Collection of Receivables of Foreign Companies in Turkey: Enforcement Proceedings and Preliminary Attachment

Foreign companies having commercial relations with Türkiye may pursue their commercial receivables arising from real or legal persons residing in Türkiye through lawsuits and enforcement proceedings stipulated under Turkish law. As a rule, the fact that a foreign company has also established a company or branch in Türkiye is not a prerequisite for pursuing receivables.

Depending on the nature of the claim uncontested enforcement proceedings through general seizure, proceedings specific to negotiable instruments, and seizure procedures may come into question. If the debtor disposes of their assets or engages in behaviors that would complicate collection, a preliminary attachment may be requested, provided the conditions are met.

The main areas where the process may differ for foreign companies from Turkish companies are the proof of foreign legal personality and representation authority, the use of documents issued in a foreign country in Türkiye, the potential tax identification number, security under the Law No. 5718 on Private International Law and Procedural Law ("MÖHUK"), and the manner inرحمن which foreign currency claims are indicated in the enforcement request.

Initiation of Enforcement Proceedings by Foreign Companies in Turkey

It is possible for a foreign company to initiate enforcement proceedings as a creditor in Türkiye. The legal personality of the company and the representation authority of the person acting on behalf of the company must be demonstrated through official documents regulated in accordance with the law to which the company is subject.

On the other hand, the establishment of a branch or liaison office to conduct commercial activities in Türkiye is a separate matter from the pursuit of receivables. In this regard explanations regarding the establishment of branches or liaison offices by foreign companies in Turkey can be examined further.

Powers of Attorney and Company Documents to be Issued on Behalf of a Foreign Company

Conducting enforcement proceedings through a lawyer is not legally mandatory in every case. However, in commercial receivables containing a foreign element, issues such as representation documents, foreign currency claims, deadlines, and preliminary attachment may need to be evaluated together.

The following documents are of importance in practice:

• Company incorporation and registration certificate: An up-to-date official record demonstrating the legal existence and principal place of business of the foreign company.
• Document demonstrating representation authority: A trade registry or equivalent official document showing that the person executing the power of attorney on behalf of the company is authorized to represent and bind the company.
• Power of attorney: A power of attorney executed by an authorized company representative, encompassing lawsuits, enforcement proceedings, and other legal actions to be conducted in Turkey.

If the Apostille Convention dated October 5, 1961, applies between the state where the document is issued and Turkey, depending on the nature of the document, Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents it may be apostilled within the scope of. Current contracting states from the HCCH Apostille Section contracting states table must be verified.

In cases where the apostille system does not apply, international regulations between the relevant state and Turkey, as well as the consular legalization procedure, must be additionally reviewed for the document to be used in Turkey. For foreign-language documents submitted to Turkish authorities, a Turkish translation and, where necessary, notarization or consular legalization may be required.

Potential Tax Identification Number

Foreign legal entities that are not registered as taxpayers in Turkey may need to obtain a potential tax identification number in order to carry out transactions that require the presentation of a tax identification number.

The procedures regarding the issuance of a potential tax identification number to foreign legal entities resident abroad are regulated in the General Circular No. 2006/1 on Tax Identification Numbers of the Revenue Administration. Regarding the regulation of the Revenue Administration concerning foreign legal entities, it would be beneficial to review it prior to the transaction.

In terms of company structuring in Turkey and commercial relations between companies, additionally corporate law and the collection of corporate receivables topics may be examined.

Security Requirement for Foreign Creditors: Article 48 of MÖHUK

Article 48 of the MÖHUK (Private International Law and Procedure Law) No. 5718 sets forth the general rule regarding the obligation of foreign real and legal persons who file a lawsuit, intervene in a lawsuit, or initiate enforcement proceedings in a Turkish court to provide security to cover litigation and enforcement expenses as well as the damages and losses of the opposing party.

Pursuant to Article 48/2 of the MÖHUK, however, foreign nationals who file a lawsuit, intervene in a lawsuit, or initiate enforcement proceedings are exempt from providing security in the presence of reciprocity.

