Turkey
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The respondent is prohibited from dealing with the assets (whether in or outside the jurisdiction) referred to in the freezing order until a specified time (for example, a further hearing, judgment or payment), further order of the Court or when the case is concluded. In Turkish law, there are two types of freezing orders. These are:
(i) interim injunctions; and
(ii) provisional attachments (lien);
(each referred to herein as a “freezing order”).
While a provisional attachment is a temporary method of legal protection specifically targeted at monetary receivables (which can be in respect of both movable and/or immovable property), an interim injunction is a temporary legal protection method used in respect of goods, rights and receivables (other than monetary receivables). The receivables secured pursuant to a freezing order can be within Turkish jurisdiction but also worldwide, subject to a creditor successful applying to Turkish Courts to secure any assets based abroad.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No, other than an order for an interim injunction to prevent the transfer of immovable property or a provisional attachment order, no orders are commonly made in conjunction with the attachment order. The respondent is not usually asked to file an affidavit or any evidence.
3. Briefly what is the relevant legal test?
The relevant legal test for the applicant for a freezing order is to establish that one of the following possibilities exists in respect of the underlying dispute:
(i) the possibility of the applicant enforcing its rights over the property in question will be significantly more difficult;
(ii) the possibility of the applicant enforcing its rights over the property in question will become impossible; and
(iii) the possibility of serious damage due to the delay in the judicial process.
The judge will then make a decision by considering these issues. In other words, absolute proof of a risk of dissipation is not required to be established by an applicant in order to obtain a freezing order, it is sufficient to present evidence for plausible proof of dissipation.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
A freezing order can be requested before or after the underlying lawsuit is filed, with the applicant applying for an order by way of a petition to the authorized Court. In this petition, the grounds on which such a request is justified must be detailed, as well as the type of freezing order requested. The applicant does not have to give notice to the respondent.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. If the Court decides to accept the applicant’s request for a freezing order, the applicant must deposit the cash guarantee or a bank letter of guarantee (usually between 10% and 20% of the receivable) from a Turkish bank with the Court within a reasonable time as security for the possible damages that the other party and third parties may incur due to the freezing order. If this guarantee is not deposited within the required period, the decision of the Court will be cancelled. This is to provide security for the possible damages that the other party and third parties may incur due to the freezing order.
6. Can it be sought against third parties?
No. A freezing order cannot be brought against third parties. However, the temporary protective measures provided by a freezing order can be claimed against third parties. Also, the creditors of the party whose property is frozen under a freezing order may be affected by the terms of the relevant order. For example, banks are often affected by freezing orders where its customer may be subject to a freezing order with the money in their bank accounts being blocked, which therefore requires the bank to comply with the terms of the freezing order in those circumstances.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets (for example, money, bank accounts, movable and immovable property, intellectual property, etc) can be covered by a freezing order. As set out above, the provisional attachment order is only granted in respect of monetary receivables, however an interim injunction can granted over goods, rights and other non-monetary receivables.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes. If there is a valid arbitration agreement, the Court will decide whether the freezing order given by the arbitrator or arbitral tribunal is enforceable. The examination to be made by the Court is related to the validity of the arbitration agreement. If an enforceable decision has been made by the arbitrator or the arbitral tribunal in accordance with Turkish law, the Court will rule on the execution of the freezing order.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
It can be requested before the underlying proceedings have been issued or at any stage during the course of the underlying proceedings.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. A freezing order should be granted over the debtor’s property only up to the value of the corresponding debt. This amount should not be exceeded and the balance of interests between the parties should be ensured. When seizing the debtor’s property in an amount that will cover the creditor’s receivables, it is necessary to start with the goods whose deficiency causes the least damage to the debtor and which are easiest to seize, preserve and sell. Subject to relevant execution and bankruptcy law, the home of the debtor, which is classified as a family residence, is listed among the types of property which cannot be seized under a freezing order. It is possible for a proportion of the debtor’s employment salary to be frozen, however that amount cannot exceed one quarter of the debtor’s salary.
12. What happens after a freezing (or equivalent) order is granted?
When the Court grants a freezing order, the applicant must apply to the Enforcement Office for the execution of the order within ten days of the order being issued. Otherwise, the freezing order will automatically become invalid. It is not necessary for the applicant to notify the respondent of the decision of the Court. When a freezing order is granted, the Court will notify the necessary institutions (for example, the land registry or police department) who have control over the relevant property subject to the freezing order. Information about the assets of the respondent can be obtained from the enforcement office at this stage.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The party applying for a freezing order pays the applicable fee. Before filing a lawsuit, the application fee and decision fee are collected in advance from the party requesting the freezing order.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
The applicant is required to provide security to the Court in order to have a freezing order executed. In circumstances where the applicant is found to be the losing party in the underlying proceedings, the security provided to the Court can then be used for any possible damages that the respondent and third parties may have suffered as a result of the freezing order.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who disobeys a freezing order may be held in contempt of Court and may be imprisoned for up to six months or fined. A third party may only be in contempt of Court where they knowingly help or permit the respondent to breach the terms of the order.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
Yes. The relevant Enforcement Office sends a notice to third parties, including banks, of the property and receivables to be seized. If the respondent has money in the relevant bank account(s), the bank can put a lien on the account(s) and, if it is requested, make a payment to the Enforcement Office. Alternatively, if there is no money in the account(s), the bank must notify the Enforcement Office. If the bank does not respond to the first notice, a second notice and a third notice are sent. If the bank does not respond to the third notice, it must file a negative declaratory action. Otherwise, the bank may have to repay the respondent’s debt to the applicant.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, in principle, although subject to the laws of the relevant jurisdiction. However, this can only be sought with the permission of the Court and enforcement itself will be a matter of local law.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Yes. It is possible for a freezing order granted in a foreign country to be implemented in Turkey, but the party requesting the freezing order is required to first apply to the Turkish Courts for the recognition and enforcement of the foreign judgment.
Contacts
Jonathan W Blythe Partner – Director Şengüler & Şengüler Istanbul, Turkey jonathan.blythe@eurasia.com.tr www.senguler.av.tr Alp Goktug Kalmaz Senior Associate Şengüler & Şengüler Istanbul, Turkey alp.kalmaz@senguler.av.tr www.senguler.av.tr
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