Mediation Settlement Agreement and Key Considerations in Practice
Introduction
Mediation was introduced into the Turkish legal system in 2012 as a voluntary dispute resolution mechanism and has produced successful outcomes over time.
As of 1 January 2018, mediation became a mandatory precondition to litigation in certain disputes arising from labor law; as of 1 January 2019, in commercial disputes; as of 22 July 2020, in disputes arising from consumer law; and as of 1 September 2023, in disputes arising from real estate and lease law, as well as disputes concerning the dissolution of joint ownership. Furthermore, transactions involving the transfer of immovable property and the establishment of in rem rights have also been recognized as disputes eligible for mediation.
Mediation is a process aimed at resolving disputes through mutual agreement of the parties, without the involvement of a decision-making authority, whereby a neutral third party registered with the mediation registry facilitates communication between the parties. Mediation may be applied to private law disputes arising from matters over which the parties may freely dispose, including disputes involving a foreign element.
As there is no adjudicatory authority in mediation, no “decision” is rendered at the end of the process. The dispute may conclude either with or without settlement. If the parties reach an agreement, the scope of such agreement is determined by the parties themselves and is documented in a settlement agreement. This agreement is signed by the parties and the mediator (Article 18 of the Law on Mediation in Civil Disputes (“LMCD”)).
At this stage, questions often arise regarding the legal nature of the settlement agreement executed at the conclusion of mediation and its legal implications.
Content and Legal Nature of the Settlement Agreement
Where mediation ends with a settlement, the agreed solution is reduced to writing and formalized in a settlement agreement.
For a document to qualify as a settlement agreement within the meaning of Article 18 of the LMCD and to be eligible for an enforceability annotation, it must be signed by the mediator. The content of the settlement agreement consists of the substantive and procedural terms agreed upon by the parties for the resolution of the dispute. The agreement may take the form of a settlement contract; however, it may also be structured in another contractual form.
That said, it is beyond doubt that the settlement agreement may not include provisions relating to matters not suitable for mediation, provisions contrary to mandatory rules of law, or provisions contrary to public morals. The mediator should refrain from signing any agreement containing such provisions. The obligations stipulated in the settlement agreement must be drafted with sufficient clarity and precision so as to allow for the issuance of an enforceability annotation and, if necessary, enforcement through execution proceedings based on a judgment.
As is well known, the parties were previously required to obtain an enforceability annotation from the court in order for the settlement agreement executed at the conclusion of mediation to qualify as a document having the force of a judgment and to be enforceable. However, pursuant to the amendment introduced to the LMCD on 12 October 2017 by Law No. 7036, settlement agreements signed jointly by the parties, their attorneys, and the mediator are deemed to have the force of a judgment without the need to obtain an enforceability annotation.
In addition, another significant amendment to the LMCD provides, as a mandatory rule, that no action may be brought by the parties in respect of matters settled through mediation.
These amendments have facilitated the settlement-oriented conclusion of mediation proceedings and have eliminated any ambiguity regarding the binding nature of settlement agreements.
In voluntary mediation, parties are entirely free to initiate mediation, to continue the process, or to withdraw from it. Even in mandatory mediation, the obligation is limited to applying to mediation prior to filing a lawsuit. This freedom indicates that disputes subject to mediation are not required to be resolved exclusively through this method.
However, pursuant to the mandatory provision introduced into the LMCD, once the parties reach a settlement at the end of mediation, the matters agreed upon become unequivocally binding upon them, and no subsequent lawsuit may be filed in respect of such matters. Accordingly, regardless of whether an enforceability annotation has been obtained, the settlement agreement is binding upon the parties with respect to the issues resolved therein. This significantly enhances the importance and legal impact of the mediation process.
The fact that the settlement agreement has acquired such a strong legal effect necessitates the utmost care in its preparation. In this regard, it may be stated that the provisions of the settlement agreement must be drafted in clear and unambiguous terms and, preferably, structured as a settlement contract and rendered equivalent to a court judgment in order to avoid any uncertainty at the enforcement stage.
