In commercial disputes, where the claim is for a receivable or damages directed at the payment of a sum of money, the mediation stage must be completed before recourse is had to the courts. The requirement here means that the possibility of mediation must have been exhausted before the dispute is brought before the court. An action brought in disregard of this stage is dismissed without the merits being examined, on the ground that the procedural requirement has not been satisfied. In defining the scope of the requirement the legislature has not provided for any threshold as to the size of the receivable; whatever the amount, the rule applies in the same way.
The process has a further significant consequence for the parties. Applying for mediation as a procedural requirement affords protection as regards the statute of limitations and preclusive periods; those periods resume running only after the final record has been signed.
Below, beginning with the definition of a commercial action, we examine which claims are subject to the mediation requirement, how the process is conducted, the parties’ rights and obligations, the fees, and the enforceability of the settlement document.
The Concept of a Commercial Action
The cases in which an action is commercial in nature are set out in the first paragraph of Article 4 of the Turkish Commercial Code No. 6102. Under that provision, civil actions arising from matters concerning the commercial enterprises of both parties are deemed commercial actions, irrespective of whether the parties bear the status of merchant.
In legal scholarship and in practice, commercial actions are examined in three groups: absolute commercial actions, relative commercial actions, and actions treated as commercial by statute even though they concern only a single commercial enterprise.
Absolute commercial actions
Actions in this group are deemed commercial irrespective of whether the parties are merchants and of whether the dispute has any connection with a commercial enterprise. Which matters fall within this scope is regulated in Article 4 of the Turkish Commercial Code No. 6102 and in a number of special statutes. Under Turkish Commercial Code Art. 4, absolute commercial actions arise in the following matters:
Turkish Commercial Code No. 6102, Art. 4
“a) in matters regulated in the Turkish Commercial Code,
b) in Articles 962 to 969 of the Turkish Civil Code concerning those engaged in the business of lending against pledge,
c) in Articles 202 and 203 of the Turkish Code of Obligations No. 6098 concerning the acquisition of assets or of an enterprise and the merger and change of form of enterprises, Articles 444 and 447 concerning the non-competition obligation, Articles 487 to 501 concerning the publishing contract, Articles 515 to 519 regulating the letter of credit and the credit order, Articles 532 to 545 concerning the commission contract, Articles 547 to 554 laid down for commercial representatives, commercial agents and other auxiliaries of merchants, Articles 555 to 560 concerning assignment orders, and Articles 561 to 580 regulating contracts of deposit,
d) in the legislation on intellectual property law,
e) in the special provisions relating to exchanges, exhibitions, fairs and markets, and to warehouses and other places specific to trade,
f) in the provisions relating to banks, other credit institutions, financial institutions and money-lending business.”
In actions brought in the matters listed, subject-matter jurisdiction lies with the Commercial Courts of First Instance, irrespective of the parties’ status and of the transaction’s connection with a commercial enterprise. Petitions for bankruptcy and for composition with creditors, and disputes arising from financial leasing contracts, may be given as examples of absolute commercial actions arising under special statutes.
Relative commercial actions
A relative commercial action denotes civil actions arising from the parties’ commercial enterprises. This characterisation depends on two conditions being satisfied together:
- That both parties to the dispute bear the status of merchant
- That the subject matter of the dispute is connected with the parties’ commercial enterprises
If one of these two elements is absent, the action is not deemed a relative commercial action. Thus a dispute arising from a television a merchant has purchased for his own home is not assessed within the scope of a commercial action, as it does not concern his enterprise. If, on the other hand, the same merchant has obtained a computer from another merchant for use in his enterprise, a relative commercial action arises, since the dispute will concern the enterprises of both parties.
Torts occurring between merchants in connection with their enterprises are assessed in the same category. A dispute arising where a courier vehicle out on delivery collides with a vehicle belonging to another company is an example.
Actions treated as commercial although they concern only a single commercial enterprise
The legislature has, by way of exception, treated as commercial actions certain disputes which do not fall within the two categories above but which concern the enterprise of one party only. In disputes concerning assignment orders, deposit and intellectual property rights, it is sufficient for the commercial enterprise of a single party to be concerned in the matter for the action to acquire a commercial character.
The distinction between a commercial transaction and a commercial action should also be mentioned here. The matters contained in the Commercial Code, and all acts and transactions connected with the activity of an enterprise, are treated as commercial transactions; not every commercial transaction, however, gives rise of itself to a commercial action. In cases which concern only a single enterprise but fall outside the scope of absolute commercial actions, the dispute arising is not deemed a commercial action even though the transaction is commercial in nature.
