Mandatory Mediation in Commercial Disputes: What is Mediation as a Prerequisite to Litigation?

Mandatory mediation in commercial disputes is a prerequisite for filing a lawsuit in certain commercial cases, requiring completion before resorting to court proceedings. Not every dispute arising between companies, merchants, and commercial enterprises is subject to mandatory mediation. However, in some commercial cases specified by law, filing a lawsuit directly without first resorting to mediation may result in the dismissal of the case on procedural grounds. According to Article 5/A of the Turkish Commercial Code, in commercial cases specified in Article 4 of the TCC and other laws, concerning monetary claims, compensation, annulment of objections, negative declaratory judgments, and restitution, recourse to mediation before filing a lawsuit is a prerequisite. Mandatory mediation is a particularly important procedural requirement for cases involving invoice receivables, current account disputes, contractual commercial receivables, and certain lawsuits following enforcement proceedings.

What is Mandatory Mediation in Commercial Disputes?

Mandatory mediation in commercial disputes is a system that requires parties to attempt to resolve their dispute through a mediator before resorting to litigation. The term "mandatory" here does not mean that the parties are obligated to reach an agreement. The parties must apply for mediation, the process must be carried out, and a report of agreement or disagreement must be drawn up. If the parties fail to reach an agreement during the mediation process, they can still exercise their right to litigation. Therefore, the requirement is not to reach an agreement, but to complete the mediation process before filing a lawsuit.

Is Mediation Mandatory in Commercial Disputes?

Mediation is not mandatory in every commercial dispute. This distinction is quite important in practice. The mere fact that a case is a commercial case is not sufficient for mandatory mediation to apply. Under Article 5/A of the Turkish Commercial Code, mandatory mediation in commercial disputes is primarily applied to cases involving monetary claims, compensation claims, appeals against the annulment of objections, negative declaratory actions, and restitution claims.

This scope has been expanded by Law No. 7445. From September 1, 2023 onwards, commercial lawsuits for annulment of objection, negative declaratory judgment, and restitution are explicitly included within the scope of Article 5/A of the Turkish Commercial Code.

What is a commercial dispute?

When evaluating mandatory mediation in commercial disputes, the first step is to determine whether the dispute is of a commercial nature. Some cases are considered commercial cases by law, regardless of whether the parties are merchants or not. These are referred to in practice absolute commercial cases . In addition, some disputes arising from issues related to the commercial businesses of both parties are also considered commercial cases. Therefore, simply stating that "both parties are companies" may not be sufficient to conclude that a dispute falls within the scope of mandatory mediation. In the specific dispute, the legal status of the parties, the source of the dispute, the nature of the contract, the type of right claimed, and the legal nature of the lawsuit to be filed should all be considered together.

Mandatory Mediation in Commercial Debt Cases

In commercial debt collection cases involving a monetary sum, mediation must be sought before filing a lawsuit. For example, if a sales contract has been made between two companies and the buyer company has not paid the purchase price, and the seller company intends to file a commercial debt collection lawsuit to recover the unpaid amount, mediation will become a prerequisite for the lawsuit.

Mandatory mediation in commercial disputes is particularly relevant for claims related to invoice receivables, current account receivables, sales prices for goods, service fees, commissions, receivables arising from dealership agreements, receivables arising from distributorship agreements, commercial leases, and certain monetary claims arising from service relationships, as well as other commercial monetary receivables arising from contracts. However, not every invoice receivable automatically constitutes a commercial lawsuit. The parties to the dispute and the nature of the legal relationship must be evaluated separately.

Mediation in Commercial Compensation Cases

Commercial compensation lawsuits involving a monetary amount may also fall under the scope of mandatory mediation. For example, a company may seek to recover damages from the other party due to a breach of a commercial contract.

Commercial compensation claims may arise from reasons such as breach of contract, incomplete performance, late performance, defective performance, wrongful termination, and unlawful termination of a commercial relationship. If the compensation claimed is in monetary terms and the dispute is of a commercial nature, the possibility of mediation should be evaluated before filing a lawsuit.

Is mediation mandatory in an appeal against the annulment of an objection?

Yes, mandatory mediation is applied in commercial disputes involving a monetary amount, specifically in cases of appeals against the annulment of an objection. An appeal against an objection is a lawsuit filed by a creditor to have an objection overturned by a debtor in an enforcement proceeding without a court judgment.

