Within the scope of 7^th Package of the Judicial Reform, Law Amending the Law on Enforcement and Bankruptcy and Certain Laws (“Law”) was enacted on 05.04.2023, with its publication in the Official Gazette on the same date. With this memorandum of understanding, significant amendments will be set forth, which were made through the Law.

Turkish Commercial Code

(1) Article 4: The upper limit for applying the simplified procedure of trial has been increased to TRY 1,000,000.

(2) Article 5/A: Actions (i) for negative declaration, (ii) for annulment of objection and (iii) of restitution have been included within the scope of the disputes subject to the mandatory mediation process. The situation before the amendment: Before the amendment, the same article regulated that claims of receivable and compensation related to a dispute, subject of which is a payment of a certain amount of money are subject to the mandatory mediation. However, this arrangement resulted in divergence, regarding whether actions (i) for negative declaration, (ii) annulment of objection and (iii) of restitution would be subject to the mandatory mediation. Before the amendment, the High Court of Appeals (“the Court”) determined that action for negative declaration could not be subject to the mandatory mediation, as this action is among declaratory actions and such obligation was not regulated under law; while other actions were deemed to be subject to the mandatory mediation, as per precedents of the Court.

Law on the Establishment, Duties and Powers of First Instance Courts and Regional Courts of Justice

Article 5: The lower limit for the commercial lawsuits that are seen before a committee has been increase to TRY 1,000,000, from TRY 500,000.

Law on Mediation in Civil Disputes

(1) Article 17/3: The parties decide which issues to be written in the minutes prepared at the end of the mediation process and the mediator is obliged to make the necessary explanations to the parties about this minutes and its consequences. With the amendment, a further obligation has been stipulated, as the mediator shall inform the parties which are absent at the meetings, through all communication tools.

(2) Article 17/A[1]: (a) Obtaining certificates of enforceability for the implementation of the settlement minutes arranged for the international commercial disputes have become mandatory, which shall be obtained from the commercial courts of first instance. (b) This certificate may be requested from the commercial courts of first instance of the place determined by the parties, if any. If not, then the same should be requested from, (i) the counterparty’s domicile address, (ii) the counterparty’s residence address, or (iii) if (i) and (ii) are non-available, one of Ankara, Istanbul or Izmir courts.

(3) Article 17/B: (a) Disputes regarding the transfer of the immovable or the establishment of limited real rights on the immovable have been made eligible for the mediation process. (b) In these disputes, provided that (i) the parties decide in writing and (ii) the mediator records this decision, an annotation may be made within the registry of deeds at the request of the mediator, that the power of disposition is restricted, limited to the mediation process and not exceeding three months from the date of its placement. (c) This annotation may either be removed automatically at the end of the three-month period or upon the request of the mediator, if the parties cannot agree or agree on the removal of the annotation. (d) If the parties come to an agreement at the end of the mediation process, the settlement minutes shall be drawn up by observing the limitations, procedures and principles in the laws regarding the transfer of the immovable or the establishment of limited real rights on it. (e) Obtaining the certificate of enforceability for the settlement minutes arranged for immovable related disputes is mandatory, which may be obtained from the civil court of peace, where the immovable is located. The court shall inquiry (i) the content of the agreement, (ii) whether it is suitable for mediation and enforcement, and (iii) whether the restrictions in the laws, procedures and principles regarding the transfer of the immovable or the establishment of limited real rights on the immovable are complied with and shall hold a hearing if deemed necessary.

(4) Article 18/4: The obligation for obtaining the certificate of enforceability has been removed for the commercial disputes.

