for a period of one month to see if the counterparty initiates a law- suit against the requesting party for the indemnification of its damages incurred as a result of the injunctive relief decision. It should be noted that such a lawsuit for compensation must be initiated within one year of the finalisation of the interim measure.
If the counterparty does not file such a claim within one month, the court returns the security to the requesting party.
6.5 Respondent’s Worldwide Assets and Injunctive Relief
Turkish courts are not allowed to grant injunctive relief against the worldwide assets of the respondent since decisions regarding the seizure and provisional seizure of the respondent’s assets are domestic matters and only possessions within Turkish borders may be seized.
6.6 Third Parties and Injunctive Relief
The requesting party is obliged to file the main lawsuit on the merits, which shall be filed against the breaching counter- party within 14 days after obtaining the injunctive relief from the court. Therefore, since the breaching counterparty is the defendant and the main case shall be filed against the defend- ant, injunctive relief cannot be obtained against third parties.
6.7 Consequences of a Respondent’s Non-compliance
Parties that fail to comply with, or violate, an interim injunction face one to six months’ disciplinary imprisonment upon a complaint filed within six months as of learning of the violation.
7.1 Trial Proceedings
Trials are primarily conducted in writing under Turkish law. Oral argument is also included in the trial proceedings. However, oral arguments do not affect the proceeding as much as written submissions.
The claims of the plaintiff and events regarding the dispute must be included in the statement of claims in a detailed way. The defendant should raise its pleas within its written submissions.
The court summons the parties to hearings several times. Courts generally grant interlocutory decisions during these hearings, such as appointing an expert or asking for additional documents from the parties or other institutions. Parties submit their written statements regarding such decisions of the court or the proceedings in general, and can also offer oral arguments during the hearing.
Expert opinions are also issued in writing during the trial and the court does not summon the experts to the court in principle. If a detailed expert examination on the subject is needed, the parties can request an additional report, which will also be in writing.
The witness statements should be given during the hearing. The parties can request the judge to ask further questions to the witnesses. The parties can submit their comments and objections regarding the witness statements both orally (during the hearing) and in writing (following it).
7.2 Case Management Hearings
Traditional case management hearings and case management conferences are not provided by Turkish law. However, a pre- liminary examination must be done before the trial.
There are two different proceedings provided under Turkish law: written and simple proceedings. In written proceedings, a preliminary examination hearing must be held. In simple proceedings, the preliminary examination can be made through written court order or as a hearing.
The court initially examines and grants a decision on the cause of action and the preliminary objections, which are lack of juris- diction and arbitration objections.
Following the above, the court evaluates the claims of the par- ties and determines the disputed subjects. Finally, the court encourages the parties to settle the dispute or apply for voluntary mediation, unless this is mandatory.
The court may hold a single preliminary hearing before the trial, unless the parties are likely to settle the dispute or apply for voluntary mediation. In such cases the court may decide to conduct another preliminary hearing.
7.3 Jury Trials in Civil Cases
Under Turkish law, jury trials are available for neither civil nor criminal cases.
7.4 Rules That Govern Admission of Evidence
In principle the court cannot collect evidence and must only consider the evidence submitted by the parties while granting its decision.
The statement of claim and the response petition must contain the evidence which will be submitted by the parties. The parties must submit their evidence, stipulated in such documents, to the court, within two weeks from the service of the preliminary hearing invitation as a rule. Regarding evidence being in the possession of a third party, the parties must provide the court with information regarding the place of the evidence.
Types of evidence available under Turkish law are:
• expert opinions;
• on-site inspection;
• witness statements; and
• expert testimonies.
The most important types of evidence in civil proceedings are deeds, documents and expert opinions. For claims with a value exceeding a certain amount prescribed in law, parties must prove their claims with a deed or document in principle. In case these types of evidence are not available, the parties should support their claims with prima facie evidence along with wit- ness statements.
Evidence obtained unlawfully will not be considered by the courts and cannot be the base of a judgment.
In addition, parties cannot rely on the documents and information shared – or the negotiations in general – during mediation meetings, unless otherwise agreed.