For example, let's say a company has a receivable of 1,000,000 TL from another company. The creditor company initiates enforcement proceedings, the debtor company objects to the debt, and the proceedings are halted. If the creditor company wants to file a lawsuit to overturn the objection, and the commercial dispute falls under Article 5/A of the Turkish Commercial Code, it must first apply for mandatory mediation. The regulation explicitly including lawsuits to overturn objections within the scope of mandatory mediation came into effect on September 1, 2023.

Is Mediation Mandatory Before Enforcement Proceedings?

An important distinction exists here. As a rule, it is not mandatory to resort to commercial mediation before initiating enforcement proceedings without a court order. The obligation in Article 5/A of the Turkish Commercial Code relates to filing a lawsuit. Therefore, the creditor can first initiate enforcement proceedings, and the debtor can object to the debt. The proceedings may be suspended upon objection. However, mandatory mediation may be required if a lawsuit is to be filed to overturn the objection. Enforcement proceedings and lawsuits to overturn objections should be distinguished from each other.

Is Mediation Mandatory in Negative Declaratory Judgment Cases?

Mandatory mediation is also applied in negative declaratory judgment cases of a commercial nature involving a sum of money. In a negative declaratory judgment case, the plaintiff requests that it be determined that they do not owe any debt to the other party.

For example, a company might face enforcement proceedings for 5,000,000 TL. The company could argue that such a debt never arose, that it was previously paid, that the contract is invalid, or that the invoice does not reflect the truth. In this case, if the negative declaratory judgment lawsuit is of a commercial nature and concerns a monetary amount, mandatory mediation is applied before the lawsuit. Negative declaratory judgment lawsuits were explicitly included within the scope of Article 5/A of the Turkish Commercial Code with the amendment that came into effect on September 1, 2023.

What happens if enforcement proceedings are initiated during mediation?

The law contains a specific provision regarding this possibility. If, after applying to a mediation office, enforcement proceedings are initiated against the applicant party concerning the same dispute, it is possible to apply the special protection provision under Article 72 of the Enforcement and Bankruptcy Law, provided that a negative declaratory action is filed and the necessary claim is made within two weeks of the final report being prepared. Therefore, it is important to plan mediation and litigation strategies together, especially in commercial disputes where enforcement proceedings are possible.

Mandatory Mediation in Property Recovery Cases

In commercial disputes, restitution lawsuits involving a sum of money are also subject to mandatory mediation before filing a lawsuit. A restitution lawsuit is generally filed by a person who, under the threat of forced execution, paid money they did not owe, in order to reclaim the amount paid. If the dispute is of a commercial nature, the mediation process must be completed before filing a lawsuit.

Is Mediation Mandatory Before Provisional Attachment?

One of the most important issues in commercial receivables is provisional attachment. Provisional attachment is a legal protection that allows for the temporary seizure of a debtor's assets to secure the creditor's future access to the receivable. A request for provisional attachment is not a lawsuit. Therefore, as a rule, the completion of the mandatory mediation process before a request for provisional attachment is not required, but a main lawsuit may need to be filed within a certain period after the provisional attachment. Under Article 18/A of the Commercial Code, if a provisional attachment or provisional injunction decision has been issued before a lawsuit is filed, the relevant lawsuit filing period does not run from the date of application to the mediation office until the date the final report is drawn up. This provision provides an important safeguard in the collection of commercial receivables.

What happens if a commercial lawsuit is filed without first applying to a mediator?

In a commercial dispute subject to mandatory mediation, filing a lawsuit without first applying to a mediator constitutes a significant procedural error. According to Article 18/A of the Commercial Dispute Resolution Law, if it is determined that a lawsuit was filed without applying to a mediator, the court will dismiss the case on procedural grounds due to the lack of a prerequisite for filing a lawsuit. Incorrect assessment can lead to wasted time and money.

What happens if the final mediation report is not attached to the petition?

The mediation process may have been completed, but the final report may not have been attached to the lawsuit petition. This differs from not having applied to a mediator at all. According to Article 18/A of the Law on Mediation, the court sends a summons to the plaintiff, demanding that they submit the original or a certified copy of the final report indicating the failure to reach an agreement within a strict one-week period. If the report is not submitted within this period, the lawsuit is dismissed on procedural grounds. Therefore, if mediation was never applied for, the lawsuit is dismissed on procedural grounds due to the lack of a prerequisite for filing a lawsuit. If mediation was conducted but the report was not attached, the court gives a strict one-week period.

