UncategorizedWhat to Know: If you are a Foreign Creditor seeking to Initiate Debt Collection in Turkey

July 10, 2018by Ezgi Aydemir0

Foreign creditors have rights to commence an action against their debtors or initiate an executive enforcement. To do so, it is not necessary for the creditor’s own jurisdiction to have a bilateral agreement with Turkey. However, it is required for the creditor to provide an `assurance/security payment` for the future costs which would cover the relevant court expenses and damages that could potentially harm the debtor if the creditor cannot prove its claims. The amount varies from case to case and it is decided by the court to be a certain percentage of the disputed amount. An exceptional case might occur when it comes to propounding an assurance:

– If there is a bilateral agreement between Turkey and the creditor’s jurisdiction, it may not be necessary for the creditor to submit a security while initiating a lawsuit or proceeding an enforcement.

  What happens if the creditor have neither security over the assets of the debtor nor any other instrument which issued or endorsed by the debtor to secure the amount?

A creditor might not have any security such as movable pledges, bank account pledges or mortgage or negotiable instruments such as a promissory note, cheque etc. In this case, the creditor have two options:

1- Either the creditor may directly file a lawsuit, then, as a result of this lawsuit obtain a binding court decision to commence a binding enforcement proceeding against the debtor.

2- Or the creditor could immediately start an ordinary enforcement. But in this scenario, if there is any objection from the debtor, the enforcement procedure would stop and the creditor must initiate a lawsuit for the cancellation of the objection made by the debtor. The enforcement procedure only could continue after the lawsuit for the cancellation of the objection itself. If the objection was unjustified, the court may decide a penalty of up to 40% of the disputed amount.

Timing is of essence

When a creditor initiates an enforcement and the debtor either do not object or miss the time that was given by the laws to object against the enforcement, usually the enforcement proceedings would conclude quicker than a lawsuit.

For more information and questions please email b.orhan@londonlegalint.co.uk Mrs Burcu Orhan Holmgren is the senior partner in London Legal International and is in charge of our Turkish Civil Law division.

Ezgi Aydemir

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