Recent development
While Turkey’s International Arbitration Law No. 4686 has long permitted Turkish courts to grant interim relief before or during arbitral proceedings, the law was silent as to whether this was permitted once a final award had been rendered by the arbitral tribunal but before it became enforceable by Turkish execution offices.
A Turkish Court of Appeal has now made clear that courts can grant interim relief at any time before, during or after arbitral proceedings, before an award becomes enforceable by Turkish execution offices.
Background
Before an arbitral award had been finalized for execution, the prevailing party applied to a Turkish court for an interim attachment (ihtiyati haciz). The trial court dismissed the request, concluding that an arbitral award cannot be enforced by execution offices in Turkey prior to expiry of the period during which an award may be challenged or, where such a challenge has been made, prior to a final court decision upholding the award, thereby making it enforceable by Turkish execution offices.
The Court of Appeal[1] overruled the lower court’s decision, holding that the granting of an interim attachment and the enforcement of an arbitral award are two separate issues. The court explained that as a matter of law there is no obstacle to granting an interim attachment prior to a final court decision ordering enforcement of an arbitral award. In support of its reasoning, the court referred to Article 6 of the law, stating that if interim attachments can be requested before or during arbitral proceedings, there is no reason to bar requests once an award has been rendered.
According to Article 257 of Execution and Bankruptcy Law No. 2004, an interim attachment on a debtor’s assets can be granted with respect to unsecured receivables that are due and payable, or for receivables not yet due and payable where the debtor has no specific place of residence or has commenced actions to conceal or dissipate assets with the aim of avoiding payment. An interim attachment has the effect of freezing the debtors’ assets to ensure the satisfaction of the debt.
Conclusion
The decision is important in that it clarifies a party’s entitlement to seek an interim attachment before a final enforcement decision is rendered. The conditions required for interim attachments must, however, be shown to exist.
Although as a general rule Turkish court judgments are not binding on other cases, they are regarded as persuasive authority and we expect other courts to follow suit. Parties should therefore consider the advantages of seeking an interim attachment from Turkish courts at all stages — before, during and after arbitral proceedings — to ensure the swift and efficient collection of the amounts due.
Please do not hesitate to contact our arbitration team if you have any questions about arbitration in Turkey.
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[1] 6th Civil Division of the Court of Appeal, File No. 2014/3906, Decision No. 2014/4941, April 14, 2014.