Where to Apply for Commercial Mediation?

Applications for mandatory mediation are submitted to the mediation office located where the competent court, depending on the subject matter of the dispute, is situated. In locations where there is no mediation office, the application is submitted to the clerk's office of the designated civil court. Following the application, a mediator is assigned to the case. It is also possible for the parties to agree on a specific mediator from the list, and for that mediator to be appointed.

How long does commercial mediation take?

A specific time limit has been established for mandatory mediation in commercial disputes. The mediator concludes the application within six weeks from the date of their appointment. In exceptional circumstances, this period may be extended by the mediator for a maximum of two more weeks. Accordingly, the commercial mediation process is generally concluded within 6 weeks + a maximum of 2 weeks in exceptional circumstances

Does mediation suspend the statute of limitations?

Yes, the statute of limitations is suspended and the forfeiture period does not run during the time between the filing of the mandatory mediation application and the date the final report is drawn up. This provision prevents the party from losing their right to sue due to mandatory mediation, but it should be remembered that the time limits may start running again after the final report is drawn up. Therefore, in commercial receivables nearing the statute of limitations, the deadline for filing a lawsuit after the final report must be carefully monitored.

What are the consequences of not attending a mediation meeting?

It is not mandatory for the parties to reach an agreement during the mediation meeting, but the failure of one party to attend the first meeting without a valid excuse has consequences in terms of litigation costs. According to the current Article 18/A of the Turkish Code of Civil Procedure, a party who fails to attend the first meeting without a valid excuse may be held responsible for half of the litigation costs of the opposing party, even if they are partially or completely successful in a subsequent lawsuit. Furthermore, half of the attorney's fees determined under the Minimum Attorney Fee Tariff will be awarded in favor of that party. If both parties fail to attend the first meeting, the litigation costs incurred by each party will remain their own responsibility. Therefore, it is important not to disregard mediation invitations.

Are mediation meetings confidential?

Confidentiality is one of the fundamental principles of the mediation system. The parties, the mediator, and other individuals involved in the process are bound by obligations regarding the confidentiality of information learned during mediation. This is particularly important for commercial disputes.

In mediation talks, companies can evaluate their trade secrets, payment offers, internal financial data, proposed solutions, and debt restructuring options in an environment different from the open litigation process in court.

What happens if an agreement is reached in commercial mediation?

If the parties agree, a mediation agreement document can be drawn up. The parties determine the scope of the agreement. It is important that the agreement clearly specifies issues such as the total debt, payment dates, number of installments, interest, collateral, penalties, breach of term, status of enforcement proceedings, mutual release, and waivers.

If the necessary conditions are met, a mediation agreement document may acquire the status of a court judgment. Therefore, commercial mediation agreements should not be treated like ordinary payment protocols.

Can a lawsuit be filed regarding matters agreed upon through mediation?

As a rule, no lawsuit can be filed later regarding matters agreed upon by the parties through mediation. Therefore, particularly broad release clauses must be carefully drafted. For example, a general clause such as, "The parties have no remaining rights or claims against each other under any name or title," can render not only the single invoice discussed but also other commercial receivables between the parties disputed. Therefore, it is important to clearly state which dispute has been resolved in the agreement document.

Is mediation mandatory if there is an arbitration agreement?

The prerequisite for mandatory mediation does not apply if a valid arbitration agreement exists between the parties. Article 18/A of the Law on Arbitration for Disputes excludes cases where special laws mandate arbitration or other alternative dispute resolution methods, or where a valid arbitration agreement exists between the parties. In particular, dispute resolution clauses in international commercial contracts must be examined before initiating litigation or mediation proceedings.

The Role of the Lawyer in Commercial Mediation

Mandatory mediation in commercial disputes should not be considered merely a formality. Especially in cases involving high-value commercial receivables, analyzing the legal situation before entering mediation negotiations is crucial.

Before the meeting, the following should be evaluated together: the amount of the principal debt, the date of default, the applicable interest, the statute of limitations, the terms of the contract, invoices, delivery documents, commercial ledgers, current account records, warnings and notices, enforcement proceedings, the counterparty's claims for set-off or offsetting, any penalties, and the status of collateral.

