The implementation of mediation, which is an alternative dispute resolution method, started in 2013 on the basis of the principle of voluntariness. The Law No. 6325 on Mediation in Legal Disputes (the “Mediation Law”) clearly stipulates the totally voluntary nature of mediation by stating that “Parties are free to apply to a mediator and to resume, conclude or withdraw from the process”.
Mediation is totally based on voluntariness, whereas mandatory mediation, which has led to serious academic debates in our country, has been put into practice in certain labour disputes as of 2017. Subsequently, the Law on the Due Process of Commencing Legal Proceedings Regarding the Receivables Arising from Subscription Agreements” (the “Law”), which stipulates mandatory mediation in commercial disputes, has been published in the Official Gazette no. 30630 dated 19 December 2018, and its provisions regarding mandatory mediation in commercial disputes shall enter into force on 1 January 2019.
At this point, it is important to analyse what mandatory mediation in commercial disputes is and how it will be implemented. In this newsletter, the matter is examined under 10 questions.
- What is “mandatory” mediation in commercial disputes?
Mandatory mediation is described in the Law as follows:
“Mediation as a Cause of Action
For the commercial actions specified in Article 4 of this Law and other laws; application to a mediator before initiating a lawsuit for those receivables and damage claims, the subject matter of which is the payment of a certain amount of money, is a cause of action.”
As seen above, the Law uses the term “cause of action”, not the term “mandatory”. Cause of action refers to those conditions the presence of which is a must for the examination of the merits of a lawsuit. In this context, in case of commercial disputes stipulated in the Law, it will not be possible to initiate a lawsuit before applying to a mediator. For this reason, in practice, reference can be made to “mandatory mediation” instead of “cause of action”.
It is stipulated that, in case a lawsuit is initiated before applying to a mediator, the judge shall dismiss the lawsuit without prejudice and without taking any action due to the lack of the cause of action.
- Under which legislation is mandatory mediation in commercial dispute regulated?
As per Article 20 of the Law which stipulates mandatory mediation in commercial disputes, the relevant stipulation is going to be regulated under a new Article 5/a with title “Mediation as a cause of action” in the Turkish Commercial Code No. 6102. Accordingly, mandatory mediation in commercial disputes is going to be based upon and be included in the Turkish Commercial Code No. 6102.
The procedural provisions of the Mediation Law shall also apply to mandatory mediation in commercial disputes. The Law has also introduced certain amendments and additions to these provisions.
- When will mandatory mediation in commercial dispute enter into force?
Mandatory mediation in commercial disputes has been published in the Official Gazette dated 19 December 2018, and will enter into force as of 1 January 2019.
- What will happen to the commercial lawsuits already initiated before 1 January 2019?
The provisions regarding mandatory mediation shall not apply to those lawsuits which have already been initiated at the courts of first instance and district courts as well as the Appeal Court before the effective date of such provisions. In other words, mandatory mediation in commercial disputes shall only apply to the commercial disputes which have not been claimed yet as of 01.01.2019.
- Is it possible any more to apply to court and/or to voluntary mediation for commercial disputes which are subject to mandatory mediation?
The mandatory nature of mediation in commercial disputes does not mean that initiating a lawsuit regarding the relevant commercial dispute is no more possible.
The goal of mandatory mediation is to ensure that the parties try to solve the commercial dispute between themselves without needing to enter into a litigation process, which is costlier and time consuming compared to mediation. However, if the parties fail to solve the commercial dispute by means of mandatory mediation, they can always initiate a lawsuit on the matter. In other words, mandatory mediation does not restrict the “right to legal remedies”, which is a fundamental right. Moreover, it is stipulated that all prescription periods will stop running during the period starting from the application to mandatory mediation until the issuance date of the last minutes, including those periods stipulated for the initiation of a lawsuit following precautionary injunction and precautionary attachment decisions.
Likewise, it is always possible to apply to voluntary mediation for a commercial dispute, which is subject to mandatory mediation, as long as both parties intend to do so. In other words, a commercial dispute’s being subject to mandatory mediation does not prevent the resolution of the dispute by means of voluntary mediation. To this extent, the parties may always apply to voluntary mediation before mandatory mediation as long as their intentions are in line.
If, however, the commercial dispute between them cannot be resolved by means of voluntary mediation, then they will be required to apply to mandatory mediation in order to initiate a lawsuit thereafter.
- What is the scope of mandatory mediation in commercial disputes?
Mandatory mediation shall apply to receivables and damage claims, the subject matter of which is the payment of a certain amount of money, that are among the commercial actions specified in Article 4 of the Turkish Commercial Code No and other laws. In other words, the prerequisite for mandatory mediation is that the relevant commercial dispute is related to a receivable or a damage claim regarding the payment of a certain amount of money.
