Bringing a claim - initial considerations

Key issues to consider

What key issues should a party consider before bringing a claim?

Before bringing a claim, claimants need to conduct a cost/benefit analysis and asses their prospects of success. An evaluation of the chances of success should consider whether a claim is based upon sufficient evidence or not. Written evidence, commercial books and records, witness statements and technical expert evaluations are all important elements of the evidence in commercial litigation. Pursuant to the TCC, it is obligatory for all transactions between Turkish companies to be recorded in their official corporate books. The courts accept commercial books as sufficient evidence only if those books have been kept in full in accordance with the Turkish legislation, and a corporation’s opening and closing approvals have been notarised officially.

Costs should also be considered: these will cover court fees, expenses and contingency fees, as well as a reimbursement obligation in the event of the party losing the lawsuit.

Establishing jurisdiction

How is jurisdiction established?

Jurisdiction for domestic matters lies within the scope of the TCCP. Generally, jurisdiction is established through a consideration of the defendant’s place of residence. For the determination of jurisdiction in contract matters, the place of performance of the contract is taken into consideration. Claimants have two jurisdiction options for tort claims. Jurisdiction may exist where the tortious act took place or where the harm arose, rather than being grounded in the claimant’s place of residence. Parties have the right to make an agreement on commercial matters to specify jurisdiction.

International matters are legislated under the IPCPL. According to the IPCPL, the jurisdiction of the Turkish courts for international matters is determined through the jurisdiction rules regarding domestic matters.

A jurisdiction plea has to be claimed by the respective party as a preliminary objection. The courts also consider ex officio certain jurisdiction rules in accordance with the TCCP.

Preclusion

Res judicata: is preclusion applicable, and if so how?

Res judicata is applicable in the Turkish legislation. If the same matter between the same parties is brought before the court again, parties can bring forward a plea of preclusion and request the court to decide that the dispute before the court has already been settled. As a result of the principle of ex officio examination, courts will also take preclusion into consideration. Upon the determination of preclusion through either method, the court will decide that the same dispute between the same parties has already come to a conclusion via a binding decision. Pursuant to the IPCL, the enforcement of foreign judgments in Turkey is conditioned on a reciprocal basis between Turkey and the state where the court decision is given.

Applicability of foreign laws

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

Turkish courts shall apply the rules of foreign law either where the parties decide mutually upon the application of foreign law, or where the Turkish conflict of laws rules and the governing foreign law are applicable in accordance with said rules ex officio. The court may ask the parties for their assistance in determining which foreign law shall be applied. If the determination of an applicable foreign law fails to satisfy a resolution of the dispute, the court will solve the dispute under Turkish law.

Initial steps

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

A claimant may consider applying for a preliminary injunction in order to impose such injunction on the defendant’s assets through claiming that there is a risk of being unable to collect receivables from the defendant at the end of the proceeding. The claimant has to submit evidence before the court that shows that the defendant is in a difficult situation financially and that there is a risk that the defendant will remove its assets. Piercing of the corporate veil is an exceptional but effective way of ensuring possible claims will be satisfied. Defendants can make themselves judgment proof through a certificate of insolvency in accordance with article 143 of the Turkish Enforcement and Bankruptcy Code.

Freezing assets

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

A claimant must demonstrate that there is a substantial likelihood of success on the merits of the claim to obtain an order to freeze a defendant’s assets. The courts take two main points into consideration: that serious damage might occur to the claimant’s rights if there is a delay, and that it will be difficult or impossible to collect receivables due to changes in the defendant’s financial situation. When the aforementioned conditions are met simultaneously, a claimant may request an order freezing a defendant’s assets from the court.

Pre-action conduct requirements

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

If the subject matter of a dispute is a monetary payment or a claim for compensation, the party shall have to apply to the Mediation Office before bringing a claim before the court. The enactment of Law No. 7155 has made the mediation process mandatory for commercial litigations since 1 January 2019. If the parties fail to conclude a settlement through mediation meetings, then they have the right to bring a claim before the court.

Other interim relief

What other forms of interim relief can be sought?

It is possible to request measures such as provisional attachments or preliminary injunctions. If a defendant has no certain residence or there is reason to believe that the defendant may remove his or her assets in the hope of hiding them from a possible attachment order, or the defendant flees, the claimant can request a preliminary attachment order from the court to ensure his or her claims. Depending on the situation, the court may request a deposit from the claimant for the attachment order. For more regarding preliminary injunctions, see question 9.

Alternative dispute resolution

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

Under Turkish law, ADR processes are optional. Turkey is a member of the International Chamber of Commerce, and the most common ADR method in commercial disputes that involve multiple parties from various countries is arbitration proceedings in Turkey. The courts require claimants to submit a signed mediation protocol, with mediation being mandatory prior to bringing a lawsuit. For details regarding the mediation process, see question 10.

Claims against natural persons versus corporations

Are there different considerations for claims against natural persons as opposed to corporations?

In the Turkish legal system, there are no procedural differences between bringing a claim before the court against natural persons or corporations. Differences will arise from the merits of a claim: for example, if the disputed matter is related to both parties’ business corporations, then the subject matter is deemed to be commercial, and the case will be held before the commercial courts.

Class actions

Are any of the considerations different for class actions, multi-party or group litigations?

In Turkey there are no class actions comparable to a common law country’s class actions. However, under CCP article 113, associations and legal persons can bring a class action under their own name. To bring a class action, associations and legal persons should make sure that the subject of the class action is within the scope of their statutes, and that the action is being brought to protect the interests of their members.

Third-party funding

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

There are no specific regulations regarding third-party funding in the Turkish legislation. Therefore, third-party funding agreements are restricted only by the general contract law regulations. There are asset management companies that are interested in being funding parties for court costs.

Contingency fee arrangements

Can lawyers act on a contingency fee basis? What options are available? What issues should be considered before entering into an arrangement of this nature?

According to the Turkish Attorneys’ Code, parties may sign contingency fee agreements. However, the agreed fees cannot be lower than the minimum amount set out in the Official Tariff for lawyers’ fees. If a lawyer follows up a pro bono case file, the Bar has to be informed about this.