For example, evaluating a commercial receivable of 3,000,000 TL solely based on the principal amount may not be accurate. If the receivable became due several years ago, the interest amount could reach a significant level. Similarly, if there is a possibility that the debtor will transfer their assets, the option of precautionary attachment should be considered in conjunction with the mediation process.

What are the advantages of commercial mediation?

Mandatory mediation in commercial disputes is not merely a procedure to fulfill the prerequisite for litigation. When used correctly, it can offer parties different solution options. Courts, on the other hand, can often only decide on the acceptance or rejection of the claim. Mediation can allow parties to develop solutions more suited to their commercial needs.

Points to Consider in Commercial Mediation

Before initiating mediation in commercial disputes, certain issues need to be specifically considered:

• Whether the dispute is truly a commercial case,
• Whether mediation is a prerequisite for filing a lawsuit,
• Where is the authorized mediation office?
• Statute of limitations period,
• The need for precautionary attachment or provisional measures,
• Whether or not there are enforcement proceedings against them
• The principal amount owed and interest calculation,
• The scope of the mediation request,
• Guarantees to be provided in case of agreement,
• Scope of release and waiver provisions.

Clearly defining the types of claims that are expected to be requested after litigation during the mediation application is crucial to prevent procedural disputes that may arise later.

Frequently Asked Questions

In which cases is mandatory mediation applied in commercial disputes?

In commercial debt and compensation cases involving a monetary amount, as well as in cases for annulment of objection, negative declaratory judgment, and restitution, recourse to mediation is a prerequisite for filing a lawsuit.

Is mediation mandatory in every commercial dispute?

No. Not every commercial case is subject to mandatory mediation. The type of case and the subject matter of the claim must be evaluated separately.

Is mediation mandatory for invoice receivables?

If the invoice receivable constitutes a commercial dispute and collection is sought through litigation, mandatory mediation may become a prerequisite for filing a lawsuit.

Is mediation mandatory in an appeal against a decision to overturn an objection?

Yes. Commercial lawsuits involving monetary claims and appeals against the annulment of a decision are subject to mandatory mediation as a prerequisite for filing a lawsuit.

Is mediation mandatory in a negative declaratory judgment case?

Yes. Negative declaratory judgment cases of a commercial nature and involving a monetary amount are explicitly subject to mandatory mediation as of September 1, 2023.

Is mediation mandatory in restitution cases?

In restitution cases that are commercial in nature and involve a monetary sum, mediation is a prerequisite for filing a lawsuit.

Is mediation required before initiating debt collection proceedings?

As a rule, mediation does not need to be completed before initiating enforcement proceedings without a court order. However, mandatory mediation may become relevant if an appeal against the objection is to be filed after the enforcement proceedings.

Is mediation required before a precautionary attachment order?

Since precautionary attachment is a temporary legal protection, completing the mandatory mediation process before filing a request is generally not required.

How long does commercial mediation take?

The process must be completed within six weeks of the mediator's appointment. In exceptional circumstances, the period may be extended by a maximum of two weeks.

Does mediation suspend the statute of limitations?

Yes. The statute of limitations is suspended and the forfeiture period does not run from the date of application until the final report is prepared.

What happens if a lawsuit is filed without going to mediation?

In a dispute subject to mandatory mediation, if a lawsuit is filed without first applying to a mediator, the lawsuit will be dismissed on procedural grounds due to the lack of a prerequisite for filing a lawsuit.

Conclusion Regarding Mandatory Mediation in Commercial Disputes

Mandatory mediation in commercial disputes is an important prerequisite for resolving commercial receivables and monetary disputes between companies; however, it should not be considered mandatory in every commercial case. Under Article 5/A of the Turkish Commercial Code, in cases involving a monetary amount, such as claims for receivables, compensation, annulment of objections, negative declaratory judgments, and restitution, recourse to mediation is required before filing a lawsuit. The fact that, as of September 1, 2023, commercial cases involving annulment of objections, negative declaratory judgments, and restitution have been explicitly included within the scope of mandatory mediation is particularly significant in practice.

Filing a lawsuit without first resorting to mediation may result in the dismissal of the case on procedural grounds. Conversely, the suspension of the statute of limitations and the waiver of the forfeiture period between the filing of the mediation application and the final mediation report provides significant protection for the parties. Therefore, when a commercial debt or receivable dispute arises, not only the possibility of filing a lawsuit but also enforcement proceedings, provisional attachment, mandatory mediation, statute of limitations, interest, security, and the potential litigation process should be considered together.