Ercüment Erdem Att. Piraye Erdem

An Important Decision of the Court of Cassation on Mandatory Mediation in Commercial Disputes

May 2020

Introduction

The 11th Civil Chamber of the Court of Cassation (“Court”), in its decision numbered 2019/3048 E. 2020/1093 K. and dated 10.02.2020 (“Decision”)[1], examines a rejection decision on procedural grounds given by a local court in a case where the plaintiff claims both restitution of a cheque, and the determination of not being a debtor due to the cheque, within the scope of Turkish Commercial Code No. 6102 (“TCC”), since the mediation as a pre-condition was not completed.

In the Decision, it was evaluated whether the action for restitution of the cheque, and the negative declaratory action, are subject to mediation as a pre-condition to file a lawsuit under Article 5/A of the TCC. The Court acknowledges that application to mediate is a pre-condition to bring negative declaratory actions. However, it decided unanimously that the claim for negative declaration would not be subject to mandatory mediation due to the fact that the lawsuit in question was jointly filed with the claim for restitution of the cheque, which is not subject to mandatory mediation. In the dissenting opinion, it was argued that mediation is not a pre-condition to bring negative declaratory actions, and in cases that applying to the mediator is a legal requirement only for one of the actions, but not the other, the actions should be severed.

An Overview of Mediation Provisions as a Pre-condition in Commercial Disputes

Prior to the examination of the aforementioned Decision of the Court, it would be beneficial to provide general information on mediation as a pre-condition before filing a lawsuit (mandatory mediation) in commercial disputes.

Through the publication of Article 20 of Law No. 7155[2] in the Official Gazette numbered 30630 and dated 19.12.2018, which entered into force on 01.01.2019, mandatory mediation in commercial disputes entered into Turkish Law. Pursuant to Article 5/A introduced to the TCC, as of 01.01.2019, application to mediate has become a pre-requisite before filing a lawsuit for commercial claims concerning receivables and compensation involving the payment of a certain amount of money, among commercial claims specified in Article 4 of the TCC and other laws. As is understood clearly from the text of this Article, mediation is not mandatory for all commercial cases; it was prescribed as a compulsory pre-requisite before filing a lawsuit with regard to cases wherein the subject matter of the dispute is a monetary payment or a claim for compensation. Therefore, in order to determine whether a case is subject to mandatory mediation or not, it is important to primarily determine whether the case is commercial and, then, whether the subject of the case is a claim for receivables or for compensation. The criteria considered as to whether or not a matter is a commercial case are regulated in Article 4 of the TCC. There are different opinions and decisions as to whether a negative declaratory action subject to mandatory mediation, which has also been examined in the justification of the Decision[3]. According to defenders who argue that a negative declaratory action should not be assessed subject to mandatory mediation, the mentioned case is not principally an action for performance, but is a “declaratory” action.

In addition, in cases of joinder of actions regulated in Article 110 of the Civil Procedure Code No. 6100 (“CPC”) or alternative pleadings as in Article 111 of the CPC, the way to proceed is explained in the book entitled, “Mediation as Pre-condition Before Filing a Lawsuit in Commercial Disputes”, prepared by the Mediation Department. In the joinder of actions where the plaintiff alleges more than one primary independent claim against the same defendant in the same petition for action (CPC Article 110), each primary claim constitutes an independent case; therefore, the pre-conditions should be separately examined for each primary claim[4]. On the other hand, in alternative pleadings where there is a relation between several claims brought by the plaintiff against the same defendant in the same petition by constituting a principal-accessory relationship (CPC Article 111), the rules for mandatory mediation shall be applied if one of the claims is a commercial case that includes a claim for monetary payment or compensation. The same applies for the elective cases regulated in Article 112 of the CPC, as well. In the Handbook of Attorney in Mandatory Mediation in Commercial Disputes, published by the Union of Turkish Bar Associations, it is advised that application to mediate would be appropriate in cases where the claims are several, and some are related to a receivable or compensation claim, but not the others[5].

Summary of the Decisions of the Local Court and the Regional Court of Justice

The plaintiff requests the restitution of the cheque and the declaratory judgment that the cheque issuer does not owe to the defendant, who is the beneficiary written on the cheque, by claiming that the cheque was lost, a case for cancellation of the lost cheque was filed, and that an interlocutory injunction had been granted. The local court decided that application to mediate is a pre-condition before bringing the action for restitution of the cheque; thus, refused the case on the grounds of absence of the prerequisite under Article 115/2 of the CPC, since the mandatory mediation procedures had not been completed.