How is Reciprocity Determined?

In assessing reciprocity, looking solely at the country where the foreign company is headquartered may not be sufficient. International agreements between the relevant state and Turkey, national legislation, and, where necessary, actual practice must be evaluated together.

Exemption may arise from the following sources:

1. Bilateral international treaties,
2. multilateral international treaties,
3. statutory or de facto reciprocity.

1954 Hague Convention on Civil Procedure

Article 17 of the Hague Convention on Civil Procedure dated March 1, 1954 prohibits imposing a security for costs requirement on persons meeting certain conditions solely on the grounds that they are foreigners or do not have a domicile in the country where the action is filed.

The Convention's current text of Article 17 with current list of the states party to the Convention must be checked together.

For example, Turkey, Germany, and France are among the parties to the 1954 Convention. However, when evaluating the exemption regarding a specific company, the personal, nationality, and residency conditions of the Convention, as well as the declarations and reservations of the contracting states, must also be taken into account.

Decision of the 4th Civil Chamber of the Court of Cassation Dated 13.09.2022

In the decision of the 4th Civil Chamber of the Court of Cassation dated 13.09.2022, numbered E. 2021/36, K. 2022/10078, it is stated that while evaluating the foreign person's obligation to provide security, the exemption from security must be investigated and, when necessary, information must be requested from the Directorate General of Foreign Relations and European Union of the Ministry of Justice.

Therefore, regarding a foreign company, whether the security for costs under MÖHUK Article 48 exists must be checked separately in each case based on the state to which the company is subject.

Subjecting Foreign Currency Receivables to Enforcement Proceedings in Turkey

It is possible for commercial receivables arising from international sales, distribution, service, or supply agreements to be denominated in USD, EUR, GBP, or another foreign currency.

The Turkish Lira Equivalent Must Be Indicated Pursuant to İİK Article 58

Pursuant to Article 58 of the Enforcement and Bankruptcy Law (İİK), the amount of the receivable must be stated in Turkish currency in the enforcement request. If the receivable is in a foreign currency, the exchange rate date on which it is claimed and the interest claim must also be explicitly specified.

Therefore, initiating enforcement proceedings merely as "100,000 EUR receivable" is not sufficient. The Turkish Lira equivalent of the foreign currency receivable and the exchange rate date relied upon must be accurately reflected in both the enforcement request and the payment order.

When determining the exchange rate, the legal nature of the specific claim and the alternative rights regarding foreign currency debts under the Turkish Code of Obligations must be evaluated together. Current and historical exchange rates from the foreign exchange rate page of the Central Bank of the Republic of Turkey can be reviewed.

Decision of the 12th Civil Chamber of the Court of Cassation Dated 18.12.2024

In the decision of the 12th Civil Chamber of the Court of Cassation dated 18.12.2024, numbered E. 2024/5193, K. 2024/10737, it was emphasized that indicating the Turkish Lira equivalent of a foreign currency receivable in the enforcement request and payment order is mandatory.

In the decision, the absence of the TL equivalent of the foreign currency receivable in the payment order located on the UYAP system became the subject of dispute, and the evaluation was made based on electronic UYAP records.

Therefore, while preparing the enforcement request, it is important that the foreign currency amount, its TL equivalent, the exchange rate date, and the interest claim are consistent with one another.

Interest on Foreign Currency Receivables

According to Article 4/a of Law No. 3095 on Statutory Interest and Default Interest, if a higher contractual or default interest rate has not been stipulated in the contract, the highest interest rate paid by State banks for a one-year deposit account opened in the relevant foreign currency shall apply to foreign currency debts.

To the current text of the law via the Ministry of Justice UYAP Legislation system, and for the explanation regarding its application from TCMB’s interest rate announcement for foreign currency debts accessible.

In the event that there is a valid contractual interest provision between the parties, the interest to be applied must also be evaluated by taking into account the contract provisions and mandatory legal rules.