7.5 Expert Testimony
The court can decide to appoint an expert, or expert commit- tee, to examine a case, at the request of the parties or ex officio, in cases requiring special or technical knowledge. Turkish law prohibits court-appointed experts giving an opinion regarding legal matters. The experts must issue an expert opinion as a result of the examination.
Furthermore, the parties can introduce expert testimony during the trial. However, this expert testimony is different from the expert opinion of the expert appointed by the court and does not have the same effect as the opinion of the expert appointed by the court in terms of conclusive force. The parties can also introduce expert testimony on legal matters.
7.6 Extent to which Hearings are Open to the Public
The hearings are held open to the public in principle. However, the court may decide to hold the hearing in private, at the request of the parties or ex officio, provided that public morality, public safety or relevant persons’ superior interests require this.
Although hearings are open to the public, taking photos or recording visuals or sounds during the hearing are prohibited.
The transcripts of hearings are subject to the confidentiality limitations regarding the case file.
7.7 Level of Intervention by a Judge
Turkish judges have an important role during both the hearings and the trial. The judge applies the law ex officio. The judge directs and administers the trial and takes all necessary measures to prevent the order of the trial from being disrupted.
Although the parties bring the evidence regarding the dispute, the judge has the duty of clarifying the dispute. In cases where this is necessary, the judge can request a statement from the parties about matters that the judge deems uncertain or contradictory in material or legal terms. The judge can also ask questions of the parties, witnesses or third parties and may request evidence to be presented in such matters.
The judgment of the court must be given during the final hearing of the trial. In principle, the decision should be pronounced along with the reasons on which it is based. However, in practice, due to heavy workload, the courts pronounce a short decision (without the reasons) then issue their reasoned decisions within one month from the pronouncement of the judgment.
7.8 General Timeframes for Proceedings
Turkish law provides two types of procedures: the written procedure and the simple procedure. The written procedure is applied more often than the simple procedure for commercial cases.
Written Procedure Timeframe
In the written procedure, the court immediately serves the statement of claim on the defendant. The defendant must submit the response petition within two weeks. However, the court can grant additional time (up to one month) for submitting a response petition, at the request of the defendant, provided that submitting a response petition within two weeks is not possible. The parties can also submit a second rebuttal petition and a second rejoinder petition within two weeks from the service of the preceding petition. The parties can also request additional time from the court before sending their rebuttal petition and rejoinder petition. This period is called “exchanging petitions” under Turkish law and takes approximately two to four months.
Simple Procedure Timeframe
In the simple procedure, the defendant has two weeks to submit a response petition, and the defendant can request additional time of a maximum of two weeks. The parties are not entitled to submit rebuttal and rejoinder petitions.
After this period, the court holds a preliminary examination hearing. If the dispute does not conclude with settlement, or the court does not reject the case on the basis of a lack of a cause of action or preliminary objections, the court proceeds with the next stage of the case.
The court can hear witnesses and order an expert examination during the trial and conducts the additional procedures for clarifying the dispute. This takes approximately one to three years, depending on various factors such as the complexity of the dispute, the number of expert examinations, and the evidence presented by the parties.
Mandatory mediation applies before initiating employment, consumer and commercial lawsuits in principle. An average mandatory mediation procedure takes approximately three to eight weeks, subject to the type of the dispute.
8.1 Court Approval
The parties can settle a lawsuit provided that their claims are subject to free disposition. Court approval is not necessary for the parties to settle a lawsuit. The parties may settle the lawsuit before the court or outside of the trial. If the dispute is settled before the court, the court may grant a verdict in accordance with the terms of the settlement or decide not to grant a verdict regarding the case.
8.2 Settlement of Lawsuits and Confidentiality
As stated in 8.1 Court approval, the parties can settle a dispute before or outside of the court.
Settlement agreements conducted before the court are included in the case file and the settlement is a part of the court’s verdict. In that regard, settlements reached before the court cannot remain confidential as persons who are allowed to have access to the case file can see the settlement.