Upon the appeal of the plaintiff, the 5th Civil Chamber of the Regional Court of Justice of Bursa concluded that the action for restitution of the cheque is an absolute commercial case, due to the fact that it is regulated under Article 792 of the TCC, entitled “The Cheque That Got out of Hand. Moreover, it is stated that the negative declaratory action contains the claim of a receivable by emphasizing that it would turn into the action for restitution ex officio in the event of the payment of the debt. All of these issues were evaluated collectively, and the appeal was dismissed with prejudice on the grounds that the case is subject to mandatory mediation, and this pre-condition has not been fulfilled.

The Opinion of the Court

The Court criticizes the assessments of the local court and the regional court of justice on the action for restitution of the cheque. Pursuant to the Court, the claim in the action for restitution under Article 792 of the TCC is not the claim for receivable or compensation involving monetary payment, but for the return of the cheque that is a legal instrument. Within this scope, the plaintiff demands that the defendant return the cheque, of which the plaintiff alleges that the bearer holds wrongfully. As a result of these evaluations, the Court concludes that application to mediate is not a pre-condition before bringing an action for restitution of the cheque.

It is emphasized that the subject of the negative declaratory action is related to a certain amount of receivable since the claim of the plaintiff requires a declaration as to whether the parties are debtor or creditor. In consequence of this evaluation, the Court decided that the negative declaratory action is subject to mandatory mediation under Article 5/A of the TCC.

Upon the justification, above, the Court decided that the decision of the regional court of justice shall be reversed. In the Decision, it is stated that even though the negative declaratory action is subject to mediation as a pre-requisite prior to bringing the action, it would not be subject to mandatory mediation, since it was claimed with the action for restitution the cheque, which is not subject to mandatory mediation. In fact, the Court rendered another recent decision on the same subject to the same end[6].

Dissenting Opinion

In the dissenting opinion given in the Decision, it was emphasized that the negative declaratory action regulated in Article 72 of Execution and Bankruptcy Law No. 2004 is a unique case, and it does not contain a claim for compensation or payment of a certain amount. Accordingly, it states that although the court might render a decision that the defendant is a creditor in consequence of the negative declaratory action, the collection of money is not ordered. Furthermore, the prejudices that might be encountered in practice due to the assumption that the negative declaratory action is subject to mandatory mediation are pointed out in the dissenting opinion. It is underlined that this would violate the principle of equality of arms considering that the negative declaratory actions are brought to the court in order to suspend the existing or possible execution proceedings, and that there is no legal procedure to suspend the execution proceedings envisaged in mediation.

The dissenting opinion furthermore criticizes the Decision from a different point of view. It is asserted that the claims should be severed if one of the claims is not subject to mandatory mediation, unless there is a provision of law ruling that the claims shall be jointly examined.

Conclusion

The Court has given a directive decision as to whether the negative declaratory action is subject to mandatory mediation, and it concluded that mediation is mandatory for negative declaratory actions. In the event of the joinder of actions, it is decided by evaluating differently from the highly accepted view in practice that the local court may examine the merits of the case even though the pre-condition of application to mediate for the claims subject to mandatory mediation has not been fulfilled. The influences of the Decision on ongoing practices will be observed over time.

[1] Decision of the 11th Civil Chamber of the Court of Cassation, No. 2019/3048 E. 2020/1093 K., 10.02.2020 (www.lexpera.com.tr).

[2] Law No. 7155 on Procedures of Initiation of Execution Proceedings Regarding the Receivables Arising From Subscription Agreements (Official Gazette, 19.12.2018, N. 30630).

[3] For the decisions stating that the negative declaratory action is not subject to mandatory mediation see. 16th Civil Chamber of Istanbul Regional Court of Justice, No. 2019/2603 E. 2019/2482 K., 15.11.2019; 16th Civil Chamber of Istanbul Regional Court of Justice, No. 2019/3030 E. 2019/2903 K., 30.12.2019 (www.kazanci.com); for counter decisions see. Koçyiğit, İlker / Bulur, Alper: Mediation as Pre-condition Before Filing a Lawsuit in Commercial Disputes, First Edition, Publication of the Directorate of Legal Affairs Mediation Department, March, 2019, p.140 (Date Accessed: 29.05.2020).

[4] Koçyiğit / Bulur, p.69.

[5] Aslanpınar, Y.Burak: Handbook of Attorney in Mandatory Mediation in Commercial Disputes, Publications of Union of Turkish Bar Associations: 364, Ankara, 2019, p.21 (Date Accessed: 29.05.2020).

[6] Decision of the 11th Civil Chamber of the Court of Cassation No. 2020/197 E. 2020/1578 K., 17.02.2020 (www.lexpera.com.tr).