Mediation as a Procedural Requirement in Commercial Actions
Mandatory mediation as a procedural requirement requires that this route be exhausted before the dispute is brought before the courts. Otherwise, the action brought is dismissed on procedural grounds without the merits being examined.
Which commercial disputes are subject to this requirement is regulated in Article 5 of the Turkish Commercial Code:
Turkish Commercial Code No. 6102, Art. 5
“In respect of claims for receivables and damages whose subject matter is the payment of a sum of money, arising out of the commercial actions specified in Article 4 of this Code and in other statutes, it is a procedural requirement that a mediator has been applied to before the action is brought.”
We explained the scope of the commercial action above. Of actions of that nature, mediation is a procedural requirement only in respect of claims for receivables and damages whose subject matter is the payment of a sum of money. If the court is applied to in respect of such a claim without recourse to a mediator, the action is dismissed on procedural grounds because the requirement has not been satisfied.
By contrast, mediation is not mandatory in commercial disputes whose subject matter is not the payment of money; the parties may bring an action directly. In the courier example above, the mediation stage before proceedings is mandatory, since the obligation in damages is directed at the payment of a given sum. A claim for annulment of a resolution adopted by the general assembly of the same company, on the other hand, although deemed a commercial action because it is regulated in the Commercial Code, may be brought directly before the court without recourse to a mediator, since its subject matter is neither a monetary receivable nor damages.
In actions for receivables and damages whose subject matter is money, the size of the sum claimed makes no difference to the requirement. The statute lays down no lower or upper threshold in this respect.
An important exception should also be noted: where special statutes make recourse to arbitration or to another alternative route to resolution mandatory, or where there is a valid arbitration agreement between the parties, the provisions on mandatory mediation as a procedural requirement do not apply.
Voluntary Mediation in Commercial Disputes
In disputes falling outside the scope of the requirement, too, the parties may apply to a mediator if they so wish. Any private law dispute, matter or action over which the parties may freely dispose may be resolved by the voluntary route. Matters that are commercial in nature but whose subject matter is not the payment of money are the typical field of application of this route.
Thus, although the claim for annulment of a general assembly resolution referred to above is not subject to mandatory mediation as a procedural requirement, the parties may, if they wish, bring that dispute to the voluntary mediation table as well.
How the Mediation Process Operates
Application to the Mediation Office
A party wishing to have recourse to mediation applies to the mediation office located in the courthouse at the other party’s place of residence. Where there is more than one opposing party, the place of residence of any one of them may be taken as the basis. In places where no mediation office has been established, the application is made to the clerk’s office designated for this purpose.
The time limits laid down for the application coincide with the limitation periods for the action relating to the dispute. The effect of the application on the statute of limitations is addressed under a separate heading.
Appointment of the Mediator
Following the application, the mediation office appoints a mediator from the list prepared by the Department of Mediation and notified to the relevant commission presidencies. The parties may, if they wish, make this choice themselves; they may agree on a common name, provided that the person is entered on the list.
Where the appointment is made by the office, the mediator may not examine of its own motion whether the office has territorial jurisdiction. A party wishing to object to jurisdiction may, at the first session at the latest, submit documents relating to the place of residence or the place where the work was carried out and assert that the application was made to an office lacking territorial jurisdiction. A mediator faced with such an objection does not carry out an assessment of its own motion; it transmits the file to the office without delay so that it may be sent to the Civil Court of Peace. The court examines the question of jurisdiction without any court fee being charged and decides it definitively.
Conduct of the Meetings
The mediator contacts the parties directly, using the contact details received through the office, and informs them of the place and time of the meeting. If no result is obtained with those details, the mediator may seek to reach the parties through its own enquiries and by using any means of communication. The parties who are reached are informed of the appointment and invited to the first meeting.
The parties may take their places at the table in person, and may also be represented by their counsel or their legal representatives. In employment disputes an employee may, with the employer’s written authorisation, take a place at the table on the employer’s behalf; no such possibility is provided for in commercial disputes, however.
During the negotiation the parties set out their respective claims and seek a common solution. The mediator’s task is to remain equidistant from the parties and to ensure that the discussion proceeds on balanced terms. Where the parties are unable to reach a solution of their own accord, the mediator may also put forward a proposal.
It is fundamental that the process be conducted in confidence. The mediator is obliged to keep confidential the information and documents learned by reason of the activity; nor may the parties use those documents in an action heard subsequently or in arbitral proceedings. The Mediation Act No. 6325 identifies the statements and documents that may not be adduced in evidence as follows:
- Documents drawn up solely on account of the mediation activity.
- Views and proposals put forward by the parties for the purpose of bringing the dispute to an end by mediation.
- A party’s request to take part in mediation, or an invitation to mediate made by the parties.
- Proposals put forward during the activity, together with statements admitting a fact or an allegation.
