New trend in Turkish Law: Mandatory Mediation

We would like to inform you that the recent Act no. 7155 (“Act no. 7155”), which was published in the Official Gazette on 19 December 2018, has introduced mandatory application of mediation process before commencing litigation in respect of commercial disputes. The new rules are applicable as of 1 January 2019.

The Act no. 7155 has added the new Art. 5/A to the Turkish Commercial Code (“TCC”). According to this new provision, if a lawsuit is one of those categorized as “commercial” under Article 4 of the TCC or under other legislation, and if the subject-matter of the dispute relates to a monetary payment or to a claim for compensation, mediation has become a pre-condition for commencing litigation for such dispute. “Commercial” disputes within the meaning of this provision would include, but are not limited to, the following:

┣ Disputes arising out of commercial relations between legal entities and/or real persons (which includes most of the maritime and insurance disputes),
┣ Most of the recourse claims of insurance companies,
┣ Disputes relation to the banking and financial services,
┣ Disputes relating to business or asset acquisitions, mergers and reorganizations,
┣ Brokerage agreements,
┣ Agency, distributorship and dealership contracts.

The procedures for mediation are stipulated under the Act no. 6325 regarding Mediation in Civil Law Disputes (“Mediation Act”). As per the related articles of Mediation Act, the parties are entitled to jointly determine and appoint a mediator of their choice before or after the dispute has arisen. However if the parties cannot so agree, the party, which is initiating the mediation process, shall apply to the Mediation Office in the jurisdiction of the Court that will be seized of the merits of the dispute. In that case the mediator will be appointed by the Mediation Office from the list of the mediators registered in that jurisdiction. Once the mediator is appointed, the mediator shall invite the parties to the first meeting, and the parties are allowed to attend the meetings with their attorneys at law.

In accordance with the recently introduced Article 5/A of the TCC, the mediator shall finalize the procedure within six (6) weeks, which period can only be extended by two (2) weeks under special circumstances. Upon appointment, the mediator will invite the parties to attend the first meeting. Failure to attend such first meeting without any excuse will cause the non-attending party to bear all legal costs, including legal attorney fees, at the end of the litigation process regardless of whether they win or lose the lawsuit.

Regarding the mediator’s fees we would like to highlight that the amount of the mediator’s fee depends on whether the parties settle the dispute or not at the end of the mediation process. In case the dispute cannot be settled through mediation, the parties will not be under any obligation to pay the mediator’s fee provided that the meetings are completed in less than two hours. If the meetings take more than two hours, the mediator’s fee will be calculated as per the First Part of the Minimum Tariff for Mediator Fees and will be shared equally between the parties in principle. On the other hand, if the parties reach a settlement at the end of the mediation process, the mediator’s fee will be calculated as per the Second Part of the Minimum Tariff for Mediator Fees and will be shared equally between the parties unless otherwise agreed.

Last but not least, in the event that parties fail to reach a settlement at the end of the mediation process, each party has the right to file action before the competent court by filing the final report of the mediator in respect of the subject dispute.

In a nutshell, although the practice of the newly introduced mediation system will gain clarity with time, the Act’s implementation is designed to affect commercial lawsuits for all sorts of pecuniary claims and compensation demands.

We hope the above will be found of assistance and please do not hesitate to contact us for any and all further queries that may arise.