Mediation as a Pre-Condition for Commercial Disputes in Turkey
The amendments to Law no. 7155 “Law on Commencement of the Proceedings Relating to Pecuniary Claims Originating from Subscription Contract” which entered into force on its date of publicity on 19 December 2018 in the Official Gazette, introduced a mandatory mediation process before litigation for commercial disputes starting from 1 January 2019.
Article 20 of the Law regulated and amended Article 5/A of the Turkish Commercial Code (hereon referred to as “TCC”) as mediation to become a pre-condition for the claimant when initiating litigation.
With this new law the scope of mediation as an alternative dispute resolution tool is extended to capture commercial disputes and not only disputes related to employment matters. The law stipulates a list of which types of commercial disputes will fall within its scope, such as monetary claims related to any of the followings:
- All disputes arising from commercial relations between legal entities and/or natural persons
- Regardless whether filed by or against legal entities and/or natural persons: all IP related disputes, all disputes relation to the banking and financial services, recourse lending transactions, disputes arising from regulations concerning stock exchanges, markets, storehouses
- Disputes relating to business or asset acquisitions, mergers and reorganizations.
- Anti-trust suits,
- Disputes relating to publishing contracts,
- Brokerage agreements,
- Agency, distributorship and dealership contracts.
However, this is not a complete list of claims within the scope of the mandatory mediation. We advise the parties to take extra caution when they are starting litigation process to determine whether their cases are within this scope or not.
Appointment of the Mediator and the Role
The Law enables the parties to jointly determine and appoint a mediator of their choice before or after the dispute. In the case of the parties failing to agree on deciding the appointment, the court-administered mediation bureau shall appoint a mediator from the list of names of accredited mediators registered with the ministry and the justice commissions of the First Instance Court.
In the event of:
- The parties to the dispute are unreachable without a reasonable and just cause,
- The parties to the dispute do not participate in the mediation meetings, or
- Despite having attended mediation meetings, the parties fail to reach a settlement
The mediator is obligated to submit a final report to the mediation bureau immediately. In the event of parties failing to reach a settlement at the end of the mediation process, each party hold the right to appeal to court with the final report of the mediator.
Cost and Time of the Mediation Process
Pursuant to the Law, the mediator is obliged to conclude the mediation process within 6 weeks of their appointment. This period may only be extended by the mediator for approximately 2 weeks.
Unless otherwise expressed by the parties, the mediation fee will be paid equally by the parties. However, if the mediation process ends due to one of the parties’ failure to attend the first meeting without a reasonable excuse; that party shall be responsible for not only the mediation expenses but all litigation related expenses (courts fees and legal fees included), regardless in which party’s favour the final ruling is granted.
How can we help?
Founder partner of Guden Law Firm and an accredited mediator both in Turkey and England, Ali Guden expects an increase in the popularity of alternative dispute resolution methods such as arbitration and mediation, as opposed to the conventional legal proceedings especially in regards to international commercial disputes. Accordingly, he is looking forward to being appointed to various international commercial dispute resolution cases both as a mediator and an arbitrator.
As Guden Law Firm, we will continue to represent our clients in arbitration and mediation proceedings internationally.