Legal Remedies for Breach of Export Contracts in Turkey

What is the role of Turkish Commercial Courts in B2B disputes?

Turkish Commercial Courts (Asliye Ticaret Mahkemeleri) serve as specialized judicial bodies that handle disputes arising from commercial activities, including export contracts and B2B transactions. These courts have exclusive jurisdiction over cases where both parties are merchants or the dispute is specifically categorized as "commercial" under the Turkish Commercial Code (Law No. 6102).

For a foreign company, the Commercial Court is the primary venue for litigating breach of contract claims that exceed the scope of simple debt collection. The judges in these courts are specialized in business law, which generally leads to more predictable outcomes compared to general civil courts.

Key characteristics of Turkish Commercial Court proceedings:

• Panel of Judges: In major cities, these courts often consist of a panel of three judges for high-value claims, though single-judge courts also exist.
• Expert Witnesses: Courts frequently appoint independent experts (bilirkişi) to review financial records and technical contract terms.
• Electronic Filing: The National Judiciary Informatics System (UYAP) allows for the electronic filing of evidence and motions, streamlining the process for international legal teams.

Is mediation mandatory for commercial disputes in Turkey?

Commercial mediation is a mandatory first step for all disputes involving monetary claims or compensation in Turkey before a lawsuit can be filed. Under the Turkish Commercial Code, if a foreign supplier files a lawsuit without first attempting mediation, the court will dismiss the case on procedural grounds without reviewing the merits.

The mediation process is designed to resolve disputes within six to eight weeks. If the parties reach an agreement, the signed mediation protocol has the legal force of a court judgment. If no agreement is reached, the mediator issues a "final minutes" report, which the creditor must attach to their formal court petition.

The mandatory mediation process follows these steps:

1. Application: The creditor applies to the mediation office at the relevant courthouse.
2. Appointment: The state appoints an official mediator, or the parties agree on a private one.
3. Negotiation: Parties discuss the dispute, often via teleconference for foreign entities.
4. Conclusion: If unsuccessful, the mediator files the final report, granting the creditor the right to sue.

How can foreign companies initiate debt collection (İcra Takibi) in Turkey?

Foreign companies can recover unpaid export debts by initiating an execution proceeding (İcra Takibi) through an Execution Office, which does not require a prior court judgment. This process, governed by the Bankruptcy and Enforcement Law, allows a creditor to send a formal payment order to the Turkish debtor, who then has seven days to pay or object.

If the Turkish debtor does not object within the seven-day window, the debt becomes finalized, and the creditor can immediately begin seizing assets, such as bank accounts, real estate, or inventory. However, if the debtor objects, the proceeding is suspended, and the creditor must file a "Cancellation of the Objection" lawsuit in court to prove the debt exists.

How can a foreign supplier freeze a Turkish debtor's assets?

A foreign supplier can apply for an interim injunction, known as a "precautionary attachment" (İhtiyati Haciz), to freeze the Turkish company's assets before a final judgment is reached. To secure this order, the creditor must prove to the court that the debt is due, unsecured, and that there is a credible risk the debtor may hide or transfer assets to avoid payment.

Courts typically require the foreign creditor to provide a "security deposit" (teminat), usually ranging from 15% to 20% of the claim amount. This deposit protects the debtor against damages if the creditor's claim is later found to be meritless. The deposit can often be provided in the form of a bank guarantee letter from a Turkish bank.

Practical steps for asset freezing:

1. Identify Assets: Work with local counsel to identify the debtor's bank accounts, vehicles, or real estate.
2. Ex Parte Application: These applications are often handled without notifying the debtor to prevent them from moving funds.
3. Execution: Once the court grants the order, it must be executed through the Execution Office within 10 days.

How are foreign court judgments recognized and enforced in Turkey?

Foreign court judgments are not automatically enforceable in Turkey and must undergo a formal "Recognition and Enforcement" (Tenfiz) procedure. This process is governed by the Law on Private International Law and Procedural Law (MÖHUK), and it ensures the foreign judgment complies with Turkish public policy and procedural fairness.