Parties are not required to submit out-of-court settlements to the case file. These settlement agreements can include a confidentiality clause. After reaching a settlement, the plaintiff can withdraw the lawsuit without informing the court about the settlement.
8.3 Enforcement of Settlement Agreements
Out-of-court settlement agreements are subject to the general provisions of the Code of Obligations. Therefore, in case of a breach, the parties can file a lawsuit or initiate execution proceedings from the bailiff ’s office for the performance of the agreement in accordance with the general provisions.
Settlement agreements conducted before the court are deemed to be a definitive judgment, meaning that the agreement can be enforced through the same procedures to which court decisions are subject. This means the debtor cannot object to the execution proceedings.
8.4 Setting Aside Settlement Agreements
Out-of-court settlement agreements can be terminated in accordance with the general provisions of the Code of Obligations. According to that, if a party does not fulfil its obligations prescribed in the agreement, the other party can terminate the settlement agreement and initiate a lawsuit or execution proceedings as the case may be.
For settlement agreements conducted before the court, the par- ties do not have a right to terminate the agreement since the agreement has the effect of a definitive judgment.
However, in both options, the parties can claim defective intention in accordance with the general provisions of the Code of Obligations and request the court to terminate the agreement. The defective intention claims include mistake, deception and treat.
9.1 Awards Available to the Successful Litigant
There are three main forms of award available under Turkish law: affirmative, declaratory and constitutive judgments.
Affirmative judgments require a party to do something, such as paying an amount or refraining from doing something.
Declaratory judgments declare the existence or non-existence of a right or legal relationship or determine the forgery of a document. Affirmative judgments also have a declaratory nature.
Constitutive judgments create a new legal situation, abolish an existing legal situation or change the content of an existing legal situation. Exclusion of a shareholder and dissolution of a company are among the most common examples of constitutive judgments in Turkish commercial law.
9.2 Rules Regarding Damages
Pecuniary damages and non-pecuniary damages are available, under Turkish law, to the successful litigant. Punitive damages are not available.
Pecuniary compensation eliminates pecuniary damages, such as loss of assets, while non-pecuniary damages aim to eliminate the moral damage caused by grief or pain. Both forms of compensation can arise from a single unlawful act.
The types of available pecuniary damages change depending on the legal relationship between the parties. If the parties have a contractual relationship, the types of pecuniary damages are positive damages and negative damages in principle.
Negative damages are caused by relying on a duly concluded agreement between the parties and include the expenses incurred concluding and performing the agreement. Positive damages, on the other hand, are caused due to a party’s failure to perform the agreement and include profit loss and actual damages. In principle, a party can only claim one of the negative or positive damages.
It is worth noting that compensation cannot cause enrichment or impoverishment of the parties. The court must evaluate the compensation amount considering the financial situation of the parties.
9.3 Pre and Post-Judgment Interest
In principle, parties are entitled to collect interest based on the period both before and after judgment under Turkish law, pro- vided that the claim of interest is included in the statement of claim.
There are two types of interest provided by Turkish Law: principal interest and default interest. Principal interest is the interest paid for the creditor’s deprivation of monies until the due date of the debt. Default interest, on the other hand, is the interest that the debtor must pay to the creditor for the period of default due to the failure to pay the debt.
Both principal interest and default interest can be determined by the parties in the contract within the limits prescribed by law. If these rates are not determined in the contract, general provisions will apply. In principle, there are no limitations on the interest rates provided for in commercial contracts.
In cases where there is no contractual relationship between the parties or the interest rate is not determined by the contract, the legal interest rate applies. In addition, for monetary claims made in a foreign currency in a commercial dispute, the highest interest rate paid by the state banks applicable to that currency will apply.
The post-judgment interest applies as of the date of the initiation of the claim, while the pre-judgment interest applies from the date of the default.
9.4 Enforcement Mechanisms of a Domestic Judgment
The prevailing party can initiate execution proceedings for the enforcement of the court decision. The execution proceedings can be initiated through the competent execution office.
