Compulsory Mediation in Commercial Cases: What You Need to Know Before Filing a Lawsuit
“Mandatory mediation”, which entered the Turkish legal system in 2019 and revolutionised the resolution of commercial disputes, is an alternative dispute resolution method that must be applied before going to court in commercial cases related to receivables and compensation claims, the subject of which is the payment of a certain amount of money. Pursuant to Article 5/A added to the Turkish Commercial Code by Law No. 7155, applying to a mediator in such disputes has become a “litigation requirement”. This means that if a lawsuit is filed directly before the commercial court of first instance without exhausting the mediation process, the lawsuit will be rejected procedurally without any further examination. So, which cases does this obligation cover, how does the process work and what advantages does it offer to the parties? In this article, we will discuss all the details of mandatory mediation in commercial cases.
Scope of Compulsory Mediation: Compulsory mediation does not apply to all commercial cases, but to those that meet certain conditions:
- The Case Being a Commercial Case: The dispute must arise from the issues regulated in the Turkish Commercial Code or other business and transactions concerning a commercial enterprise.
- The subject matter of the lawsuit is a claim for the payment of a sum of money or a claim for compensation: The main purpose of the lawsuit should be the collection of a sum of money or compensation for a loss. For example, claims such as unpaid invoice receivable arising from a sales contract, compensation claim arising from unfair competition, commission receivable arising from an agency agreement fall within this scope.
Cases Excluded from the Scope of Mandatory Mediation: Some commercial cases are outside the scope of mandatory mediation due to their nature:
- Non-Contentious Judicial Actions: For example, the request for the bankruptcy of the company.
- Cases where arbitration or other alternative dispute resolution is mandatory under special laws.
- Bankruptcy and Concordat Related Cases.
- Cancellation of Negotiable Instruments (Cheque, Bond, Policy) Cases.
- Negative Determination and Recovery Cases Regulated in the Enforcement and Bankruptcy Law.
Mediation Process Step by Step:
- Application: The party who wants to be a plaintiff applies to the mediation office of the courthouse where the competent court is located according to the subject of the dispute. No fees or expenses are charged during the application.
- Appointment of Mediator: The mediation office automatically appoints a mediator from the list of mediators registered in the registry of the Ministry of Justice through the system. However, the parties may also select a mediator from the list by agreeing on a common mediator.
- Invitation to the First Meeting: The appointed mediator contacts the parties by taking their contact details and invites the parties by determining the place and date of the first meeting.
- Negotiations: The mediator, as a neutral and independent third party, helps the parties to come together and find their own solutions. The mediator does not decide as a judge, but only manages the process and facilitates communication. Meetings are confidential; what is discussed cannot be used as evidence in court.
- Completion of the Deadline: The mediation process is concluded within six weeks from the date of the mediator’s appointment. This period may be extended by the mediator for a maximum of two more weeks in mandatory cases.
- Conclusion and Minutes:
- In Case of Agreement: If the parties agree on a solution, the terms of this agreement are documented in a “Document of Agreement” and signed by the parties and the mediator. Upon the request of one of the parties, this document may be subject to an execution proceeding with writ of execution, just like a court judgement, by obtaining a “certificate of enforceability” from the court.
- In Case of Failure to Agree: If the parties cannot agree or if one of the parties does not attend the first meeting without a valid excuse, the mediator ends the process and prepares a “Final Minutes”. The plaintiff may file a lawsuit in the court by attaching the original of this final report or a copy of it approved by the mediator to the lawsuit petition.
Sanction for Failure to Attend the Meeting: The party who is invited to the mandatory mediation process, but fails to attend the first meeting without showing a valid excuse, shall be sentenced to pay the entire costs of the proceedings, even if he/she is vindicated as a result of the lawsuit. Furthermore, no attorney fee shall be awarded in favour of this party. This regulation aims to encourage the parties to participate in the mediation process.
Advantages of Mandatory Mediation:
- It is fast: Compared to litigation processes that may take months or even years, it is finalised within a maximum of 8 weeks.
- Less Costly: There are no high judgement costs such as litigation fees, expert fees, discovery costs. Only mediation fee is paid.
- Confidential: It is not public like court hearings. Trade secrets and reputations of the parties are protected.
- Protects Commercial Relationships: Since the parties produce their own solutions instead of a winner-loser relationship, they have the chance to maintain their commercial relations that have been damaged by the litigation process.
- The Parties are in Control: Instead of leaving the outcome to the discretion of a judge, the parties shape the resolution of the dispute with their own will.
Compulsory mediation in commercial cases is a modern institution that alleviates the workload of the justice system, while at the same time offering a faster, economic and peaceful solution to the actors of commercial life. As it is a condition of litigation, if you have a commercial receivable or compensation claim, it is a legal obligation to exhaust this process before filing a lawsuit. Instead of seeing this process as a mere formality, it will be in the parties’ favour in terms of both time and cost to use it as an opportunity to resolve the dispute without going through the corrosive process of the courts. Getting legal support from a lawyer in this process will be of great benefit in terms of fully understanding your rights and conducting negotiations more effectively.