Please note, your browser is out of date.
For a good browsing experience we recommend using the latest version of Chrome, Firefox, Safari, Opera or Internet Explorer.

Newsletter Articles

Amendments to the Execution and Bankruptcy Law and Certain Laws

24 Apr 2023 Europe

The Law Amending the Enforcement and Bankruptcy Law and Certain Laws ("Amendment Law"), known as the 7th Judicial Package, was published in the Official Gazette (32154) dated 05 April 2023 and entered into force except for several provisions with later effective dates.

The Amendment Law sets out several changes in the fields of enforcement law, criminal law, and procedural law, and it expands the scope of mandatory mediation significantly. Some of the prominent amendments introduced by the Amendment Law are examined below:

   i. AMENDMENTS TO THE ENFORCEMENT AND BANKRUPTCY LAW NO. 2004 ("EBL")

  • Seizure at Residential Properties

Article 79/a added to the EBL introduces certain rules on seizures at residential properties and subjects the bailiff’s decision on seizures at residential properties to the approval of enforcement courts, in order to strengthen residential privacy. Accordingly,

  • The bailiff who determines that the place of seizure is a residence will render a seizure decision and immediately submit it to the enforcement court for approval.
  • Within a maximum of 3 days from the submission, the court will approve the decision if the place of the seizure is deemed a residence; otherwise, it will remove the decision. The decisions to approve or remove will be final.
  • The court will notify the bailiff’s office regarding the decision on the seizure at the residence. Seizure procedures will continue upon the court’s approval; and otherwise the bailiff will render a new decision regarding the seizure request upon the court’s removal of the initial seizure decision.
  • If the place of seizure turns out to be a non-residential place during the seizure, the seizure will continue.
  • If the place of seizure turns out to be a residence during the seizure and the debtor does not explicitly consent to the seizure, the seizure procedure will be ceased; and the enforcement court’s approval will be required for the seizure as per the procedure explained above.
  • This provision shall not apply to seizures at residential properties in provisional attachment procedures.

These rules will not apply to the seizure decisions at residential properties given before the effective date of the article, which is 5 April 2023.

  • Non-Seizable Goods

The amendment to Article 82 of the EBL prohibited the seizure of all personal belongings of debtors and their family members living under the same roof and all household items serving the family's everyday use. This provision will not apply to items seized before the effective date of the article, which is 5 April 2023.

  • Prohibition on Excessive Seizure

The amendment made to Article 85 of the EBL, which regulates the seizure of movable and immovable properties, provides that the movable and immovable properties under the debtor’s or third parties’ possession and their receivables and rights cannot be seized excessively over the total amount sufficient to cover all the creditor’s receivables, including principal amount, interest, and expenses. By adopting the prohibition of excessive seizure legally, the amendment aimed to prevent excessive seizures which have been common in practice.

  • Liquidation of Goods No Longer Need Retention

The new Article 88/a added to the EBL stipulated the procedures and principles regarding the liquidation of goods that are retained by a custodian and the seizure of which has been lifted, along with the actions to be taken by the bailiff’s office and the enforcement court. In this context, for liquidation of these goods, it is required to apply to the debtor first, then to the holder of lien; otherwise, to hold an electronic auction for the registered goods. If the liquidation is still not possible, the custodian will be notified to acquire the good; and otherwise, Makine ve Kimya Endüstrisi Anonim Şirketi shall be notified for the registered goods. If the property is still not liquidated, the ownership shall be transferred to the Turkish Red Crescent Association free of charge.

   ii. LIABILITY OF LEGAL ENTITIES WITHIN THE SCOPE OF THE MISDEMEANOUR LAW

Article 43 / A of the Misdemeanour Law regulates the administrative fines to be imposed on legal entities where the crimes listed under the law, including but not limited to fraud, bribery, and collusive tendering, are committed for the benefit of the legal entity by a body or representative of a private legal entity or a person who undertakes a duty within the scope of such legal entity.

