Sponsored briefing: New practice commenced in 2019 – current status of mandatory mediation in commercial lawsuits

Mehmet Selim Yavuz of Yavuz & Uyanık discusses the effects of the new rules

Prior to 2016, the Court of Cassation was the only high court reviewing rulings of the courts of first instance. This led to an enormous workload for the court; hence final rulings could only be reached after a seriously long period of time. The Turkish judicial system was reformed with a view to address this and the appellate courts were established in 2016 as a judicial authority between the courts of first instance and the Court of Cassation.

Initially, the appellate courts were quite efficient and swift, however, in time they were also clogged up due to the increasing number of files. Currently, just a review by the appellate courts takes a minimum of one to one and a half years. The immediate effect of this is the lawsuits with higher values being finalised after five to six years given that lawsuits over a certain amount (around $10,300) are also subject to review by the Court of Cassation.

On the other hand, the Turkish Commercial Code was amended by the beginning of 2019 and applying to a mediator became a prerequisite for initiating a commercial receivable lawsuit. The main objective was to minimise delays in the judicial system by attempting to resolve disputes through an impartial mediator and reducing the caseload of the courts. However, the expected returns in theory could not be reached in practice and parties seldom reached an agreement during the mediation process. Defendants tend to view longer litigation periods as an advantage and prefer to lengthen the process – settle for a lesser amount after two to three years rather than making an immediate payment. In addition, it is difficult to determine the amount on which the parties may agree to settle since there is no court-appointed expert determining the actual receivable amount in the mediation process.

Different requirements for different claims in relation to the same dispute also complicate the process. For instance, a preliminary injunction request in relation to a commercial receivable does not necessitate a mandatory mediation process. Yet, mediation is a prerequisite for filing a lawsuit for such receivables. Accordingly, plaintiffs now have to set forth their claims under two or three separate lawsuits, which create unnecessary caseload and paperwork.

Consequently, mediation has not become an effective dispute resolution mechanism and is seen merely as a procedural requirement to be fulfilled. Based on our professional experience, the settlement rate for mediation is not above 5% even though official numbers suggest otherwise. The Turkish government has been defending mandatory mediation and voicing an intention to widen its application. Therefore, amendments to the applicable legislation to resolve the relevant issues are expected in the future. That being said, so far, establishment of the appellate courts and the introduction of mandatory mediation have not positively affected the speed of the judicial system, but to the contrary, they have prolonged the process, in particular for lawsuits with higher values