(5) Article 18/A: (a) It has been explicitly stipulated that the mediator shall inform the parties regarding the assignment and the first meeting, even though parties have lawyers. (b) Before the amendment, it was regulated that the durations for filing a lawsuit as a complementary action as per the Civil Procedure Law (i) of 2 weeks in case of interim injunction decision, (ii) of 7 days in case of a provisional attachment decision is made, would not run from the date of the application to the mediation, until the last minutes are drawn up. In addition to this regulation, it has become possible for the party applying to the mediation (“Applying Party”) to request an interim injunction in return of a security deposit, provided that; (i) An enforcement proceeding is initiated against the Applying Party, in relation to the subject matter of the dispute; and (ii) Applying Party should initiate an action for negative declaration within 2 weeks, as of the arrangement date of last minutes. (!) Therefore, an exception has been foreseen to the rule that an interim injunction decision may only be claimed, if an action for negative declaration is filed before the enforcement proceedings are initiated.

(6) Article 18/B: The scope of the disputes subject to the mandatory mediation has been expanded to the below disputes: – Disputes arising from the tenancy relationship, excluding the provisions regarding the evacuation of the leased immovables through enforcement proceedings without judgment; – Disputes regarding the allocation of movables and immovables and elimination of joint ownership; – — — Disputes arising from the Law on Property Ownership; and Disputes arising out of the right of neighbor. Regarding above disputes, the following regulations have been set forth: (a) In case of agreement of the parties, the settlement minutes shall be drawn up by observing the limitations, procedures and principles set forth in the laws regarding the immovable. (b) The certificate of enforceability to be drawn up for the above disputes must be obtained from (i) the place where the immovable is located, in terms of settlement minutes related to the immovables, (ii) the place where the mediator carries out his/her activity, for the other settlement minutes. (c) Obtaining the certificate of enforceability for the settlement minutes arranged for immovable related disputes has become mandatory, which may be obtained from the civil court of peace, where the immovable is located. The court shall inquiry (i) the content of the agreement, (ii) whether it is suitable for mediation and enforcement, and (iii) whether the restrictions in the laws, procedures and principles regarding the transfer of the immovable or the establishment of limited real rights on the immovable are complied with and shall hold a hearing if deemed necessary. (d) The provisions regulated in this Article shall not be applied to the lawsuits pending as of 05.04.2023, before the courts of first instance, regional courts of justice and the Court.

Law on Labor Courts

Article 3/1: Actions for (i) negative declaration, (ii) annulment of objection and (iii) of restitution related to the claims of either employees’ or employers’ receivables and/or compensation have been included within the scope of the disputes subject to the mandatory mediation. The situation before the amendment: Before the amendment, the previous version of the Law on Labor Courts regulated that the application to a mediator as a mandatory requirement for filing a lawsuit with the claim of employee/employer receivables and compensation or re-employment. However, this arrangement resulted in divergence similar to the situation for the commercial disputes, regarding whether actions (i) for negative declaration, (ii) annulment of objection and (iii) of restitution would be subject to the mandatory mediation. And similarly, the Court determined that action for negative declaration could not be subject to the mandatory mediation, as this action is among declaratory actions and such obligation was not regulated under law; while other actions were deemed to be subjectto the mandatory mediation, before the amendment has been made.

Law on Enforcement and Bankruptcy

(1) Article 79/A: (a) In the case the bailiff determines that the place where the attachment is requested is a residence, s/he decides to make an attachment on this place and submits this decision to the enforcement court for approval. The court either; (i) Conclusively decides to approve the decision, if it is understood that the place requested to be attached is a residence within three days at the latest. Afterwards, this decision is notified to the enforcement office and the attachment proceedings are carried out; or (ii) Conclusively revokes the decision, if otherwise is understood. Upon notification of this decision to the enforcement office, the bailiff re-decides on the current attachment request. (b) If it is understood that the place of attachment is not a residence upon the court’s approval decision, the attachment continues. (c) In the case that an attachment proceeding is conducted pertaining to a place accepted non-residential, attachment proceedings are ceased provided that (i) it is understood that the place in question is a residence and (ii) the debtor does not consent to the attachment. (d) This article shall not apply to (i) provisional attachment and (ii) to the decisions on attachment on residences given before 05.04.2023.