The execution office sends an execution order to the losing par- ty, which is in conformity with the decision of the court. The losing party has seven days to perform the court’s decision. If the decision is not performed by the losing party, the execution office will ensure the performance of the decision by seizing the assets of the losing party, or by other remedies depending on the subject of the court’s decision.
9.5 Enforcement of a Judgment from a Foreign Country
In order to enforce a judgment from a foreign country, an exequatur lawsuit must be filed before the Turkish courts.
A Turkish court can examine these judgments in a limited manner, without discussing the merits and legal basis of the case. The courts are only allowed to examine:
• the reciprocity between Turkey and the country where the judgment originates;
• whether Turkish courts have exclusive jurisdiction over the case;
• public order ramifications; and
• whether the judgment was granted without violating the right to defence of the defendant.
Turkey has concluded bilateral agreements with various countries ensuring reciprocity between Turkey and such countries. In addition, de facto reciprocity is also sufficient for the reciprocity condition to be met.
As a result of the above-mentioned examination, the court will decide on the recognition and enforcement of the judgment. If the above conditions are met, the court will decide to recognise and enforce the decision. This decision is also subject to appeal procedures in Turkey. After the decision becomes definitive, the prevailing party can enforce the decision through the execution office with the same procedures as a domestic judgment.
10.1 Levels of Appeal or Review to a Litigation
In Turkish legislation, the hierarchy of the court system is as follows:
• Civil Courts of First Instance and Civil Courts of Peace;
• Regional Courts of Appeal (appellate courts); and
• the Court of Cassation.
Parties can appeal the decision of Civil Courts of First Instance and of Civil Courts of Peace to be examined before the Regional Courts of Appeal under certain circumstances. Parties may also apply to the Court of Cassation for further appeal for some of the appellate courts’ decisions.
10.2 Rules Concerning Appeals of Judgments
As a rule, parties can appeal only the decisions of Civil Courts of First Instance and Civil Courts of Peace that exceed the amount of TRY5,880 (this amount is amended annually) to be examined by the Regional Courts of Appeal.
On the other hand, parties may appeal the Regional Courts of Appeals’ decisions to the Court of Cassation for further appeal. However, the following disputes cannot be examined before the Court of Cassation.
• Decisions of Regional Courts of Appeal, the amounts of which do not exceed TRY78,630.
• Disputes within the jurisdiction of the Civil Courts of Peace, excluding the disputes regarding real property rights.
• Decisions of a Regional Court of Appeal on a Civil Courts of First Instance’s or a Civil Court of Peace’s decision regarding the place of jurisdiction, competence, or authorised courts.
• Decisions regarding ex parte proceedings.
• Decisions on corrections of the Civil Registry.
• Records of persons, excluding the cases that have consequences regarding paternity.
• Decisions on temporary legal protections.
10.3 Procedure for Taking an Appeal
As a rule, while the decisions of Regional Courts of Appeal may be appealed within two weeks, a decision of the Court of Cas-sation may be appealed within one month of the notification being served.
10.4 Issues Considered by the Appeal Court at an Appeal
When the appeal remedy is applied for before Regional Courts of Appeal, the case file is examined for the second time by the Court and the decision of the Civil Court of First Instance and of the Civil Court of Peace is audited and checked by them. Appeal is the supervision of the decisions taken by the Civil Courts of First Instance and of the Civil Courts of Peace, both in terms of fact and law by the higher court. In other words, the Regional Court of Appeal may re-hear witnesses, or carry out on-site inspections. As a rule, the Regional Courts of Appeal hold hearings for the sake of right of defence.
On the other hand, appealing to the Court of Cassation is a legal remedy that aims to examine the decisions of the Regional Courts of Appeal and whether the law was applied to the case properly. The Court of Cassation is not obliged to perform fact and evidence checks, it examines the case file without holding a hearing (except under some circumstances specified in law).
Parties are not allowed to submit new facts and evidence at the appeal stage unless the evidence could not be demonstrated before due to force majeure, or public order requires them to do so.