The most critical requirement for enforcement is "reciprocity." This means Turkish courts will only enforce a judgment from your home country if that country also enforces judgments issued by Turkish courts. This reciprocity can be established through a bilateral treaty, a multilateral convention, or consistent judicial practice between the two nations.

Requirements for a successful Tenfiz action:

• Finality: The foreign judgment must be final and binding (non-appealable) in its country of origin.
• Public Policy: The judgment must not violate fundamental Turkish legal principles.
• Right to Defense: The Turkish debtor must have been properly served and given a fair chance to defend themselves in the original foreign court.
• Jurisdiction: The foreign court must not have exercised jurisdiction over a matter that falls under the "exclusive jurisdiction" of Turkish courts (such as Turkish real estate).

Common Misconceptions about Turkish Commercial Litigation

Misconception 1: "I can litigate in English since it is an international contract."

Regardless of the language used in the contract, all proceedings in Turkish courts must be conducted in Turkish. All foreign documents, including the export contract and invoices, must be translated by a sworn translator and notarized. While the court may acknowledge the English version, the Turkish translation is the legally binding text for the judge.

Misconception 2: "Foreign companies don't have to pay any upfront costs."

Turkey requires a "security for costs" (Cautio Judicatum Solvi) from foreign plaintiffs. If your home country does not have a bilateral treaty with Turkey exempting you from this, you must deposit a sum with the court to cover the defendant's potential legal fees. Furthermore, Turkish courts charge a proportional "decision and judgment fee" (around 6.8% of the claim value), of which one-quarter must be paid at the time of filing.

Misconception 3: "A foreign judgment is enough to seize bank accounts immediately."

A foreign judgment is merely a piece of evidence until it has been "recognized" by a Turkish court. You cannot go directly to an Execution Office with a US or UK court order. You must first win a recognition and enforcement lawsuit, which can take several months, before any assets can be seized.

FAQ

How long does a commercial lawsuit typically take in Turkey?

A first-instance commercial lawsuit usually takes between 12 and 24 months. If the case is appealed to the Regional Court of Justice or the Court of Cassation, the process can extend by another 1 to 2 years.

Can I recover my attorney fees from the losing party?

Yes, but only partially. Turkish courts award "statutory attorney fees" based on a fixed tariff set by the Union of Turkish Bar Associations. This amount is often lower than the actual fees charged by high-end commercial law firms.

Do I need a power of attorney to sue in Turkey?

Yes. Foreign companies must provide their Turkish lawyer with a "special power of attorney." This document must be notarized and bear an Apostille (per the Hague Convention) to be valid in Turkish courts.

What is the statute of limitations for export contract disputes?

The general statute of limitations for commercial breach of contract claims in Turkey is 10 years. However, specific types of claims or certain transport-related disputes may have much shorter windows, sometimes as little as one year.

When to Hire a Lawyer

You should consult a Turkish commercial litigator as soon as a payment deadline is missed or a contract breach is identified. Because of the mandatory mediation requirement and the technicalities of "İcra" debt collection, early intervention can prevent the debtor from emptying their bank accounts. Professional legal help is essential if the debtor files an objection to your debt collection attempt or if you need to navigate the complexities of the Turkish "security for costs" requirements.

Next Steps

1. Review Reciprocity: Check if your home country has a judicial cooperation treaty with Turkey or a history of mutual enforcement.
2. Gather Documents: Collect all original invoices, bills of lading, and signed contracts.
3. Apostille Documents: Ensure your company's certificate of good standing and power of attorney are Apostilled.
4. Initiate Mediation: Have your counsel file for mandatory mediation to stop the statute of limitations and begin formal negotiations.
5. Asset Search: Conduct a preliminary search for the debtor's registered assets in Turkey to determine if litigation is financially viable.

For further information on Turkish judicial procedures, you may consult the official portal of the Ministry of Justice of the Republic of Turkey.