(2) Article 82/1: With the amendment, if there is more than one personal or household items used for the same purpose, one of them cannot be attached anymore. In addition, even if the debt arises out of personal belongings of family members or household items in common use of the family, these items again cannot be attached. Be aware that this regulation shall not apply to the items attached before 05.04.2023. The situation before the amendment: Before the amendment, if there were more than one personal belongings of the family members or household items used for the same purpose, then it was possible to attach one of them.

(3) Article 88/A: The procedure for the liquidation of the goods (“Good/s”) which kept by the trustee, even though the attachment as a basis for the preservation has been removed are regulated with this article. Accordingly; (a) The Goods must be liquidated ex officio, after the information regarding the Goods is announced via the national judiciary informatics system -UYAP- by the enforcement office of the place where the enforcement proceeding is conducted. (b) The enforcement office notifies the debtor that (i) it may receive the Goods by paying the trusteeship fee within ten days from the date of notification, or (ii) the Goods shall be liquidated. (c) In the event that the debtor does not receive the Goods, the enforcement office notifies the pledge owner that (i) s/he may use her/his rights arising from the pledge within ten days from the date of notification, which must be made to the enforcement office, or (ii) the Goods shall be liquidated. (d) If the debtor does not receive the Goods or the right of pledge has not been exercised, the enforcement office sells the Goods -which are registered to a registry- ex officio by electronic auction, provided that these Goods have not been put up for sale before. (e) If the Goods cannot be liquidated, the enforcement office notifies the trustee that it may be decided to transfer the ownership of the Goods to the trustee within 10 days as of the notification, by paying the balance amount after deducting the trusteeship fee over forty percent of the value assessed in the last two years -if any- or appraised by the enforcement office. Provided that the criteria are met within this paragraph, and the balance amount is paid by the trustee, if any, the enforcement office sends the file to the enforcement court. (f) If the trustee does not accept the transfer of the ownership to him/herself, the enforcement office notifies the Makine ve Kimya Endüstrisi A.Ş. (“the Company”) that it may be decided to transfer the ownership of the Goods to the Company, provided that (i) it notifies that it shall pay the price of the scrap within one month as of the notification and (ii) shall pay this amount within 3 months, as of its notification to the enforcement office. Provided that the criteria are met within this paragraph, and the price of the scrap is paid by the Company, the enforcement office sends the file to the enforcement court. (g) If the Goods cannot be liquidated, the enforcement office send the file to the enforcement court, for the court to decide that the Goods are transferred to the Turkish Red Crescent, without any charge. (h) The enforcement office shall decide conclusively within 10 days, for the files sent for the transfer of the ownership. With the acceptance decision, the ownership of the Good passes to the relevant person, by removing all attachments and pledges. (i) The debts arising out of the Goods subject to liquidation, (e.g., taxes, penalties, premiums) belong to the debtor and the Goods shall pass to the relevant person without any kind of debts and burdens. In addition to this, transfer and registration transactions are exempt from all kinds of taxes, duties and fees.

Enforcement and Provisional Articles

As per the Provisional Article 1 of the Law, provisions included to Article 5/A of the Turkish Commercial Code and the Article 3 of the Law on Labor Courts regarding the mandatory mediation, shall be applied to lawsuits to be filed after 01.09.2023 (including this date).

Amendments other than the following provisions shall enter into force on 05.04.2023, and the following provisions shall enter into force on 01.09.2023:

• Amendment in Article 5/A of the Turkish Commercial Code regarding the mandatory mediation;
• Amendment to the fact that disputes regarding the transfer of the immovable or the establishment of limited real rights on the immovable are suitable for mediation;
• Amendment in the Law on Mediation in Civil Disputes regarding the extension of the scope of disputes subject to the mandatory mediation and the action for the negative declaration; and

Amendment in the Law on Labor Courts, regarding the mandatory mediation.

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[1] Articles that have been recently included to the relevant legislation are indicated under red sub-headlines within this file.