I.  Economic relations

Since economic reforms took hold in 2001, Turkey’s trade volume has tripled to reach $277.2 billion USD at the end of 2007. Though the majority of Turkey’s foreign trade takes place with the European Union, mostly because of proximity and the customs union that was formed between the two entities in 1996, trade ties with the U.S. are equally strong. 

The U.S. and Turkey formed a Trade and Investment Framework Agreement in 1999 and launched an Economic Partnership Commission in 2002 to upgrade bilateral economic relations. As a result of these agreements, Turkey’s 2007 exports to the U.S. totaled about $4.1 billion USD, while U.S. exports to Turkey totaled $8.1 billion USD.

In December 2009, the main partner country for exports was Germany with 894 Million Dollars and decreased by 16,6%. For exports, Germany was followed by the United Kingdom (658 Million Dollars), France (628 Million Dollars) and Italy (558 Million Dollars).

For December 2009, the top country for Turkey’s imports was Russia (2 022  Million Dollars), records for imports range from Germany (1 602 Million Dollars), China (1 419 Million Dollars)   and the USA (867 Million Dollars).

December 2009 exports increased by 30,3% and reached to 10 062 Million Dollars while imports increased by 31,4% and reach to 14 989 Million Dollars compared with December 2008. At the same month, foreign trade deficit increased by 33,8%,  reached from 3 683 Million Dollars to 4 927 Million Dollars.

II. Bad debt losses and claim collection

Due to the constant growing business development between Turkey and Europe or U.S. there arise bad debts and conflicts that do not always run in favor of the law-abiding person. In that case the creditor can adopt the following lawful means.

For debt collection is an enforceable title required which the creditor can obtain by proceeding or directly by institution of an execution proceeding.

The most important enforceable titles are:

• Judgments of Civil Courts (also accepted judgments according to Art. 92 of the Turkish civil process order) and judicial settlements

• Ruling of arbitral courts according to Art. 536 of the Turkish civil process order

• Notarize acceptance of a debt

• Appeal and revision guarantee according to Art 426 j and 433 of the Turkish civil process order (bank guarantee)

• Guarantee at the office of enforcement according to Art. 38 of the Turkish Enforcement and Bankruptcy Law

1.  Information about the debtor

Before taking legal steps there should be adequate and accurate dates and information about the habitual residence, the asset and as the case may be about the credit history of the debtor available. The institution of a proceeding with incomplete Information leads to delay of the proceeding because of failures in service of process or failing asset the proceeding came to nothing after the cost and time consuming proceeding. Furthermore the enforcement may fail due to the fact that the habitual residence of the wealthy debtor cannot be determined. In Turkey it is impossible to find out the residence of a debtor through the registration office.  Only the local commercial register provides limited information about companies. Against this background the following should be noted particularly:

The information about the debtor should be collected at the beginning of a business relationship. From experience it is considerable more difficult to obtain information upon completion and in particular after bad debt losses. The few in debt collection specialized law firms in Turkey take over the function of detective agencies and debt collection agencies. The Turkish insurance industry has no insurance for bad debt losses. Relying upon insurance for bad debt losses of the debtor there cannot be closed a transaction. It is advisable to think about a letter of credit within a long term business relationship.

2. Collection in litigation

a) Court system

The Turkish court system consists of the constitutional jurisdiction, the system of administrative courts and the under the supreme court concentrated civil and criminal jurisdiction. The court of first instance according to civil and commercial law conflicts is the civil division (Asliye hukuk mahkemesi). The amendment to the Judicature Act in 2004  after which the previously dominant two-tier structure of the Turkish courts should be expanded with a court of appeal (regional civil courts), could not be implemented so that the Turkish court system still works in two stages. For that reason the Turkish law still knows no appeal. Cassation against judgments of trial court can be handed in just at the court of cassation (Yargitay) in Ankara within 15 days from unto service of a judgment.  However, the creditor can request enforcement although the judgment is still without legal capacity. In that case the debtor/defendant can stop the enforcement only if he pays the entire amount of debits into the court cashier or deposits it security.

b) Bail

Under Turkish civil procedure law natural and legal persons of foreign origin have to provide security for bringing a suit. Usually the security adds up to 15 % of the amount in controversy.  According to Art 17 of the Hague Convention from 1th of March 1954 nationals of contracting member states are not required to provide security. Turkey as well as Germany is a contracting member of state. Therefore in case of an action of a German citizen or a legal person based in Germany there is no security required. However Turkish nationals resident abroad have to provide security under Art 97 of the Turkish civil process order.  According to Art 187 para 1 of the Turkish civil process order in case of missing security the defendant can put this in a plea within 10 days after service of writ. The security will not be reviewed or requested ex officio.

c) Evidences

Just as in the German civil procedure law everybody has to prove all the facts favorable to him in court. The creditor has to explain his claim and prove it by presenting appropriate evidences. The Turkish civil procedure law recognizes the following evidence: confession, witness, expert, oath, legal inspection and deed. It should be noted that according to Article 287 ff of the Turkish civil process order asserted acts of disposal (like development, cancelation, transmission, amendment, respite, renewal) with value of the matter more than 490 TL require documentary evidence. Therefore the foreign creditor should document his claims in Turkey in advance. Especially public and private documents in written, confirmations of signatures, documents of a foreign agency and electronic documents duly signed are considered to be deeds.

d) Foreign titles

Abroad obtained judgments and arbitrations cannot be enforced directly in Turkey. Previously there has to be carried out a validation process in court in Turkey. In practice these action takes between 6 and 12 month. The acceptation of foreign judgments first requires that:

-           the reciprocity principle is respected

-           the foreign judgment do not affect the exclusive jurisdiction of Turkish courts 

-           the public order (so called ordre public) is not perturb

-           and that especially the basic right to be heard is respected.

