Turkey: The New Dispute Resolution Method For Commercial Disputes: Mandatory Mediation

The Law on the Procedure for Initiating Execution Proceedings based on Monetary Receivables Arising out of Subscription Agreements ("Law No. 7155") was published in the Official Gazette on December 19, 2018. The Law No. 7155 introduces new rules for different legal subject matters, including (but not limited to) the execution and bankruptcy law, concordatum, and mandatory mediation.

The codification method of the Law No. 7155 can be characterized as quite unusual, given the fact that Article 1 of the Law No. 7155 describes the purpose of this law simply as "regulating the procedures and principles for the initiation of execution proceedings based on subscription agreements," whereas the Law No. 7155 also incorporates a number of articles amending various other laws at the same time. To that end, one of the most eye catching modifications brought forth by the Law No. 7155 concerns the Turkish Commercial Code No. 6102 ("TCC") and the Civil Mediation Law No. 6325 ("Law No. 6325"). Accordingly, as per Articles 20 to 23 of the Law No. 7155, it is now mandatory to apply to a mediator before filing a lawsuit for specific types of commercial disputes.

The fundamental amendment herein is that, effective from January 1, 2019, as per Article 20 of the Law No. 7155, the claimant will be required to first apply to a certified mediator for compensation as well receivable claims, before being allowed to initiate a commercial lawsuit. The Law No. 7155 mandates that the mediation process will be completed within six (6) weeks, starting from the date on which the mediator is appointed. However, this mediation term could be extended for an additional two (2) weeks, if necessary. On that note, compared to the mandatory mediation mechanism provided under the employment law, it appears that the lawmaker has considered the potential complexity of commercial disputes and sets a longer time period for completing the mediation phase in these cases. Furthermore, the mediation application must be submitted to (i) the mediation office where the competent judicial authority is located in accordance with the subject matter of the dispute, or (ii) in locations where the mediation office has not been established, the appointed directorates.

It is worth noting that, pursuant to the Law No. 7155, applying to mediation before filing a commercial lawsuit now constitutes a cause of action. From the perspective of procedural law, this means that if the litigant files a lawsuit before applying to a mediator, then the court will refuse to delve into the merits of the case and reject the lawsuit on procedural grounds. Therefore, it is obligatory and vitally important to exhaust the mediation phase prior to bringing one's claims before a court of first instance. However, it should be noted that, as per Article 21 of the Law No. 7155, the mandatory mediation procedure does not apply to pending cases.

As for the appointment procedure of the mediators, pursuant to Article 23 of the Law No. 7155, mediators can be appointed from the Registered Mediators list. A mediator may be selected from this list by an agreement of the parties; however, in other cases, mediator appointments will be made by the authorized mediation office established in the relevant jurisdiction.

Moreover, the mediator shall be required to finalize the mediation procedure if it is unable to reach the parties to the dispute, or if the disputing parties fail to participate into the mediation meetings, or in cases where the parties reach an agreement (or decide not to agree) before the mediator. Once the mediation procedure is completed and finalized, the mediator must duly inform the mediation office of the situation by issuing the final minutes. In the event that the mediation process is concluded because one of the parties fails to attend the first meeting (without presenting a valid excuse), then the non-attending party shall be identified and specified in the final minutes and it shall be held solely responsible for all of the litigation fees, even if that party wins the subsequent lawsuit. On the other hand, in cases where the mediation procedure is concluded due to the fact that both parties fail to participate in the first mediation meeting, each party shall be liable for its own litigation expenses during the course of the ensuing litigation process.

As for the effective date of the Law No. 7155, Articles 10, 20 and 21 came into force on January 1, 2019, whereas Articles 1 to 9, provisional Article 1, and Articles 18 and 19 will come into force on June 1, 2019.

In light of the foregoing explanations, we conclude that the Law No. 7155 not only created a new enforcement system in relation to execution proceedings, but it has also introduced the mandatory mediation process prior to initiating legal proceedings in commercial lawsuits. These procedural modifications concern the fact that the litigation cycles of commercial courts are often quite lengthy and drawn-out in these types of matters, and that such disputes could actually be resolved in a short period of time by employing effective dispute resolution methods. As a result, they are based on the realization that the ability to provide meaningful remedies in a reasonable amount of time is perhaps the most important indicator for measuring confidence in any legal system.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in March 2019. A link to the full Legal Insight Quarterly may be found here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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