10.5 Court-imposed Conditions on Granting an Appeal
The conditions of appeal are strictly stipulated under law; there- fore, the courts cannot impose any further conditions. How- ever, even though they cannot be considered as court-imposed conditions, courts indicate the time limitations, court fees and expenses to be deposited in their decisions in order for the par- ties to appeal the decision. The courts cannot send the file to the appellate courts, unless the parties deposit such fees and expenses and appeal the decision within the time limits.
10.6 Powers of the Appellate Court after an Appeal Hearing
Regional Courts of Appeal may:
• send the file to the Civil Court of First Instance or to the Civil Court of Peace for retrial without examining the merits of the case, if there are procedural reasons for doing so;
• abolish the decision of the Civil Court of First Instance or of the Civil Court of Peace and render a new one;
• correct the decision of the Civil Court of First Instance or of the Civil Court of Peace in cases where there is no need for a retrial or if there is an error in the legal reasoning; or
• reject the application on the grounds that the decision of the Civil Court of First Instance or of the Civil Court of Peace is in accordance with law and procedure.
On the other hand, the Court of Cassation decides to (i) approve, (ii) revoke or (iii) partially approve or revoke the decision of the Regional Courts of Appeal by evaluating the legal aspect of the case. When the Court of Cassation revokes a decision, it sends the case file back for a new decision instead of rendering a new one by itself.
11.1 Responsibility for Paying the Costs of Litigation
Some of the court fees and costs are collected in advance by the civil courts while filing the lawsuit, excluding costs regarding further proceedings (such as collection of evidence through expert reports, on-site inspections, etc). The litigation costs include expenses such as decision and judgment charges, expert and witness fees, notification fees, documentation fees and the official attorney fees.
The losing party is required, in principle, to reimburse the pre- vailing party for the costs of litigation.
If a party is of the opinion that the costs of litigation were mis- calculated by the court, it can challenge and appeal this decision.
11.2 Factors Considered When Awarding Costs
The costs are calculated by the court in accordance with the Code on Fees and the official minimum attorney’s fee tariff.
According to the Code on Fees, whereas some types of cases are subject to a fixed court fee, others are subject to a pro rata court fee based on the amount of the dispute.
The costs of on-site inspections and expert examination are calculated based on the number of experts and the workload.
Regarding attorneys’ fees, they cannot be less than the amount written in the official minimum attorney’s fee tariff and more than three times the minimum. In determining this fee, the effort of the lawyer, the importance of the work, the nature and the duration of the case are all taken into consideration.
11.3 Interest Awarded on Costs
The courts do not rule for interest awards on costs. However, if the losing party does not pay the determined amount of costs to the prevailing party and the prevailing party decides to enforce the court decision through execution offices, the payment order is sent to the losing party along with the interest, calculated from the decision date.
12.1 Views of Alternative Dispute Resolution within the Country
Mediation and arbitration are the most common ADR processes in Turkey. Mediation has become quite popular since the process became mandatory and a prerequisite for parties to seek redress in the court in certain labour, commercial and consumer disputes. Mandatory mediation has changed the understanding of ADR in Turkey since it provides fast and efficient outcomes.
12.2 ADR Within the Legal System
In certain dispute types, parties are required to apply for mandatory mediation before initiating court proceedings. Three types of dispute where the parties have to attend mandatory mediation as a cause of action are:
• disputes arising from compensation claims of employees or employers relating to labour agreements and re-employment lawsuits;
• commercial disputes related to monetary receivables or compensation claims; and
• consumer disputes over the monetary limit of TRY10,090.
Since applying mandatory mediation is a cause of action, if the parties do not apply for mandatory mediation before commencing legal proceedings, the case will be dismissed on procedural grounds due to the lack of a cause of action.
12.3 ADR Institutions
The Istanbul Arbitration Centre (ISTAC) was established in 2015 with the goal of providing efficient and fast dispute resolution services for both international and domestic parties. ISTAC publishes general guidelines covering the rules on arbitration proceedings and mediation. If the parties wish the dispute to be resolved in accordance with ISTAC rules, they must agree to ISTAC rules governing the proceedings.