With the amendment, the phrase "private legal entity" is changed to "legal entity"; which aimed to acknowledge the responsibility of all legal entities for administrative sanctions regulated in the article by removing the distinction between public and private legal entities.

   iii. MONETARY THRESHOLD OF SIMPLIFIED TRIAL PROCEDURE IN COMMERCIAL CASES

According to Article 4 of the Turkish Commercial Code No. 6102 (“TCC”), the simplified trial procedure is applied in commercial cases where the amount or value does not exceed 500,000 Turkish liras (around USD 25,805-).

With the amendment made to the TCC and the Law No. 5235 on the Establishment, Duties, and Jurisdiction of the Judiciary First Instance Courts and Regional Courts, the threshold for simplified trial procedure in commercial cases is increased to 1,000,000 Turkish liras (around USD 51,610). This monetary threshold will be increased by revaluation rate annually.

   iv. REGULATIONS CONCERNING MEDIATION

  • Eligibility of Real Estate Disputes to Mediation

According to Article 17/B added to the Law No. 6325 on Mediation in Civil Disputes (“HUAK”), which will enter into force on 1 September 2023, disputes regarding the transfer of immovable property or the establishment of limited real rights on immovable properties are mediatable.

In these disputes, it became possible to annotate the land registry that the power of disposition is restricted, for a term limited to the mediation process and not exceeding three months. For this purpose, the parties must agree this in writing, and the mediator must hold minutes of this decision.

It is mandatory to obtain a certificate of enforcement from the civil court of first instance where the immovable property is located for the enforceability of the agreement.

  • Disputes Included in the Scope of Mandatory Mediation

With Article 18/B added to HUAK, the following disputes are now included in the scope of disputes subject to mandatory mediation:

  • Disputes arising from rental relationships, except for the eviction of rented properties through enforcement proceedings without judgment under the EBL,
  • Disputes related to the partition and termination of joint ownership of movable and immovable properties,
  • Disputes arising from Condominium Law No. 634, and
  • Disputes arising from neighbour rights.

This provision shall not apply to cases pending in first-instance courts, regional courts of appeal, and the Court of Cassation as of the effective date, which is 1 September 2023.

  • Mandatory Mediation in the Cancellation of Objection, Negative Declaratory Actions, and Restitution Actions

Article 5/A of the TCC, which subject the claims concerning payment of a certain amount of money to mandatory mediation, has created controversies in practice in terms of applicability of this provision in cancellation of objection, negative declaratory actions, and restitution actions. With the amendment, these types of actions are added to the wording of the article and the hesitations thereof are now cleared.

A similar arrangement has been made in Article 3 of the Labor Courts Law No. 7036 regarding mandatory mediation as a cause of action. By this way, the cancellation of objection, negative declaratory actions, and restitution actions concerning re-instatement cases and the employee or employer receivables and compensation claims arising from the law, individual or collective labor agreements shall also be subject to mandatory mediation.

Both amendments will enter into force as of 1 September 2023.

  • Initiation of Enforcement Proceedings After Applying for Mediation

As per Article 72 of the EBL, enforcement court hearing the negative declaratory action initiated before enforcement proceedings can order interim injunction to suspend the enforcement proceeding in exchange of a collateral. As negative declaratory actions are included in the scope of mandatory mediation with the Amendment Law, the applicant would not be able to initiate a court action before the mediation is concluded, but the counterparty would be entitled to initiate enforcement proceedings against the applicant in respect of the same receivable. This would prevent the applicant to obtain an interim injunction suspending the enforcement proceeding in the negative declaratory action to be initiated at the end of the mediation process.

To prevent this, the Amendment Law clarified that the applicants could enjoy their rights under Article 72 of the EBL provided that they file a negative declaratory action within two weeks from the issuance of the final mediation minutes.

  • Enforcement of International Settlement Agreements

The United Nations Convention on International Settlement Agreements Resulting from Mediation ("Singapore Convention"), which applies to international settlement agreements concluded as result of mediation for the resolution of commercial disputes, has been in force in Turkey since 11 April 2022.

The Amendment Law introduces some provisions to HUAK for alignment of the domestic law with the Singapore Convention. Accordingly, the certificate of enforcement for settlement agreements executed through mediation within the scope of the Singapore Convention shall be obtained from the commercial court of first instance.