The mediator must preserve its impartiality and perform the task in person. It may not act as counsel for one of the parties in an action brought subsequently concerning the same dispute.
A mediator who concludes that it cannot remain impartial must notify the parties of this. For example, if one of the parties making the application is the mediator’s neighbour in the same apartment building and the mediator considers that it cannot for that reason act objectively, it is obliged to disclose the situation. If the parties nonetheless wish to continue with the same person, there is no impediment to the process being continued. The circumstances casting doubt on impartiality are not exhaustively listed in the statute; a mediator may make this assessment on many different grounds.
The First Session
The first session takes place when, following the invitation, the parties come together for the first time within the scope of the process. The mediator records that session in a written record. The consequences of attending, and of failing to attend without valid excuse, are addressed separately.
The Final Session
As with the first session, a written record must be drawn up at the final session too. The final record is a decisive document as regards mandatory mediation as a procedural requirement. For if that document is not annexed to the pleading in the action to be brought, and is not submitted within the period allowed by the court either, the action is dismissed because the requirement has not been satisfied. The document is also significant as regards the period for bringing the action, since the statute of limitations and preclusive periods resume running after the final record is drawn up.
The Parties’ Rights and Obligations
Like the mediator, the parties too have rights and obligations to be observed throughout the process.
Confidentiality. The process is conducted entirely in confidence. For the parties, confidentiality is both a right and an obligation: they may require the process to remain confidential and are themselves obliged to preserve it. The same responsibility applies to the information and documents obtained by the mediator by reason of the activity. A person who, by acting in breach of confidentiality, causes harm to a legally protected interest of another may, under Article 33 of the Mediation Act, be punished upon complaint with imprisonment of up to six months.
Voluntariness. Mediation is in essence a voluntary route; the parties are free to apply, to continue the process, to conclude it or to bring it to an end. Where mediation is a procedural requirement, however, the party wishing to bring an action must complete this stage. Failure by the party who will stand as respondent to take part in the meetings gives rise to the adverse consequences explained below.
Equality. The parties have equal rights throughout the process. The mediator must show to one party the same approach it shows to the other. The periods allowed for speaking must be kept equal, and any practice liable to create an imbalance must be avoided.
The consequences arising in the event of non-attendance should also be emphasised. If one of the parties fails to attend the first meeting without valid excuse and the activity comes to an end for that reason, the position is entered in the final record. A party who fails to attend the meeting without excuse is held liable for the whole of the litigation costs in the action brought subsequently, even if found wholly or partly in the right; nor is counsel’s fee awarded in its favour. Where both parties fail to attend the meeting and the activity ends for that reason, each party bears its own litigation costs in the actions to be brought.
Representation in the Process
Attendance at the meetings may be in person; the parties may, if they wish, also take part in the process through their counsel or their legal representatives.
Time Limits and the Statute of Limitations
In commercial disputes the mediator is obliged to conclude the application within 6 weeks of the date of appointment. In cases of necessity this period may be extended by the mediator by 2 weeks. By contrast, the period laid down for mandatory mediation in employment actions and in consumer actions is 3 weeks, extendable by 1 week in cases of necessity. Having regard to the structure and complexity of commercial disputes, the legislature has allowed a longer period in this field.
Where mediation is a procedural requirement, the statute of limitations is suspended for the period running from the moment of application to the office until the signing of the final record; preclusive periods likewise do not run during that interval. Recourse to the voluntary route, on the other hand, has no effect whatever on those periods.
The Mediator’s Fee
The mediator is entitled to claim its fee and expenses in return for the activity carried out, and may indeed request an advance in respect of these before beginning the activity. Unless otherwise agreed, the fee is calculated on the basis of the Minimum Mediation Fee Tariff in force on the date the activity comes to an end. The parties may not agree on a sum below that tariff. The fee and the expenses incurred for the dispute are, as a rule, shared equally between the parties; the parties may nevertheless agree that the whole or the greater part of the sum is to be borne by one of them.
Where the activity has come to an end because the parties could not be reached, because no meeting could be held owing to a failure to attend, or because no settlement could be reached at meetings lasting less than two hours, the sum corresponding to two hours is met from the budget of the Ministry of Justice. That sum is calculated on the basis of the fixed amounts set out in the first section of the tariff according to the hours and the number of parties. If the meetings have exceeded two hours but no settlement has been reached, the sum relating to the excess portion is, unless otherwise agreed, likewise borne equally by the parties under the same section. Both the sums paid from the Ministry’s budget and those borne by the parties are deemed litigation costs.
