Foreign Creditor’s Guide to
Debt Enforcement in Turkey
In this short guide, we would
like to provide brief tips regarding the debt enforcement under Turkish laws.
In this regard, our guide is separated in the following main sections: i)
Foreign Creditor’s Right to Sue and Initiate Enforcement Proceedings, ii) Injunctive
Relief and Provisional Attachment, iii) Filing a Lawsuit, and iv) Enforcement
Proceedings.
I. Foreign Creditor’s Right to Sue and Initiate
Enforcement Proceedings:
A foreign creditor is entitled
to file a lawsuit or initiate enforcement proceedings under Turkish laws
against a debtor located in Turkey. Nevertheless, unless there is a reciprocal
agreement between Turkey and the creditor’s country or the foreign creditor has
no assets in Turkey (i.e. real estate), pursuant to the Turkish Conflict of
Laws Rules, a foreign creditor may have to provide a security to the court to
guarantee the court expenses and damages which may arise in case the creditor
fails to prove its case. The amount of such security is determined by the
court, usually as a certain percentage of the amount claimed in the lawsuit.
II. Injunctive Relief and Provisional Attachment:
Pursuant to the Turkish Civil
Procedural Law and Bankruptcy and Enforcement Law, a foreign creditor, indifferently
from local plaintiffs, is entitled to seek injunctive relief or provisional
attachment as well.
Injunctive relief may be
sought in cases where the subject of the case or the claim is related to a
movable or immovable property. Therefore, for monetary claims, the courts do
not grant an injunctive relief for the creditors as in such cases, the
creditors must seek provisional attachment. Injunctive relief may be sought
along with the filing of main lawsuit as well as separately, prior to the
filing of the main lawsuit. Turkish Civil Procedural Law provides that a court
may grant an injunctive relief in case i) the plaintiff can show that it is
likely that the main lawsuit will be decided in his favor and ii) unless an
injunctive relief is granted, it is likely that the plaintiff will incur
irrecoverable damages. The court may as well, require the plaintiff to deposit
a certain amount of security to guarantee the payment of defendant’s possible
damages in case the main lawsuit is decided in defendant’s favor. In case an
injunctive relief is sought separately, prior to the filing of the main
lawsuit, the plaintiff is required to file the main lawsuit within ten (10)
days from the grant of the injunctive relief.
Unlike injunctive relief, a
creditor may seek provisional attachment for monetary claims (unless it is
secured by a lien-with limited exceptions) prior to the initiation of
enforcement proceedings in order to prevent the debtor from transferring his
assets to third persons. Provisional attachment may be sought for both due and
payable debts and for the debts that are not yet due. However, for the debt
which are not yet due, the creditor must prove that i) the debtor does not have
specific residency or ii) it is likely that the debtor will transfer his assets
to avoid paying the debt or to obstruct the enforcement of payment. In
practice, the courts are likely to grant a provisional attachment in case the
creditor can present the court a bill of exchange. Like the injunctive relief,
the court will require the creditor to deposit a security in order to ensure
the payment of debtor’s possible damages that may arise due to the provisional
attachment. In practice, the amount of the security is often decided as the
fifteen (15%) percent of the amount claimed. In case a provisional attachment
is granted by the court, the creditor, through enforcement offices, may start a
preliminary enforcement proceeding and attach the property (movable or
immovable) of the debtor without any prior notice.
III. Filing a Lawsuit:
A foreign creditor may as well
directly file a lawsuit against the debtor in order to collect the debt without
seeking any provisional attachment or initiating an enforcement proceeding. As
stated above, in such case, a foreign creditor may be required to deposit a
security to the court until the end of the lawsuit to guarantee the payment of
court expenses or defendant’s (debtor’s) possible damages if the plaintiff
(creditor) fails to prove his case. The place and court where the lawsuit is
filed in determined pursuant to Turkish Civil Procedural Law, which in most
cases is the defendant’s place of residency. Competent court (i.e. Commercial
Court or Civil Court of General Jurisdiction) is decided based on the nature of
the case. When filing the lawsuit, the plaintiff is required the deposit the
court expenses such as service, court expert, viewing and witness expenses, in
advance. Moreover, a court charge which will be calculated based on the amount
of the claim must also be paid at the time of filing. In general, courts render
a decision within two (2) years of the filing whereas finalization of the
decision may take up to four (4) or more years as in some cases, the plaintiff
and the defendant are entitled to both apply to court of appeals and court of
cassation respectively. When a judgement is rendered by the court, the creditor
may initiate an execution proceeding based on the decision where the debtor
will have no right to object. Therefore, except some cases, it is possible to
initiate an enforcement proceeding based on a judgement, without waiting the
finalization of it. However, if such judgement is not finalized, the debtor is
entitled to seek a decision for stay of execution until the finalization from
the court of appeals or the court of cassation. In such case, the debtor will
be required to deposit the whole amount granted in the judgement to the
enforcement office which will be directly paid to the creditor if the judgement
of the court is approved by the court of appeals or the court of cassation and
finalized.
IV. Enforcement Proceedings:
A foreign creditor is also
entitled to initiate an enforcement proceeding for the collection of the debt
without obtaining any judgement before. The type of the enforcement proceedings
which a creditor should initiate differs depending on the nature of the debt
(i.e. secured by a lien or a bill of exchange)
In case the creditor does not
have a judgement and the debt is not secured by a lien or the debtor has not
issued a bill of exchange, a creditor may initiate a general enforcement
proceeding. In such case, the enforcement office serves an order of payment to
debtor to which the debtor is entitled to object in writing within seven (7)
days of the service. The creditor may not attach any of the debtor’s property
during this time-frame whereas if the debtor does not object within seven (7)
days, the procedures for attachment may be initiated by the creditor. In case
the debtor objects to the enforcement proceeding within seven (7) days (stating
that he does not have such debt or he did not sign such agreement etc.), the
creditor must file a lawsuit for the annulment of the objection within a year
from the date of objection. The action for the annulment of the objection is
filed before the courts of general jurisdiction or commercial court depending
on the nature and cause of the debt. In case the creditor holds one of the
documents listed under the Article 68 of Turkish Bankruptcy and Enforcement
Law, proving the debt and its amount (i.e. a signed letter by the debtor), he
can also file a case for the removal of the objection before the enforcement
court within six (6) months.
If the creditor has a security
(i.e. a bill of exchange) over the debt, Turkish laws entitles the creditor to
initiate “special” enforcement proceedings. Special enforcement proceedings enable
the creditor to move faster in collecting the debt as the time-frames and
reasons for an objection on the debtor’s part are more limited. Where there is
a lien, securing the debt, the creditor mostly must initiate foreclosure
proceedings, if it is available, before resorting to any other proceedings.
Nevertheless, as foreclosure proceedings usually are the fastest and easiest
way to collect the debt, it is also the usually most preferred choice of
creditors. In case the whole amount of the debt is not satisfied after the foreclosure
proceedings, the creditor may also resort to other means of enforcement and
court proceedings.
The debtor, in all kinds of
enforcement proceedings, is entitled to file a negative declaratory action,
claiming that he does not have such a debt to the creditor. In such case, the
enforcement proceedings may be stopped if the debtor deposits a security to the
court which is usually determined as 115% of the disputed amount by the courts
in practice.
Please click the below link for the PDF version of the article.