Enforcement Proceeding Avenues Available to Foreign Companies in Turkey

1. Execution Proceedings Without Judgment via General Seizure

Execution proceedings without judgment via general seizure may be initiated in terms of monetary claims based on documents such as invoices, current accounts, delivery receipts, written contracts, or commercial correspondence, and which are not tied to negotiable instruments.

For detailed information regarding this type of proceeding explanations regarding enforcement proceedings and debt collection processes may be examined.

• Payment order: A payment order regarding the general attachment procedure is sent to the debtor.
• Objection period: As a rule, the debtor may object to the debt, interest, or jurisdiction within 7 days as of the service of the payment order.
• Stoppage of proceedings: An objection filed within due time halts the proceedings initiated via the general attachment procedure.

Lawsuit for the Annulment of Objection

Pursuant to Article 67 of the İİK, the creditor may file a lawsuit for the annulment of objection within one year from the service of the objection.

If the dispute constitutes a commercial lawsuit and falls within the scope of Article 5/A of the TTK, it is a mandatory condition of litigation to apply to a mediator before filing lawsuits concerning claims for a sum of money, compensation, and the annulment of objection.

Execution denial compensation does not arise automatically in an action for annulment of objection. Elements such as the fulfillment of the conditions under Article 67 of the EBL (İİK), the existence of a request, and specifically the nature of the claim are evaluated in terms of the specific case.

Removal of Objection

If the creditor possesses one of the documents specified under Articles 68 and 68/a of the EBL (İİK), provided that the conditions are met, removal of the objection may be requested from the enforcement court within six months from the service of the objection.

2. Foreclosure Proceeding Specific to Negotiable Instruments

If the claim is based on a check, promissory note, or bill of exchange, foreclosure proceedings specific to negotiable instruments may be initiated provided that the conditions set forth in Article 167 et seq. of the EBL (İİK) are met.

Regarding the validity conditions of promissory notes and bills explanations regarding bills, promissory notes, and negotiable instruments can be examined further.

• Objection period: As a rule, the debtor must submit their objections to the debt or signature to the enforcement court within 5 days.
• Payment period: The payment period in foreclosure proceedings specific to negotiable instruments is, as a rule, 10 days.
• Effect on proceedings: An objection to the debt or signature does not automatically stay enforcement proceedings, excluding foreclosure sales, without prejudice to special statutory provisions. There are instances where the court may additionally issue a stay order.

Securing the Claim: Preliminary Attachment

A preliminary injunction of attachment (ihtiyati haciz) is a provisional legal remedy aimed at securing the future collection of a monetary claim through enforcement proceedings.

A preliminary attachment order is not granted for every foreign company claim. The request must meet the conditions set forth in Article 257 et seq. of the İİK (Enforcement and Bankruptcy Law).

Conditions for Preliminary Attachment

Pursuant to Article 257 of the İİK, as a rule, a creditor holding a due monetary claim that is not secured by a pledge may request a preliminary attachment over the debtor's assets.

In the case of a due monetary claim, it is not additionally required to prove the "risk of asset dissipation" in every instance. Conversely, with regard to claims that are not yet due, the specific conditions enumerated in Article 257/2 of the İİK must be satisfied.

Regarding a debt that is not yet due, it is particularly significant if the debtor lacks a fixed domicile or is preparing to conceal or dissipate assets, or engage in fraudulent transactions violating the creditor's rights, in order to evade obligations.

Prima Facie Evidence (Approximate Proof) in Preliminary Attachment

Since a preliminary attachment constitutes a provisional legal remedy, the court does not require the level of definitive proof sought at the conclusion of the main action. Nonetheless, documents and evidence sufficient to form a conviction in the court regarding the existence of the claim and the conditions for preliminary attachment must be submitted.

In international commercial claims, contracts, purchase orders, invoices, delivery documents, shipping documents, current account reconciliations, payment notices, and commercial correspondence may carry significance in this assessment.

Security (Bond) in Preliminary Attachment: Article 259 of the İİK

Pursuant to Article 259 of the İİK, the creditor requesting a preliminary attachment is obligated to provide security to cover any damages that the debtor and third parties may suffer in the event that the attachment is unjustified.

