Complications surrounding the practice of enforcement of foreign decisions in Turkey

Efe Kinikoglu

Moral Partners, Istanbul

efekinikoglu@moral.av.tr

Yelda Yalcin

Moral Partners, Istanbul

yeldayalcin@moral.av.tr

Çağla Yargic

Moral Partners, Istanbul

caglayargic@moral.av.tr

Court decisions and arbitral awards (hereinafter referred as decisions) reflect the sovereign power of the country in which they are rendered, and as a rule, they can only have an effect within the borders of that country.[1] For the same reason, for a decision rendered in a foreign country to be able to have effect in Turkey, it is necessary to first be enforced by Turkish courts.

In this contribution, we first examine the legal regulations relating to the enforcement of foreign decisions. Subsequently, we will discuss the practice of enforcement of foreign decisions as far as it relates to commercial disputes under private law. 

Enforcement and its conditions

Enforcement is a legal institution that allows a foreign decision to be enforced in Turkey.  The judgment of an enforced decision would form the basis of executory actions, as if it was originally rendered in Turkey.

Enforcement of a foreign decision is essentially regulated by the provisions of the International Private and Procedure Law (IPPL) No. 5718. In addition, in many international conventions to which Turkey is a party, there are regulations on the recognition and enforcement of foreign decisions.

Enforcement of foreign arbitral awards

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 1958 (New York Convention), which has become part of domestic law by being approved on 2 July 1992 under Article 90 of the Constitution, is applied solely for arbitral awards rendered in the signatory states concerning commercial disputes.

The relevant provisions of IPPL largely mirror the legal obstacles to the enforcement of foreign arbitral awards as set out in Article V of the New York Convention. In accordance with the New York Convention, a foreign arbitral award will be enforced in a signatory state of the Convention, unless the defendant proves the existence of the obstacles to enforcement specified in Article V. Conditions that may prevent enforcement are, in summary, as follows:

• the parties to the arbitration agreement do not have the authority to execute the agreement or the agreement is invalid for any reason;
• the notice of arbitration has not been delivered to the party against which the award is rendered or the said party was unable to be present at the proceedings;
• the award exceeds the scope of the arbitration agreement;
• the formation of the arbitral tribunal or the arbitration procedure is contrary to the agreement between the parties or the law of the country in which the arbitration proceedings took place;
• the award is annulled in accordance with the law of the country in which the arbitration proceedings took place;
• the subject matter of the dispute is not conducive to arbitration; or
• the implementation of the award violates public order.

Enforcement of foreign court decisions

Although the fundamental legal provisions regarding enforcement of foreign court decisions are in the IPPL, it is also necessary to take into consideration whether the country in which the award requested to be enforced is rendered, is a party to any international convention or any bilateral agreement. If a foreign decision falls within the field of application of an international convention to which Turkey is a party, the request for enforcement of the decision is evaluated firstly per the provisions of the relevant international convention. However, if the provisions of the convention contain provisions that are more stringent than the provisions in the IPPL, the plaintiff may benefit from the provisions included in the IPPL. The enforcement of the foreign decision is possible if the following conditions are met:

• Existence of a reciprocal agreement between Turkey and the state in which the foreign decision was rendered, or a provision of the law or de facto practice that allows the enforcement of Turkish court decisions in that state.
• A foreign decision has been rendered on a matter that does not fall under the exclusive jurisdiction of Turkish courts.
• Provided that the defendant makes such an objection, the decision is not rendered by a state court that is not actually related to the subject matter or parties.
• The decision is not clearly in violation of public order.
• The person against whom the decision for which enforcement is being requested is rendered, has not made an objection on the basis that they were not duly summoned or represented before the court that rendered that decision, or a decision was rendered in their absence in violation of the law.

Procedure of enforcement proceedings

First, it should be noted that foreign decisions regarding civil law matters are enforceable as long as they are final under the laws of the foreign country. Parties must have exhausted all rights of appeal. It will be useful to submit a written confirmation from the foreign court or authority that no ordinary appeal has been filed against the judgment, or that the judgment is final to the court.

The enforcement of interim measures is not regulated under the IPPL. It is mostly accepted that interim measures are not in any way enforceable under Turkish law since they are not final decisions, although it is subject to discussions from time to time whether interim measures will be enforceable if the dispute has been finally settled by the foreign court that issued those interim decisions. As they do not have the characteristics of final decision, since the purpose of these decisions is taking precaution before a final adjudication, such interim decisions as interim measures or interim attachments which are decided by foreign arbitral tribunal will not be considered as final decisions.