Where the parties reach a result by settlement, the fee is calculated in accordance with the provision in the second part of the Minimum Mediation Fee Tariff, that is to say on a percentage basis. The sum so arrived at may not, however, fall below the two-hour fee set out in the first part of the tariff.
Conclusion of the Mediation
The outcome of the activity, whether the parties have reached a settlement, and the manner in which the process has been completed, are recorded in a written record drawn up by the mediator. That document is signed by the parties and, where applicable, by their lawyers or legal representatives. Where signature is refused, the record is signed by the mediator alone, with the reason stated.
If the meetings have ended in settlement, the parties may not subsequently bring an action on the matters settled.
Where no settlement has been reached, that fact is entered in the final record. That document may be annexed to the pleading and the dispute brought before the Commercial Court of First Instance. If the court is applied to without the record being annexed, a summons is sent to the claimant containing a warning to submit the document, failing which the action will be dismissed on procedural grounds. If the warning is not complied with, the action is dismissed on procedural grounds.
The Enforceability Annotation
Where the meetings end in settlement, an annotation must be granted for the settlement document drawn up to acquire enforceability. The parties may address this request to the Civil Court of Peace of the place where the mediator carried out the task. A settlement document bearing the annotation is deemed a document in the nature of a court judgment; that is to say, it acquires force equivalent to a judgment of a court.
No annotation is required, however, for settlement documents signed jointly by the parties, their lawyers and the mediator. A document bearing, alongside the parties’ signatures, those of their counsel and of the mediator is in the nature of a court judgment without any further need for a court decision, and may be put to enforcement directly.
Bringing an Action After the Process
Where the parties have reached a settlement at the end of the mediation, no fresh action may be brought on the matters covered by the settlement.
Matters on which no settlement could be reached may, by contrast, be made the subject of an action. The record of failure to settle, bearing the signatures of the parties, their counsel or legal representatives and the mediator, must be annexed to the pleading in the action to be brought before the Commercial Court of First Instance. If this is not done, the court allows a period for the document to be produced; if it is not submitted to the file within that period either, the action is dismissed on procedural grounds.
Frequently Asked Questions
Does applying to a mediator affect the statute of limitations?
In voluntary mediation the application has no effect on the statute of limitations or on preclusive periods. Where mediation is provided for as a procedural requirement, by contrast, the application interrupts and suspends those periods.
Must a mediator be applied to before commencing enforcement proceedings?
The requirement has been introduced in respect of certain actions to be heard in the employment, consumer and commercial courts. Recourse to a mediator is not required in order to commence enforcement proceedings.
What happens to counsel’s fee if no settlement is reached?
Where the activity ends without settlement, counsel is entitled to a fixed fee of TRY 2,400.00 for the year 2023. That sum may not exceed the principal receivable. Where an action is brought with the same counsel, the sum paid at the mediation stage is set off against the minimum sum payable during the litigation.
How is counsel’s fee calculated where a settlement is reached?
In matters whose subject matter is money or is capable of being valued in money, counsel’s fee is, upon the signing of the mediation settlement document, fixed at one quarter more than the sum arrived at under the third part of the Minimum Attorney Fee Tariff. The percentage method therefore applies here.
In matters whose subject matter is not money or is not capable of being valued in money, the fee is calculated as one quarter more than the fixed sum set out in the second section of the second part of the Minimum Attorney Fee Tariff, taking as the basis the court before which the dispute would be heard.
Independent Legal’s Assessment
Mandatory mediation as a procedural requirement is in practice often treated as “a formality to be got through”, and that approach causes the parties to forfeit significant opportunities. Yet the position taken at the first session directly determines both the prospect of the dispute being resolved at the table and where the burden of litigation costs and counsel’s fees will fall in any subsequent proceedings. The sanction for non-attendance without excuse is severe enough to leave even the successful party bearing the burden of costs.
The second critical point concerns the documents. Failure to annex the final record to the pleading may result in the procedural dismissal of a claim that is in substance well founded. Likewise, having the settlement document signed jointly by counsel and the mediator removes the need to obtain a separate annotation and thus affords a marked advantage in terms of time and cost.
When the mediation stage in a commercial dispute is being planned, it is appropriate to review the following headings:
- Determining at the outset whether the claim is for a monetary receivable or damages, or is a claim falling outside the requirement
- Checking whether there is an arbitration agreement between the parties
- Making the application to the office with territorial jurisdiction and assessing in advance the possibility of an objection to jurisdiction
- Ensuring attendance at the first session and documenting any excuse
- Drawing up the settlement document with counsel’s signatures so as to remove the need for an annotation
- Submitting the final record in full as an annex to the pleading
Independent Legal provides services across the whole process in commercial disputes, from conducting the mediation and enforcing the settlement document through to pursuing the action before the Commercial Court of First Instance where required.