Debt Collection in Turkey

Author: Mr. Gökhan Cindemir , Phd Candidate , Senior Partner Lawyer cindemir@cindemir.av.tr

This article aims to explain the procedures regarding debt collection turkey. There are two separate procedures in Turkey in order to follow your debt. 1. Debt Execution Procedure which will be provided by Administrative Body 2. obligatory mediation (commercial disputes) and 3. Litigation Procedure which will be examined by the Court.

Debt Execution Procedure

As regards to the first method, component debt collection lawyer initiates debt execution procedure via debt execution administration which is governmental body. Subsequently, the administration submits order of payment to the debtor by a mail stamped by the government. After the notification, if debtor shall object the order of payment with an objection on the debt attributed within 7 days (this duration is 5 days in types of bill of exchange and objection grounds are restricted such as signature, form and validity than ordinary dispute) all process shall be frozen.In that regard, the creditor must apply to the litigation. If dispute is commercial meditation proceeding will be required to start for litigation.

Mediation is obligatory in dispute of commercial matters and first 2 hours are provided by the justice ministry without a fee. Mediator appointed by the court will try to find the settlement for the dispute. Maximum time limit is 6 weeks for this. If the parties comes to an agreement during the proceedings, written agreement has the same affect as a court decision. In case that parties don’t come to an settlement, mediator will end the proceedings and take the statement regarding failure of the proceeding.

It is also noteworthy to mention that in case of the litigation decision shall be in favor of creditor, unfair objection to the debt during debt execution procedure shall be subjected to the penal fee as 20 percent of  the debt amount. Thus, creditor becomes entitled to receive that amount. On the other hand, creditor can skip the debt execution procedure in the beginning and directly apply to the mediation or litigation.

The administrative debt execution fee is percent 0.05 of the debt amount and almost 10 € extra fee. As mentioned above in case of objection, litigation shall come to an issue. The litigation process shall be governed by the court with the consideration of the evidences such as invoices, contracts, correspondences, accounting books and related proofs. This process also encompasses hearings including claim and counter claim procedure. The court fee related to litigation shall be also dependent on the amount of the debt. Percent 59/1000 of the amount will be the litigation and the posting, expert fees and other possible court fees will be included to it. According to the act of fees of Turkey, it is sufficient to remit court fee’s ¼ in order to initiate litigation in the beginning. The rest can be remitted in previous hearings in advance of the decision.

Litigation must be initiated by a Turkish Attorney on the basis of a valid power of attorney as debt execution procedure also requires. Power of attorney can be obtained from Turkish embassies and consulates by the Turkish legal entities or Turkish citizens. Foreigner citizens and legal entities must obtain from relevant authorities in their country which are capable of issuing power of attorney based on the country’s law. Having power of attorney from these authorities will not make the power of attorney as valid in Turkey by itself. Apostille stamp requires for international validity of Power of Attorney to be used in Turkey or approval of the power of attorney via Turkish embassy or consulate will be necessary. In case that the country is not the party of The Hague convention enabling Apostille, the only way to make power of attorney valid will be approval from mentioned Turkish embassies. (Our LinkedIn)

If the country of creditor applies some restrictions for Turkish entities for filing a case in the jurisdiction of said country, Turkish court will request security deposit from the creditor. In case that judicial assistance agreement or relevant convention’s ratification lacks between Turkey and third countries, there is a security deposit obligation (Cautio Judicatum Solvi) for foreign legal entities or real persons who intends 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 certain provision laying down the percentage of amount related to deposit, however in practice courts determines percent 15 of disputed amount as a security deposit. (Home)

A Judicial Assistance Agreement Exists between Turkey and the Countries Mentioned Below:

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, United Kingdom, Ukraine, Switzerland, Italy, Kazakhstan,Turkmenistan

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 or extra restriction rather than their citizens to Turkish citizens. Accordingly Turkey does not seek any security deposit obligation for mentioned below countries: Russia, Egypt, Chile, Finland, Peru, Libya, Syria due to their law explicitly enables other nationals to file a case without any restrictions.

Remittance of Security deposit can be proved with several ways such as remittance of the amount to Turkish central bank account in foreign currency,  guarantee letter from a bank, pledge on a real state, guarantee letter approved by a Turkish notary and bill of exchange. In the end of a case or enforcement procedure, the security deposit  is refunded to creditor by the court. Real reason behind security deposit is to protect Turkish debtor for possible damages by foreign entities during procedure.

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