Public order

Due to the proscription on revision au fond in the Turkish judicial system, the substance of the decisions that are to be enforced may not be reviewed. Only a limited examination is carried out on whether the aforementioned obstacles to enforcement exist. As a rule, Turkish courts are prohibited from re-evaluating the dispute. 

However, as the decision has to comply with the Turkish public order for it to be enforced, and as the contents and the limits of the concept of public order are not regulated by law, it is noticed that in practice, courts sometimes re-evaluate the dispute in depth. In summary, the concept of public order is built around:

• the basic values of the Turkish law;
• Turkish understanding of general morals;
• the fundamental ideas of justice upon which Turkish law is based;
• the general underlying politics of Turkish law;
• fundamental rights and freedoms set out in the Constitution;
• rules based on common principles in force in the international arena and the principle of good faith which is part of private law;
• legal principles which are the expression of moral principles and sense of justice adopted jointly by civilised communities;
• the level of civilisation of the society;
• its political and economic regime;
• human rights and freedoms; and
• the violation of these elements.[2]

Therefore, it is observed that, even though the review of foreign decisions by courts shall be carried out within a limited scope, and while taking into consideration that it consists of an exceptional obstacle to enforcement, in practice many requests of enforcement of foreign decisions are rejected on the grounds of violations of public order. As a result, the analysis and preparation of a foreign decision to be enforced in Turkey, taking into account the up-to-date case law of the Court of Appeals regarding public order, is of great importance in terms of preventing possible problems that may be encountered in the future during any procedure of enforcement.[3] ​​​​​​​

Competent court

The concept of competence of courts concerns which court is authorised to render a decision regarding a lawsuit. According to the IPPL, the Civil Courts of First Instance, which are in general the competent court per the Turkish procedural law, are competent for the enforcement of foreign decision. In principle, the Civil Courts of First Instance have general jurisdiction over civil law matters regardless of the value of the claim.

Specialised courts operate in specific matters, such as commercial disputes, family disputes or employment disputes. For instance, it is accepted that all cases concerning commercial issues should be filed before the specialised Commercial Court of First Instance. However, there is no unity in practice and some civil courts of first instance reject such lawsuits due to lack of jurisdiction – sending the case file to the relevant commercial courts. In order to eliminate the risk of prolonging the legal proceedings, it is vital to follow the current decisions of the Supreme Court and file an enforcement lawsuit in the correct court.

Foreign guarantees

A foreign plaintiff who has filed or participated in any lawsuit in Turkey must deposit security for costs so that the defendant may be compensated for the damage that the defendant may incur due to an unjust lawsuit. Although the amount of security is assessed by the court according to the characteristics of the lawsuit at hand, in practice it is usually assessed as 10 per cent or, as seen in recent years, 15 per cent of the value of the lawsuit. This amount is a separate and different type of collateral than the collateral that will have to be deposited during the request for a possible temporary legal protection measure, which is briefly explained below.

However, if there is a bilateral agreement between the plaintiff's country and Turkey, or provision of law or actual practice providing for the exemption from depositing collateral, the plaintiff will not be obliged to deposit any security. Therefore, it is important to first investigate whether a foreigner who wants to file a claim in Turkey should deposit any security, and in this context, to state this clearly in the petition – especially by carefully examining bilateral agreements between countries or actual practices.

In practice, failure to account for this amount in the first place or filing a lawsuit without depositing such an amount can lead to a loss of time, and some courts which are not sure of bilateral agreements or actual practice can insist on collateral to be posted. At that point, as with other similar issues, communication with the court and command over local enforcement practices can make a big difference.

Fees

One of the important issues for the plaintiff in enforcement cases is the court fees that must be paid for the lawsuit to be filed. If the subject matter of the judgment seeking to be enforced is monetary, a proportional fee shall be applicable to enforcement applications, and one-quarter of this amount is payable at the moment of filing of the lawsuit. If not, a fixed court fee, depending on the type of the subject matter, shall be applied.