The certificate of enforcement can be requested from the court at the jurisdiction agreed by the parties, or in the absence of such agreement, from the court at the defendant's residence in Turkey, or otherwise the court in the defendant's habitual residence, or if these are not available, from the courts in Ankara, Istanbul, or Izmir. The court will review the application over the file and will open a hearing only if necessary and by explaining the reasoning.

   v. REGULATIONS IN THE FIELD OF CRIMINAL PROCEDURE

  • Accused's Absence at the Hearing

According to Article 139 of the Criminal Procedure Code No. 5271 (“CPC"), no hearing shall take place in the absence of the accused, save for the cases set out under the law. However, according to the previous wording of the article, the case could be concluded in the absence of the accused even with no interrogation, if the court was to render a decision other than conviction.

The Constitutional Court's decision dated 8 September 2022 and numbered 2021/118 E., 2022/98 K. stated that in cases where a court decides that a crime had been committed but no punishment should be imposed, the accused's innocence is removed. On the other hand, when security measures are imposed, as well as removal of the innocence, the accused is also subject to a sanction. In this regard, conclusion of a case without the accused’s interrogation was deemed contrary to the right to a fair trial in terms of decisions involving consequences other than conviction.

In line with the Constitutional Court's decision, the Amendment Law regulated that a case cannot be concluded without the accused’s interrogation not only in respect of conviction decisions, but also the decisions on non-punishment and the application of security measures. The article's preamble emphasizes that this amendment aims to strengthen the legal security and protect the right to a fair trial more effectively.

  • Announcement of the Judgement and Deferral

According to Article 231 of the CCP, deferral of the announcement of a judgment is subject to objection.

However, the Constitutional Court's decision dated 20 July 2022 and numbered 2021/121 E., 2022/88 K. ruled that the provision regulating the objection to deferral decisions of the announcement of a judgment does not provide a specific and effective scrutiny mechanism in i) evaluation of the claims and evidence of those applying for this legal remedy, iii) balancing the conflicting interests, iii) determination of the compatibility and proportionality of the intervention to the fundamental rights and freedoms as a requirement of a democratic social order. In this regard, the Constitutional Court annulled the referred rule by deeming it incompatible with the right to an effective remedy.

As emphasized in the preamble, the procedure for examining the objection to the decisions on deferral of the announcement of a judgment, which has been controversial ever since it entered into force, has been the subject of several judicial decisions. Recent precedents of the Court of Cassation’s General Assembly of Criminal Chambers ruled that the review on the objection should not concern only the formal conditions but also the substance to provide an effective protection of the right to an effective remedy. In practice, such appeals are often examined in respect of formal conditions only despite the Court of Cassation’s approach.

With the Amendment Law, it is now clarified that the court hearing the objection will evaluate the merits of the case, rather than merely assessing the formal conditions. If the court deems the decision contrary to the law in terms of procedure and principle, it will revoke the deferral decision and send it to the relevant court for conduct of the necessary procedures.

  • The Objection Authority of the Chief Public Prosecutor of the Regional Court of Appeal

Under Article 308/A of the CPC, the chief public prosecutor of the Regional Court of Appeal can object to the final decisions rendered by the criminal chambers of the Regional Court of Appeal.

The Constitutional Court’s decision dated 26 January 2021 and numbered 2021/48 E., 2022/7 K. concluded that the provision regulating this objection authority, which is recognized as an extraordinary legal remedy, is incompatible with the non bis in idem principle. The Court emphasized that this objection authority is not limited to specific reasons; therefore, the prosecutor can use this authority for certain reasons that are not exceptions to the non bis in idem principle. The Court also noted that there is not any mechanism ensuring that the accused is informed of the objections raised, depriving the accused of the opportunity to defend themselves preventing the right to a fair trial.

With the Amendment Law, for the Chief Public Prosecutor of the Regional Court of Appeal to file an objection against the accused, there must be a substantial error that affects the decision, and such objection must be notified to the accused or their attorney. The parties have the right to provide a written response within seven days of the notification.