Administrative & Judicial Processes
Under the law relating to Turkish Debt Collection, a creditor is granted the right to collect its receivable in two ways:
Debt Enforcement via Administrative Procedure
Once the relevant administrative body has received the details of the claim it submits an order for payment to the debtor. If the debtor objects to the order for payment by claiming that the debt does not exist within 7 days (7 days if an ordinary debt. If the debt stems from a bill of exchange then the time frame for objection is reduced to 5 days) subsequent to submission of the letter, the enforcement process shall be frozen and the only way to proceed with it shall be to file a litigation case against the debtor company. In the event that the debtor does not make an objection to the payment order the proceedings shall finalize.
Debt Enforcement via Litigation Process
The litigation process shall be governed by the court with consideration given to evidence such as invoices, contracts, correspondence between the parties, accounting books and related proof. This process will also encompass hearings including claim and counterclaim procedures. The court fee related to litigation shall be also dependent on the amount of the debt.
The litigation process must be initiated by a Turkish attorney. Moreover, the attorney must be given a power of attorney (the “POA”). If the Claimant’s country is a party to the Hague Convention, the PoA must be stamped with the Hague Apostille via the usual government authorities, if not, the POA must be approved by a Turkish embassy or Consulate.
Debt collection in Turkey: advantages of the Litigation Approach
Filing an action of debt grants the claimant interim measures which make the litigation process more advantageous than the enforcement process. Firstly, the Claimant shall be entitled to request precautionary attachment to be placed on the fixed and liquid assets of the debtor along with the rights and receivables held by third parties.
The second remedy is to request for a preliminary injunction to freeze the fixed and liquid assets of the debtor to restrict their sale and/or transfer to third parties under any manner whatsoever to prevent the debtor from stripping their assets until the completion of the proceedings. In all cases the court must be persuaded by illustrating the necessity of the subject interim measure.
If the Court awards in favor of the Claimant, the verdict can be enforced directly against the debtor. In the event of non-performance of the paying the debt, the Claimant shall be entitled to initiate an executive enforcement procedure with judgement before the execution office.
Debt collection in Turkey: executive procedure with judgement process
The executive procedure with judgement process is as follows:
The Claimant informs the debtor regarding their claim by sending an enforcement order (it is called a payment order in enforcement proceedings without judgement process) which is based on the favorable court decision.
If there are restrictions in the creditor’s country against Turkish Citizens and Turkish legal entities filing a litigation case in that country, the Turkish Court will request a security deposit from the creditor. Should there be no judicial assistance agreement or relevant convention between Turkey and third countries, there is an obligation to pay a security deposit (Cautio Judicatum Solvi) for foreign legal entities or real persons who intend to initiate a lawsuit or enforcement procedure in Turkey. (Article 97 of the Turkish Code of Civil Procedure and Article 32 of the Code of Private International Law and International Civil Procedure).
There is no amount or percentage specified with regard to the amount of the deposit, however in practice the courts determine 15% of the disputed amount to be an appropriate amount for the security deposit.
Countries with a Judicial Assistance Agreement with Turkey
A Judicial Assistance Agreement Exists between Turkey and the countries below:
United Kingdom, Germany, N. Cyprus ,Albania, Kuwait, Austria ,Lithuania, Azerbaijan, Hungary Bulgaria, Macedonia, Czech Republic, Algeria ,Moldova, China, Mongolia, Morocco, Uzbekistan, Georgia, Poland, India, Romania, Croatia, Tajikistan, Iraq, Tunisia, Jordan, Yugoslavia, Ukraine, Switzerland, Italy, Kazakhstan
There are also countries exempt from security deposit due to reciprocity principle in Turkish Private State Law Act. These countries do not apply any security deposit to Turkish citizens and legal entities in the case of debt recovery proceedings, accordingly Turkey does not seek any security deposit obligation for those countries: Russia, Egypt, Chile, Finland, Peru, Libya, Syria.