As per Article 4 of the Turkish Commercial Code No. 6102, civil lawsuits and non-contentious legal works arising from commercial operations of both parties, and civil lawsuits and non-contentious legal works arising from the matters stipulated in;
- the Turkish Commercial Code no. 6102,
- Articles 662 to 969 of the Turkish Civil Code regarding those who act as pawnbrokers,
- Articles 202 and 203 regarding acquisition of assets and business as well as merger and change of form of businesses, Articles 444 and 447 regarding the prohibition of competition, Articles 487 to 501 regarding publishing contracts, Articles 515 to 519 regulating letters of credit and orders of credit, Articles 532 to 545 regarding commission agreements, Articles 547 to 554 stipulating provisions for commercial representatives, commercial agents and other merchant assistants, Articles 555 to 560 regarding transfer, and Articles 561 to 580 regulating safekeeping contracts of the Turkish Code of Obligations No. 6098,
- the legislation regarding the intellectual property law,
- the special provisions regarding exchanges, exhibitions, fairs and markets as well as warehouses and other trade-specific places,
- the regulations related to banks, other credit institutions, financial institutions and lending business, are considered as commercial lawsuits and commercial non-contentious legal work.
However, exceptionally, mandatory mediation shall not be applicable in the following cases;
- lawsuits arising from transfer, deposit and rights related to intellectual and artistic works, which do not concern any commercial enterprise, and
- cases where special laws require application to arbitration or alternative dispute resolution methods, or cases where an arbitration agreement exists.
- Is there any monetary limit for the resolution of commercial disputes within the scope of mandatory mediation?
No monetary limit is stipulated for the resolution of commercial disputes within the scope of mandatory mediation. In other words, in case of a commercial dispute stated in section 6 of this newsletter, the resolution of the relevant dispute by means of mandatory mediation is required in any case, regardless of the amount being very small or very high.
- Is it possible to apply to mediation for a commercial dispute which does not meet the requirements stipulated in the Law?
Mediation for a commercial dispute which does not meet the requirements for application to mandatory mediation stipulated in the Law shall not be “mandatory”. In such a case, the parties may apply to voluntary mediation and try to solve their commercial dispute by this method if they mutually intend to do so.
In order to apply to voluntary mediation, in addition to mutual intent of the parties, the relevant commercial dispute should be a private law dispute arising from businesses and operations over which the parties can freely dispose of.
- What is the procedure to be followed for mandatory mediation in commercial disputes?
In Terms of the Mediators; Mediators who wish to mediate commercial disputes should register with a commission. To this extent, among the registered mediators, the Department of Mediation makes a list of those mediators who are willing to act as a mediator, stating their area of expertise, if any, according to the justice commissions of the courts of first instance, and present such list to the chairmanship of the relevant commissions. The commission chairmanships send these lists to the mediation offices within their own judicial localities and, in places where there is no mediation office, to the clerk’s offices of the civil court of peace to be designated by them.
In Terms of the Place of Application; The application is made to the mediation office located at the place of the competent court and, in places where there is no mediation office, to the designated clerk’s office. The mediator is chosen by the office from the list notified to the commission chairmanships. If, however, the parties agree on a mediator not contained in the list, such mediator is appointed.
In Terms of the Mediation Period; The mediator concludes the application within six weeks as from his/her date of appointment. Where necessary, such period may be extended for two weeks as a maximum.
In Terms of the Post-Mediation Process; If, in consequence of the mandatory mediation process, the parties fail to reach an agreement and a lawsuit is initiated, then the original of the last minute indicating the failure to reach an agreement in consequence of the mediation process, or a copy thereof certified by the mediator should be attached to the lawsuit petition. In case of non-fulfilment of this requirement, the court serves an invitation to the plaintiff, notifying that the last minute should be submitted within a definite period of one week, and that, otherwise the lawsuit will be dismissed without prejudice. If the condition so notified is not fulfilled, then the dismissal the lawsuit without prejudice is decided without serving the petition to the counter party.
- How will the fees and costs of mandatory mediation in commercial disputes be determined?
In case the parties reach an agreement in consequence of the mediation process, the mediation fee is equally paid by the parties unless otherwise agreed as per Section Two of the Mediation Fee Tariff attached to the Mediation Minimum Fee Tariff. In such a case, the fee shall not be less than two hours’ fee as determined in Section One of the Tariff.
In cases where the parties cannot be contacted at the end of the mediation process, where no meeting can be held due to the absence of the parties or where the parties fail to reach an agreement at the end of negotiations lasting for less than two hours, the two hours’ fee is paid from the budget of the Ministry of Justice according to Section One of the Tariff. If the parties fail to reach an agreement at the end of negotiations lasting for more than two hours, the fee for the time exceeding two hours shall be equally paid by the parties according to Section One of the Tariff (based on hourly fees), unless otherwise agreed. The fee paid from the budget of the Ministry of Justice and covered by the parties is considered as litigation expenses.
The unavoidable expenses incurred by the mediation office are paid from the budget of the Ministry of Justice, and then, if an agreement is reached in consequence of the mediation, it is shared equally by the parties and, if no agreement can be reached, it shall be collected from the party proven to be faulty in the future.
When mandatory mediation was first put into practice for labour disputes, most people considered it only as a step to be taken out of the way before initiating a lawsuit, the consequences of which were not so seriously taken by the parties as well. However, shortly after its being put into practice, it was understood that around 65% of the labour disputes could be resolved much faster and less costly without going to the court, and this has made favourable impacts both on the parties and on the courts whose workload has considerably decreased.
In the light of the foregoing, it is expected that, after the “adaptation period”, mandatory mediation in commercial disputes will also influence both the parties and the courts positively.
The information given in this note are aimed only at providing information, and does not serve as a legal opinion under any circumstances.