When assessing the evidentiary nature of the settlement agreement, Article 5 of the LMCD, titled “Inadmissibility of Statements and Documents,” comes to mind. Pursuant to this provision, in the event that a civil action is filed or arbitration proceedings are initiated, the parties, the mediator, and third persons involved in the mediation process may not rely on the statements or documents specified in the article as evidence, nor may they testify regarding such matters. However, such information may be disclosed to the extent required by a statutory obligation or necessary for the implementation and enforcement of the settlement reached at the conclusion of mediation. Considering that the settlement agreement is binding by virtue of a mandatory statutory provision and that no action may be brought in respect of the matters settled therein, it may be concluded that the settlement agreement falls outside the scope of the confidentiality rule.
Issues Encountered in Practice
The fact that mediation has become a mandatory precondition to litigation for a wide range of disputes, that settlement agreements prevent the filing of subsequent lawsuits on the same subject matter, and that settlement agreements signed by the parties and their attorneys qualify as documents having the force of a judgment have rendered mediation particularly prevalent in employee–employer disputes, especially in termination-related processes.
In such disputes, it has become common practice for the parties to settle before a mediator following termination of the employment contract, with the employer paying the employee’s labor receivables. This practice has effectively replaced termination by mutual agreement (“ikale”) and has become widely adopted.
However, it is also frequently observed that mediation processes are not conducted in compliance with the LMCD, other applicable legislation, the specific circumstances of the case, or the ordinary course of life, leading to consequences that may ultimately result in the annulment of the mediation settlement agreement. In employee–employer disputes in particular, situations such as employer representatives acting as mediators, employees not being adequately informed, the exertion of material or moral pressure to procure the signature of the settlement agreement, or negotiation processes not being conducted in accordance with procedural requirements are encountered in practice. These issues have recently been subject to extensive judicial scrutiny before the Regional Courts of Appeal and the Court of Cassation, which have rendered precedent-setting decisions in this regard.
For instance, settlement agreements regulating the termination of an employment contract and related matters (such as payment of labor receivables) through mediation, where no genuine dispute has yet arisen and the employment relationship is still ongoing, are deemed invalid. The Court of Cassation has emphasized that mediation may not be used merely as a means to prevent an employee from filing a future lawsuit; rather, it must aim at resolving an existing dispute between the parties. It has further held that where mediation is conducted solely to eliminate the right to bring an action, without providing a procedurally proper negotiation environment, the resulting settlement agreement is invalid (see Court of Cassation, 9th Civil Chamber, decision dated 10.09.2025, file no. 2025/5019, decision no. 2025/6137).
In another decision, the 9th Civil Chamber of the Court of Cassation ruled that where it is alleged that the mediation process was not conducted at all or was not conducted in accordance with procedural requirements, an action for annulment of the settlement agreement is not subject to the one-year forfeiture period, which applies only in cases involving defects of consent. On this basis, the Court upheld the annulment of the settlement agreement due to the failure to conduct the mediation process properly (see Court of Cassation, 9th Civil Chamber, decision dated 30.06.2025, file no. 2025/4865, decision no. 2025/5551).
Similarly, in its decision dated 22.09.2025 (file no. 2025/6034, decision no. 2025/6727), the 9th Civil Chamber upheld the decision of the Regional Court of Appeal annulling the settlement agreement on the grounds that the dispute involved collective dismissals, the mediator conducted meetings via teleconference from the employer’s headquarters, the mediation process was not carried out in a lawful and sound manner, negotiations were not conducted genuinely, and the employee’s consent was impaired, thereby rendering the settlement legally invalid.
Conclusion
In mediation proceedings, which are increasingly prominent in practice, where the parties reach a settlement, the agreed matters are formalized in a settlement agreement signed by the parties and the mediator. Pursuant to Article 18/5 of the LMCD, where a settlement is reached at the conclusion of mediation, no lawsuit may be filed by the parties in respect of the matters settled.
Accordingly, the settlement agreement has become a legally binding instrument by operation of law. Moreover, following the amendments to the LMCD, settlement agreements jointly signed by the parties, their attorneys, and the mediator are deemed to have the force of a judgment without the need for an enforceability annotation, enabling such agreements to acquire executory effect without recourse to the courts.
Nevertheless, where the mediation process is not conducted in accordance with procedural requirements or where the employee’s consent is impaired, the settlement agreement may be declared invalid. Therefore, it is essential for both the parties and the mediator to act in strict compliance with the provisions of the LMCD and to manage the mediation process with due care so as to avoid any violation of rights.
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