In the landscape of Turkish dispute resolution, settlement agreements (uzlaşma) serve as a powerful alternative to lengthy court proceedings, particularly in commercial and enforcement matters. The mechanism governed by Article 35/A of the Turkish Attorneyship Law No. 1136 (Avukatlık Kanunu) enables parties to resolve monetary debts amicably, granting the agreement the binding force of an enforceable title. This article explores the legal framework, procedural steps, and consequences, with insights from a recent cross-border case involving European, Asian, and Middle Eastern stakeholders.
Legal Framework of Settlement under Article 35/A
Introduced in 2001 and refined over the years, Article 35/A promotes out-of-court resolutions for pecuniary claims, encompassing principal debts, interest, court costs, and attorney fees. Core principles include:
- Voluntariness: Agreements are reached through mutual consent, facilitated exclusively by licensed Turkish attorneys (baro members).
- Attorney Involvement: Negotiations occur via attorneys, ensuring professionalism, confidentiality, and compliance with ethical standards.
- Enforceability as Executive Title: The signed protocol (uzlaşma tutanağı) equates to a court judgment under the Turkish Code of Civil Procedure (HMK Art. 38). It can be directly submitted to the Enforcement Office (İcra Dairesi) for compulsory execution without further judicial intervention.
For international parties, such settlements align with global standards, including the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) for transnational elements, or bilateral treaties (e.g., Turkey-Russia Legal Assistance Treaty of 1993). European clients benefit from seamless recognition under EU Regulation (Brussels I bis) if enforcement extends to EU jurisdictions.
Procedure for Concluding a Settlement Agreement
The process begins with one party (typically the creditor) inviting the other to negotiate. Key stages:
- Initiation: The applicant (alacaklı) issues a formal invitation (davet) via their attorney. Meetings are held at an attorney's office.
- Negotiation and Execution: Parties or representatives discuss terms. The protocol is drafted in two identical copies, signed by attorneys and parties (if present), with date, time, and venue recorded.
- Protocol Content:
- Party identification (company details, addresses, tax IDs, representatives).
- Dispute subject (reference to enforcement file, debt amount).
- Payment terms (amounts, deadlines, beneficiaries).
- Default clauses.
- Supplementary protocols (e.g., for counter-attorney fees under Art. 164).
Legal Consequences of the Settlement
1. Benefits for Parties
- Efficiency Gains: Avoids court fees (harç), expert reports, and appeals, resolving matters in weeks rather than years.
- Immediate Enforceability: Submit to İcra Dairesi for asset seizure, bank account freezes, or salary attachments (Enforcement and Bankruptcy Law Arts. 89–143).
- Case Closure: Full compliance leads to termination of proceedings (takipsizlik).
- Tax Implications: Settled commercial debts are typically VAT-exempt; attorney fees are gross, subject to withholding tax (Art. 164).
2. Consequences of Default
- Automatic Nullification: Failure to pay by deadline (e.g., 30.12.2025) voids the agreement without notice. Original claim revives.
- Compulsory Recovery: Creditor initiates enforcement directly, incurring extra costs (icra harcı: 1–2% of claim).
- Penalties: Accrued fines, cross-border asset pursuits via international mechanisms.
- Independent Fee Recovery: Non-payment of attorney does not void the main protocol but allows separate lawsuit (Art. 164).
3. Cross-Border Considerations for European Clients
- Foreign Entities (e.g., Hong Kong, UAE): Require power of attorney (vekaletname), notarized signature specimens (imza sirküleri), and apostille (Hague Convention 1961).
- Enforcement in Europe: Recognized under Brussels I bis for EU states; exequatur procedures in non-EU (e.g., UK post-Brexit via common law).
- Risk Mitigation: Payments to third parties release the attorney from liability post-transfer (after deducting fees). European principals should mandate confirmation of authority to validate attorney actions.
Practical Recommendations
- Creditors: Specify precise deadlines and bank details; demand authority confirmations.
- Debtors: Verify calculations; strict adherence to timelines is critical.
- Attorneys: Maintain confidentiality; use supplementary protocols for fee clarity.
Article 35/A settlements handle over 100,000 cases annually in Turkey, easing judicial burden while offering predictable outcomes in international trade disputes. For EU-based clients, this tool provides cost-effective debt recovery with robust enforceability.
