Business Starters’ Legal Kit Part 12: Dispute Resolution in Turkiye: Mandatory Mediation, Lawsuit and Arbitration Processes

Att. Abdulkadir Argıllı

 

In the business world, disputes are almost inevitable. Handling these disputes efficiently is crucial for maintaining smooth operations and preserving business relationships. In Turkiye, the dispute resolution landscape has evolved to incorporate mandatory mediation alongside traditional lawsuit processes. In many disputes, it is mandatory to apply for mediation before filing a lawsuit. If no agreement is reached during the mediation process, the parties enter the litigation process.

 

1. Last Exit Before The Highway: Mandatory Mediation in Turkiye

 

1.1. What is Mediation?

For sustainable success in business, legal risks shall be minimized with “preventive law” services. In the moments when problems are encountered inevitably, they should be concluded with the least damage, and even with mutual gains if possible.

Mediation is an “alternative dispute resolution” method. It is voluntary and confidential process where a neutral third-party mediator assists disputing parties in reaching a mutually acceptable agreement. It is an alternative to litigation, focusing on collaborative problem-solving and preserving relationships. In this article, we will focus only on the mandatory type of mediation.

 

1.2. Legal Framework for Mandatory Mediation

The Turkish Law on Mediation in Civil Disputes (Law No. 6325) established the legal framework for mediation. More recently, mandatory mediation has been introduced for certain types of disputes, particularly in labor and commercial cases. The objective is to reduce the burden on courts and encourage amicable settlements.

Mediation process is a must before filing a lawsuit in certain types of legal disputes. It includes, but not limited to, labor disputes, commercial disputes and rent disputes.

 

1.3. The Mandatory Mediation Process

To give some basic information about the mandatory mediation process:

Initiation: For disputes subject to mandatory mediation, parties must initiate the mediation process before filing a lawsuit. This is done by applying to a mediation center or directly to an accredited mediator.

Selection of Mediator: The parties select a mediator from the registry maintained by the Ministry of Justice. If they cannot agree on a mediator, one is appointed by the mediation center.

Mediation Sessions: The mediator facilitates discussions between the parties, helping them explore options and negotiate a settlement. The process is confidential, and the mediator does not impose a solution.

Agreement or Termination: If the parties reach an agreement, it is documented and signed by both parties and the mediator, having the same legal effect as a court judgment. If no agreement is reached, the mediation process is terminated, and the parties may proceed to litigation.

Certificate of Mediation: Upon completion, whether an agreement is reached or not, a certificate of mediation is issued, which is required to proceed with a lawsuit.

 

1.4. Advantages of Mediation

Cost-Effective: Mediation is generally less expensive than litigation, reducing legal fees and court costs.

Time-Saving: Mediation can resolve disputes more quickly than court proceedings, minimizing business disruptions.

Enforcement power: If an agreement is reached in mediation, the agreement document prepared by the mediator has the force of a court order. As a result, instead of losing years in litigation, the mediation outcome document can be directly enforced and receivables can be obtained.

Confidentiality: Mediation sessions are private, protecting the parties’ reputations and business secrets.

Preservation of Relationships: Mediation promotes cooperative solutions, helping preserve business relationships.

Control Over Outcome: Parties have more control over the resolution, as opposed to a court-imposed decision.

 

2. Lawsuit Processes in Turkiye

 

2.1. The Lawsuit Process

  • Filing a Complaint: The plaintiff files a complaint with the competent court, detailing the claims and the relief sought. The complaint must be accompanied by the certificate of mediation for disputes subject to mandatory mediation.
  • Response: The defendant files a response, addressing the plaintiff’s claims and presenting any counterclaims.
  • Trial: The court conducts a trial, where both parties present their arguments, evidence, and witnesses. The judge or a panel of judges hears the case and renders a judgment.
  • Expert reports: If the dispute requires evaluation or calculation outside the field of law, the court appoints an expert. This expert prepares a report about the dispute and submits it to the court. Especially in commercial disputes, expert reports are generally obtained. Parties have the right to object to expert reports. Again, the parties have the right to submit their own expert reports to the file.
  • Judgment: The court issues a written judgment, which is binding on the parties. The judgment can include monetary damages, specific performance, or other relief.
  • Appeal: Parties can appeal the judgment to a higher court if they believe there were errors in the trial process or the legal conclusions.

 

2.2. Challenges of Lawsuits

  • Costly: Litigation can be expensive due to legal fees, court costs, and other expenses, making it less accessible for some businesses.
  • Time-Consuming: Court cases can take a long time to resolve, causing delays and uncertainties that can impact business operations.
  • Adversarial Nature: Litigation can strain business relationships and create a hostile environment, potentially affecting future interactions.
  • Lack of Flexibility: Court judgments may not provide creative or tailored solutions to the dispute, unlike mediated agreements.

 

3. What is Arbitration?

Parties can agree to submit their dispute to an arbitrator for a binding decision. In Turkiye, arbitration is a widely used method for resolving commercial disputes outside of court. Governed by the Turkish International Arbitration Law (Law No. 4686) and the Civil Procedure Code, arbitration allows parties to select arbitrators who render binding decisions. It is known for being faster, confidential, and more flexible than traditional litigation. Arbitration awards can be enforced in over 150 countries under the New York Convention, making it an effective choice for international and domestic disputes.

 

4. Practical Tips for Effective Dispute Resolution

  • Draft Clear Contracts: Ensure contracts clearly outline dispute resolution mechanisms, including mediation and arbitration clauses.
  • Engage Legal Counsel: Seek legal advice early to understand your rights and options, and to ensure proper representation in mediation or litigation.
  • Document Everything: Keep detailed records of all communications, agreements, and transactions, which can serve as evidence in a dispute.
  • Consider Early Mediation: Engage in mediation at the early stages of a dispute to avoid escalation and promote amicable solutions.
  • Be Prepared: For lawsuits, gather all necessary evidence and prepare thoroughly for court proceedings to present a strong case.

 

5. Conclusion

Understanding the dispute resolution mechanisms available in Turkiye is essential for businesses to navigate conflicts effectively. Mandatory mediation offers a cost-effective, confidential, and cooperative approach, while lawsuits provide a formal, enforceable, and precedent-setting resolution. By choosing the appropriate method and following best practices, businesses can resolve disputes efficiently, minimize disruptions, and maintain healthy business relationships. Engaging legal counsel, drafting clear contracts, and being prepared for either mediation or litigation are crucial steps in managing business disputes successfully.

 

A Reminder About Business Starters’ Legal Kit: This article is a part of “Business Starters’ Legal Kit” series. As we explained in our introductory article, the articles in this series contain essentials only. For detailed information, you can review the articles in special categories on our website or contact us.

 

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