The law does not establish a fixed percentage regarding the preliminary attachment security. The amount of the security is determined by the court based on the circumstances of the specific case. Therefore, certain percentages observed in practice should not be considered as statutory and immutable rates.

• If the claim is based on a court judgment (ilam), no security is required.
• Receivable based on a document in the nature of a court judgment, the court decides whether security is required.

MÖHUK Security and Enforcement and Bankruptcy Law (İİK) Article 259 Security Are Not the Same

The foreign litigant security under MÖHUK Art. 48 and the precautionary attachment security under İİK Art. 259 serve different legal purposes.

The exemption of a foreign company from security due to reciprocity or an international treaty under MÖHUK Art. 48 does not, by itself, mean that the security required for precautionary attachment under İİK Art. 259 is also eliminated.

Execution of Precautionary Attachment Order: 10-Day Period

Pursuant to İİK Art. 261, a creditor who obtains a precautionary attachment order must request the execution of the order from the competent enforcement office within 10 days from the date of the order. If execution is not requested within this period, the precautionary attachment order automatically becomes null and void.

Perfection of Precautionary Attachment: İİK Article 264

If the precautionary attachment has been obtained before filing a lawsuit or initiating enforcement proceedings, the creditor must file a lawsuit or initiate proceedings within 7 days from the implementation of the attachment, or if implemented in the absence of the debtor, from the service of the attachment report.

In cases where the debtor objects to the payment order in enforcement proceedings, special and short time limits are stipulated under Article 264 of the Enforcement and Bankruptcy Law (İİK) for maintaining the precautionary attachment. The 7-day supplementary procedure period starting from the service of the objection to the creditor must be especially taken into consideration.

Enforcement Proceedings and Preliminary Attachment Comparison Table

Practical Examples

Example 1: Collection of EUR Claim of a Germany-Based Company

Suppose Germany-headquartered A GmbH delivered commercial goods worth 100,000 EUR to its buyer in Turkey, but the invoice was not paid by the due date.

Turkey and Germany are parties to the 1954 Hague Convention on Civil Procedure. However, when evaluating whether A GmbH is exempt from the security deposit requirement under Article 48 of the PIL (MÖHUK), the conditions set forth in Article 17 of the Convention and the relevant international regulations must be checked with respect to the specific company in question.

If enforcement proceedings are to be conducted in foreign currency, the enforcement request must clearly indicate the 100,000 EUR claim along with its Turkish lira equivalent required by law, the exchange rate date relied upon, and the interest demand.

Whether a foreign company needs to establish a separate company in Turkey is a different matter from initiating debt collection proceedings. Regarding the options of establishing a branch or liaison office in Turkey, structuring options for foreign companies in Turkey can be evaluated separately.

Example 2: The Debtor Beginning to Transfer Assets

Let us assume that France-headquartered B SAS has a due and unsecured claim in the amount of 250,000 USD against its distributor operating in Turkey.

If the claim and the conditions for a preliminary attachment are demonstrated to the court with sufficient documentation, B SAS may request a preliminary attachment from the competent and authorized court. The court may rule for the provision of a security deposit pursuant to Article 259 of the Enforcement and Bankruptcy Law (İİK).

Following the issuance of the decision, the 10-day execution period under Article 261 of the Enforcement and Bankruptcy Law (İİK) and, in the case of a preliminary attachment obtained prior to a lawsuit or enforcement proceeding, the complementary procedural periods under Article 264 of the Enforcement and Bankruptcy Law (İİK) must be meticulously observed.

In the Presence of a Foreign Court Judgment

If there is a court judgment rendered in a foreign country regarding the claim of the foreign company, instead of directly initiating enforcement proceedings without a judgment, the recognition or enforcement (tenfiz) of the judgment in Turkey may come into question.

In this case recognition and enforcement of foreign court judgments in Turkey the conditions set forth in Article 50 et seq. of MÖHUK must also be evaluated.