For the year 2021, the fixed fee to be paid in enforcement cases is TL59.30, while the proportional fee is 6.831 per cent of the total amount of the dispute. However, while the Court of Appeals has adopted different approaches regarding the issue of court fees according to the nature of the enforcement proceedings over the past decade, there is no firmly settled practice in this regard in Turkey. Some courts may still apply fixed fees for enforcement applications, whereas some chambers of the Court of Appeals seldom apply fixed court fees. In established practice, the opinion that ‘proportional’ court fees shall be imposed for enforcement proceedings, the value of which can be measured in money, became predominant.

In summary, due to the lack of uniform practice in the matter of court fees, especially among the Civil Chambers of the Court of Appeals, it is of great importance for the plaintiffs who will initiate the enforcement proceedings to be aware of recent decisions and, if possible, to get the payment of fixed court fees accepted.

Interim measures that can be sought during enforcement proceedings

In practice, during the period leading up to the conclusion of the enforcement proceedings, a defendant may try to transfer their assets to third parties or to move them out of the country in order to prevent the creditor from taking recourse on those assets for the amount due to them pursuant to the foreign decision.

In order to prevent this as much as possible, all possible interim measures shall be requested by taking strategic steps before or at the beginning of the enforcement lawsuit. Therefore, it is essential that the defendant's assets and transactions in Turkey are carefully investigated before the initiation of the lawsuit, and that it is requested that a decision be rendered for the adoption of measures such as preventing the other party from transferring his assets to third parties, foreclosing on bank accounts or requesting collateral, until the enforcement lawsuit is finalised.

Otherwise, even if the enforcement lawsuit is won, the decision to be rendered at the end of the enforcement lawsuit will not be of any practical value, since the claim will not be able to be collected. For this reason, requesting temporary legal protection measures during enforcement lawsuits is important to minimise the risks of embezzlement of assets during the proceedings.

Conditions on finalisation of enforcement decisions

A foreign decision for which an enforcement decision is rendered will have the effect and enforceability as to be executed from the moment the decision is rendered as if it was a decision rendered by Turkish courts.

However, decisions on the enforcement of foreign decisions cannot be executed until they are ‘duly’ finalised. This means that all possible legal recourses against the decision by way of appeal or revision must have been exhausted or have remained unutilised during the relevant legal periods during which an appeal may be lodged. An appeal, which can be filed by a party against the decision of enforcement, automatically stops the execution of the decision. Therefore, for the execution of enforcement decisions, they shall first need to be finalised.

Given the caseload of the higher courts and the period to pass for the finalisation of decisions, enforcement lawsuits always take longer than expected. In practice, it takes about 12–18 months for a first instance court to render its decision. Under Turkish law, the courts hand down a short decision at the hearing, which is referred to as a ruling. Afterwards, generally in two to three months, a fully reasoned decision is rendered, which is referred to as a justified decision. The justified decision of the court of first instance can be appealed within two weeks of the notification of the justified decision to the parties. Finally, the approximate duration for Court of Appeals to render a decision takes also 8–12 months.

Conclusion

Although the issue of enforcement of foreign decisions in Turkish courts depends on certain rules under both the New York Convention and the IPPL, it is indisputable that the general problems encountered therein occur during the implementation of those rules. The main reason for this is that judges in local courts are often unfamiliar with enforcement lawsuits for foreign decisions and, consequently, with the relevant legislation and practice.

Therefore, it is of great importance to follow up current case law regarding enforcement lawsuits, how the rules of domestic law are interpreted and how the process is completed in practice. Given the evaluation by courts of the public order test is entirely within the discretion of the courts, it is important for the success of the lawsuit to draft the first petition of the lawsuit accordingly – bearing in mind the points and latest practices that we have examined in this article. In this context, the choice of law and alternative dispute resolution methods to be applied before the dispute arises and the planning of strategies to be followed during the course of the dispute, must be made meticulously.

In fact, it is critically important to distinguish the necessary strategies before and after the dispute, to conclude the arbitration agreement in accordance with the mutual will of the parties in a valid way before any dispute arises, especially since the Turkish courts evaluate diligently the condition for the existence of a valid arbitration agreement in enforcement cases.

Finally, in agreements to be concluded between the parties, it should not be ignored that the choice of law and the choice of jurisdiction should be made according to the obligations of the debtor who is under the primary obligation set out in the agreement, and the country in which the counterparty of the agreement resides and the ability to collect in the country in which the decision was rendered.