After receiving the acceptation and the writ of execution the foreign judgments and arbitrations can be enforced by Turkish courts.

In this context it should be noted that enforcement orders obtained abroad can directly neither be enforced nor legally accepted. In that case there has to be carried out an entire lawsuit. The enforcement order can be used only as evidence.

Therefore it is generally advisable to carry out an assertion of a claim in Turkey by a Turkish lawyer base in Turkey. Thereby you have the advantage that the lawsuit can immediately follow the execution without carrying out a time and costs consuming validation process.

3. Debt collection in the way of foreclosure and bankruptcy

Comparable to the German order for payment there exist as well an order for payment of a debt before taking legal steps in Turkey. According to Art 42 of the Turkish Enforcement and Bankruptcy Law this proceeding is developed as a single tier temporary measure of execution which usually takes about 2 weeks. The creditor can optionally file the suit either in the way of foreclosure or in the way of a bankruptcy proceeding if the debtor is a merchant. Against the decisions of the enforcement authorities you can appeal to court by means of complaint (formal objection) and plea (substantive objection). The debtor has the possibility to file a protest or a complaint against the payment of a debt within 7 days after service of process.  The respite of 7 days also applies to foreign debtors. In case of an appeal against a court order the creditor is obliged to take legal actions against the debtor so that the order for payment led over to a due process of law before the court competent for execution. If the debtor files an unfounded protest then there exists the possibility to convict the debtor to pay compensation regardless of culpability amounting up to 40 % of the claim. Particularly due to this system of compensation for damages in the Turkish Enforcement and Bankruptcy Law the Turkish order for payment of a debt is an effective instrument for time and cost - saving collection of a debt. If the creditor sends the debtor an order for payment of debt he can use distraint, enforcement of pledged property and bankruptcy as enforcement measures whereas the last enforcement measure is just possible against merchants.

In this context it has to be mentioned that according to Art 111 of the Turkish Enforcement and Bankruptcy Law the debtor who wants to pay within a foreclosure or bankruptcy proceeding can pay by 3 equal installments after the acceptance of the enforcement authority whereas the first one has to be paid before the acceptance of the enforcement authority. 

4. Prejudgment seizure and interim security

Ahead of a lawsuit or enforcement proceeding there is except the order for payment of a debt also the injunction (tedbir) and the prejudgment seizure (ihtiyati haciz) available for security of the assets of the debtor according to Turkish law. Due to the effectiveness the prejudgment seizure has to be explained in detail:

If there is a risk that the debtor concealed or assigned his property to a third party or fly till the end of the due process of law in Turkey the creditor has the right to apply for an prejudgment seizure above the entire assets of the debtor. The particular advantage of this approach is that the prejudgment seizure order may be issued to the debtor without any service of process. Neither the claim nor the order is served to the debtor. If you want to act by way of prejudgment seizure the existence and the due date of a claim have to be shown credibly to court. Another possibility is to provide a guarantee in the amount of 15 % of the entire amount of the claim. In praxis usually a bank guarantee is used. Even the due date is not required if it becomes known that the debtor tries to move his asserts. After abatement the prejudgment seizure order has to be executed within 10 days. After expiration of this deadline the order become void. In accordance to Turkish Law the prejudgment seizure is formed as a preliminary step. Therefore the principal proceedings have to be instituted within 7 days after enforcement (NOT pronouncement) of the prejudgment seizure order.

5. Characteristics in check and bill of exchange

Correspondent to the Turkish Enforcement and Bankruptcy Law check and bill of exchange are abstract, from legal foundation detached titles with which the creditor may immediately take actions of foreclosure against the debtor by initiating a special check and bill of exchange proceeding. As far as the debtor is a merchant by those means also a bankruptcy proceeding may be initiated. Due to this reason it is particularly recommended to secure the claim additionally by check or bill of exchange.

III. Enforcement

After fighting a case and obtaining a title the enforcement agencies assigned to courts are cognizant. Their enforcement measures range from attachment of property, realty and claims (particularly bank accounts) to actions in foreclosure.

IV. Turkish judgments in Germany

In case of enforcement of Turkish judgments in Germany a special order by a German court is required. This is enacted if the Turkish judgment has come in existence in due form, without any procedural error and by granting of the right to be heard.

It is recommended to obtain the judgment always at the residence of the debtor by a local lawyer.

V. Conclusion

Finally it has to be mentioned that a successful debt collection is possible despite the distance and the home field advantage of the debtor if there are enough information of the debtor available, all remedies are exhausted and you are represented by an appropriate local lawyer.