Suppose you take a dispute with your commercial partner in Turkey to the local courts in your own country (e.g., the Netherlands, Germany, or the UK) and win a lawsuit for millions of Euros. Does this foreign court decision hold direct value in Turkey? No. Decisions obtained from foreign courts or arbitration panels cannot be executed (forcibly collected) within Turkish borders unless they are “Enforced” by Turkish courts.
In this practical guide, we examine the roadmap for dispute resolution in Turkey to help you legally secure your capital and investments.
What are Recognition and Enforcement?
Recognition: The legal acceptance of a foreign court decision as a “final judgment” (res judicata) in Turkey. It involves only a determination of status or a change in legal standing.
Enforcement: Making the decision “executable” (applicable) in Turkey. For decisions directly affecting capital—such as the collection of commercial receivables, transfer of company shares, or compensation payments—an enforcement order is mandatory to collect funds through Turkish banks or enforcement offices.
When reviewing an enforcement request, Turkish courts do not examine the merits of the dispute; the case is not retried, and there is no debate over “who is right or wrong.” The court only checks if the decision meets formal requirements, whether the right to defense was violated, and if it contradicts Turkish public policy.
Key Points of Private International and Procedural Law (MÖHUK)
To minimize costs and avoid losing time while collecting your receivables, consider these critical points:
- “De Facto Reciprocity”
Many foreign investors worry if their country’s decisions are valid in Turkey. Even without a bilateral treaty, there is no need for concern. Turkish courts accept “de facto reciprocity” (reciprocity in practice) with many Western European countries, including the Netherlands, Germany, the UK, and Switzerland. This allows commercial decisions to proceed to the enforcement stage quite rapidly.
- The Mediation Requirement
In the Turkish legal system, participating in “mandatory mediation” for weeks before filing commercial debt lawsuits is a legal requirement. However, there is excellent news for foreign investors: according to the latest appellate court decisions (e.g., 2024 rulings), if you already hold a finalized foreign commercial court decision, you are not required to go to mediation before filing an enforcement action. You can save time by filing your case directly.
- Fees in Arbitration Awards
International investors often include “Arbitration” clauses (e.g., ICC, LCIA, or NAI) in their contracts rather than using state courts. These awards are enforced in Turkey under the 1958 New York Convention. According to the latest precedents of the Court of Cassation, high “proportional fees” (6.8% of the total claim) cannot be charged for the enforcement of foreign arbitration awards, even if the amount is millions of dollars. Courts may only collect a nominal fixed fee, saving multinational companies millions in litigation costs.
- Precautionary Attachment
You may fear that the debtor company in Turkey might empty its bank accounts or sell its factory while the lawsuit is ongoing. Under Turkish Court of Cassation practices, you can request a “Precautionary Attachment” (conservatoir beslag) on the debtor’s assets based on your foreign court or arbitration decision even before the enforcement case is concluded. This strategic move secures your receivable from day one.
- “Security Deposit” (Judicatum Solvi) Obligation
Foreign legal entities must be cautious: when filing a lawsuit, the court may require a “security deposit” to cover potential costs if you lose. While the 1954 Hague Convention provides exemptions for citizens, the Turkish Court of Cassation has ruled that this exemption does not cover companies/legal entities. Unless a specific bilateral treaty exists, you may need to budget for a security deposit (e.g., a bank letter of guarantee).
Bilateral Investment Treaties (BIT)
Turkey has signed “Bilateral Investment Promotion and Protection Treaties” (BIT) with over 70 countries, including the Netherlands, Germany, and the UK. These provide international shields such as the free transfer of capital, Fair and Equitable Treatment (FET), and protection against nationalization. In state-level disputes, investors can seek rights through platforms like ICSID and easily execute those decisions in Turkey.
What Should Foreign Investors Do?
While your capital knows no borders, do not let your court decisions be hindered by sovereign boundaries. Leaving commercial receivables, compensation, or bankruptcy decisions idle on a shelf means your capital remains unproductive.
Once you have your decision, ensure it is “Apostilled” and obtain a sworn Turkish translation. By working with a law firm proficient in international procedural law, you can utilize strategic advantages—such as mediation exemptions, asset freezing through precautionary attachment, and arbitration fee benefits—to collect your receivables securely. Protect your investments in the Turkish market with proactive legal steps!