Out of court settlement solutions such as repayment plans can be negotiated. Another option is a reminder  letter signed by a Turkish lawyer and served by a notary on the debtor, putting the debtor in default and announcing legal action in case of non-payment.

If no default interest rate was agreed before, the applicable rate is regularly fixed by the Turkish authorities, taking inflation into account. But

the parties concerned are free to agree on a higher rate in

the contract conditions.

The legal system, while at times slow and overburdened, can be used effectively.

Before taking court action, it is recommended that you carefully assess the chances of a successful collection to avoid undue expenses.

In particular, the debtor’s financial circumstances pending bankruptcy,

the strength of the legal grounds for the action and, of course, the likely costs should be reviewed.

As lawyers fees are not fixed by law, costs can vary according to the complexity of the case.

Contingency fees and fees on a hourly basis are common. The Brazilian bar association (Ordem dos Advocados do Brasil) provides some non-binding guidance on the fees level.

Court fees vary between the single federal states and according to the amount in dispute. They have to be paid in advance by the claimant.

Reimbursement of fees: The losing party has to reimburse

the winning party’s legal costs plus related expenses as well

as those of the lawyers.

Therefore, legal action can be very expensive.

The Turkish court system is in principle a two-tier one. Usually, commercial cases are heard at the Civil Courts of First Instance.

There are also Commercial Courts in the major cities in charge for business cases.

In charge for revision is the Court of Cassation. Limitation of claims in Turkey is after three years in general.

A creditor may appeal for a payment summons at the respective court in charge, which becomes executable two weeks later in case no debtor’s objection is filed within seven days after receipt.

If the debtor disputes the claim, the creditor may initiate an ordinary proceeding.

Foreign arbitral awards can be enforced in Turkey, as Ankara has acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Therefore, Turkey accepts and executes foreign arbitral awards on the basis of reciprocity. Arbitration in Turkey is in principle regulated along the UNCITRAL Model Law.

Recognition of foreign judgements

In principle, external judgements are recognised and executed

in Turkey, but external writs of executions are not recognised.

The claimant requires a writ issued by a Turkish court.  Before going down this route, legal advice should be sought.

Court and lawyer fees

Depending on the amount in question and the nature of the dispute, lawyer’s fees may vary between 10 % and 20 % of the claim’s value.

Fees based on a hourly rate or on a contingency basis are possible (max. 25 % of the amount in dispute).

Court fees in Turkey are usually 6% of the amount claimed. The losing party has to reimburse the court costs of the winning party, but each side has to pay its lawyer fees on its own.

Insolvency procedure

The Turkish Execution and Bankruptcy Act of 1932 originates from the Swiss Federal Law on Bankruptcy.

Despite various amendments, it still suffers from outmoded procedures and lacks efficient restructuring schemes. But Turkey’s financial

crisis in 2001 triggered a round of major efforts on modernisation.

The latest reform package was passed in February 2004, introducing a set of innovative provisions on corporate restructuring: After having gained the pre-acceptance of a requisite majority of affected creditors, a debtor that is under an imminent risk of insolvency or even insolvent may

apply to the court for a for a fast-track approval of a restructuring plan.

This will alleviate consensual agreements between creditors and debtor to speed up the restructuring of a distressed but viable business.

Turkey: 330 days

Average OECD: 225 days