Claims of a Foreign Company in the Event of the Debtor's Bankruptcy

In the event that a bankruptcy ruling is issued against the debtor company, it may no longer be possible to pursue the claim solely through individual attachment proceedings. Upon the opening of bankruptcy, the bankruptcy provisions of the Enforcement and Bankruptcy Law shall apply, and the foreign creditor may also take the necessary steps to register its claim in the bankruptcy estate.

For general explanations regarding enforcement, attachment, and bankruptcy proceedings, enforcement and bankruptcy law page may be examined.

Frequently Asked Questions

Is it mandatory for a foreign company to establish a company or branch in Turkey in order to initiate execution proceedings in Turkey?

No. As a rule, a foreign company is not required to establish a separate company or branch in Türkiye merely to pursue its receivables in Türkiye through litigation or enforcement. However, the legal personality and representation authority of the foreign company must be proven with duly executed documents.

Is an apostille mandatory for a power of attorney issued on behalf of a foreign company?

The same legalization procedure does not apply in every case. If the Apostille Convention applies between the country where the document is issued and Türkiye, an apostille may be used on qualifying documents. In countries where the apostille system does not apply, consular legalization or another international legalization procedure may be required.

Is a foreign company required to deposit security in enforcement proceedings?

No. Although Article 48 of MÖHUK provides for a security deposit rule for foreign real and legal persons, an exemption from security may apply in the presence of reciprocity. Legal and factual reciprocity, as well as bilateral or multilateral treaties concerning the relevant country, must be evaluated separately.

Is the security deposited for a preliminary attachment the same as the MÖHUK security?

No. The legal purpose and basis of the security for foreigners under Article 48 of MÖHUK and the security for precautionary attachment under Article 259 of the İİK are different. Being exempt from the MÖHUK security does not mean that the security under Article 259 of the İİK is automatically eliminated.

Can a foreign currency claim be directly put into enforcement as USD or EUR?

A foreign currency claim may be subject to enforcement proceedings; however, pursuant to Article 58 of the İİK, the enforcement request must also indicate the Turkish Lira equivalent and the exchange rate date upon which the claim is based. The form of the request must be evaluated together with the provisions of the Turkish Code of Obligations regarding foreign currency debts.

What happens if the debtor objects to the proceedings initiated via general attachment?

An objection filed by the debtor within the statutory period halts enforcement proceedings without a judgment through general seizure. Depending on the documents held by the creditor and the nature of the dispute, the remedies of removal of objection or annulment of objection may arise. In lawsuits for the annulment of objections of a commercial nature, the mandatory mediation requirement under Article 5/A of the TTK must also be taken into consideration.

Within what timeframe must a preliminary attachment order be executed after it has been issued?

Pursuant to Article 261 of the İİK, the enforcement of the preliminary attachment must be requested from the competent enforcement office within 10 days from the date of the decision. If this period lapses, the decision automatically becomes null and void.

Is the security deposit rate in preliminary attachments strictly 10 percent or 15 percent?

No. The Enforcement and Bankruptcy Law does not stipulate a fixed percentage for preliminary attachment security. The amount and type of the security are determined by the court based on the circumstances of the specific case.

Conclusion

It is possible for a foreign company to collect its commercial receivables in Turkey. However, it is crucial to prepare foreign legal entity and representation documents, evaluate the security requirement under Article 48 of the MÖHUK, state foreign currency receivables in the enforcement request in compliance with Article 58 of the İİK, select the correct enforcement procedure, and adhere to the strict deadlines set forth in Articles 261 and 264 of the İİK if a preliminary attachment has been obtained.

If the receivable is based on a foreign court judgment, a check or promissory note, a commercial contract, or merely invoices and commercial records, the applicable path may vary. Therefore, the form of enforcement, the documents underlying the receivable, and the debtor's asset status must be evaluated together.

Author Information

Atty. Batın YILMAZ
Istanbul Bar Association Bar Registry No: 77008

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Contact Information

Batın Yılmaz Law Firm
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