The Union of Chambers and Commodity Exchanges of Turkey (TOBB), the Istanbul Chamber of Commerce (ITO) and the Izmir Chamber of Commerce (IZTOK) have also established arbitration centres. However, these institutions, rather than being international arbitration institutions, aim to effectively resolve disputes among their members.
In addition to the above, disputes arising from football are resolved in the Turkish Football Federation Dispute Resolution Committee in line with the Committee’s rules. For appealing the Committee’s decisions, parties shall apply to the Turkish Football Federation Arbitration Board.
13.1 Laws Regarding the Conduct of Arbitration
International arbitration in Turkey is governed by the Code on International Arbitration, which is based on the UNCITRAL Model Law, whereas domestic arbitration is governed by the Code of Civil Procedure.
13.2 Subject Matters Not Referred to Arbitration
In terms of both internal and domestic arbitration, disputes arising from real rights on real estate or transactions that are not subject to the will of both parties are not eligible for arbitration. Disputes arising from rights related to property, easements, usufruct and liens can be given as examples of disputes regarding real rights. What is meant by matters that are not subject to the will of the parties are issues that concern public order and on which the parties do not have the freedom to settle, such as disputes arising from criminal and bankruptcy law.
13.3 Circumstances to Challenge an Arbitral Award
Even though arbitral awards are final and there is no appeal mechanism for arbitral awards, parties are able to ask for cancellation of the award from the courts.
For both domestic and international arbitration, parties are able to request the cancellation of a decision from the Regional Courts of Appeal, which decisions can themselves be appealed to the Court of Cassation.
Grounds for setting aside the award are that:
• the agreement is not valid because one of the parties was incapacitated;
• the appointment of arbitrators was not in accordance with the parties’ agreement;
• the arbitral award is not rendered within the terms of the arbitration;
• the decision on competence was unlawful;
• the arbitral tribunal rendered an award on matters beyond the parties’ claims, or did not rule on one of the party’s claims;
• the arbitral proceedings were not in line with the parties’ agreement or, in the absence of such an agreement if this situation affects the substance of the award;
• if the parties’ equality was not respected;
• if the matter is non-arbitral under Turkish law; and
• if the award is incompatible with public policy.
13.4 Procedure for Enforcing Domestic and Foreign Arbitration
Turkey is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, with a reservation regarding Article I(3) of the Convention, which results in only awards rendered in the territory of another member state being enforceable.
Recognition and enforcement of a foreign award is also regulated under the Code on International Private and Civil Procedure Law, according to which enforcement of a foreign arbitral award must be requested from the Turkish Civil Courts of First Instance. Parties that seek enforcement of a foreign award must submit:
• the original arbitration agreement or clause (or a duly certified copy);
• the original final and executable award (or a duly certified copy); or
• a duly certified translation of the above-mentioned documents.
Unlike foreign awards, domestic awards are enforceable without further proceedings.
14.1 Proposals for Dispute Resolution Reform
An amendment to the Code of Civil Procedure, which entered into force in August 2020, mainly aims to manage civil judicial procedures in a more efficient and timely manner for preventing the violations of the right to a fair trial.
In addition, mandatory mediation has recently become a cause of action for consumer disputes, as was the case before for employment and commercial disputes in principle.
14.2 Impact of COVID-19
As of 13 March 2020, courthouses began to shut down and the hearings were postponed until 15 June 2020 in Turkey, except for urgent matters such as proceedings regarding detained per- sons. Accordingly, periods of limitation were also suspended until further notice. Although the pandemic still continues in Turkey, on 15 June 2020, the courthouses began to operate again and periods of limitation were restarted.
The COVID-19 pandemic also accelerated arrangements for parties to attend hearings remotely. Some pilot courts started to conduct online hearings. The Istanbul Arbitration Centre also began to implement telephone and videoconferencing technology during its arbitration proceedings.
This article was first published on Chambers and Partners Practice Guides in December 2020. See the article here.