I. Generally
Foreigners are required to deposit collateral in order to file lawsuits, participate in lawsuits, and execute judgments in Turkish courts. Collateral is an obligation introduced to secure the litigation costs and potential damages of the opposing party in lawsuits filed by foreigners in Turkish courts. In this article, we will first examine the conditions for foreigners to deposit collateral, who is obliged to deposit collateral, and then the exempt countries from collateral and the amount of collateral.
II. Legal Basis of Collateral
The obligation of foreigners to deposit collateral is regulated by Law No. 5718 on International Private Law and Procedure. Article 48 of this Law is as follows: “Foreign individuals and legal entities filing lawsuits, intervening in lawsuits, or conducting execution proceedings in Turkish courts must provide the collateral determined by the court to cover the litigation and execution costs as well as the damages of the opposing party. The court exempts the plaintiff, intervenor, or execution agent from providing collateral on a reciprocal basis.” This collateral obligation in the International Private Law and Procedure aims not only to cover the possible litigation and execution costs that the defendant may incur but also to cover potential damages. Furthermore, the 48th article secures not only the defendant but also the possible damages that the court (treasury) may incur.
III. Conditions for Providing Collateral
1. Being a Foreign Natural Person or Legal Entity
In terms of collateral obligation in the International Private Law and Procedure, the criterion of “foreignness” is considered. In contrast, the citizenship of the defendant or the defendant against whom the execution is initiated is not relevant. Similarly, the residence or habitual residence of the defendant, whether in Turkey or abroad, does not matter. The collateral obligation under Article 48 of the International Private Law and Procedure is linked only to the “foreignness” of the plaintiff, intervenor, or executing party. In other words, whether the opposing party is a foreign or Turkish citizen is not relevant.
The collateral obligation mentioned in the Law on International Private Law and Procedure applies to foreign natural persons, including citizens of foreign countries, stateless persons, and refugees. Citizens of foreign countries are individuals who are not Turkish citizens but citizens of other countries. However, individuals who hold both Turkish citizenship and the citizenship of a foreign country are not required to deposit collateral because their Turkish citizenship is considered. However, special provisions apply to stateless persons and refugees.
Stateless Persons
Stateless persons are individuals who are not connected to any country by citizenship ties. Since they are not citizens of any country, they cannot benefit from the diplomatic protection of any country when faced with any act contrary to international law concerning their person or property. According to Turkish law, stateless persons are considered foreigners. However, according to Article 16 of the Convention relating to the Status of Stateless Persons, to which Turkey is also a party and which entered into force on June 6, 1960:
“1) A stateless person shall have free access to the courts of law in the territories of all Contracting States.
2) A stateless person shall enjoy in the Contracting State in which he has his habitual residence the same treatment as a national in matters pertaining to access to the courts, including legal assistance and exemption from cautio judicatum solvi (deposit to cover costs).
3) A stateless person shall enjoy in other Contracting States the same treatment as a national in legal matters in respect of matters referred to in paragraph 2.”
According to this provision, stateless persons are exempt from depositing collateral.
Refugees
A refugee is a person who, due to political and social crises, is forced to leave their country. These individuals are not under the protection of any state. However, the Republic of Turkey has signed the 1951 Convention relating to the Status of Refugees with a geographical limitation. As a result of the geographical limitation, Turkey provides temporary international protection to those who seek asylum from countries outside the Council of Europe.
Article 16 – “1. Each refugee shall have free access to the courts of law in the territories of all Contracting States.
- Each refugee, in the Contracting State where he has his habitual residence, shall enjoy the same treatment as a national in matters pertaining to access to the courts, including legal assistance and exemption from depositing security for costs.
- Each refugee shall enjoy in the Contracting States, in matters other than those referred to in paragraph 2, treatment at least as favourable as that accorded to a national of a foreign country.”
According to this provision, refugees are also exempt from depositing collateral.
Privileged Foreigners (Blue Card Holders)
Turkish citizens by birth who reside abroad but wish to acquire the citizenship of states that do not accept dual citizenship for economic or social reasons may be required to renounce their citizenship first.
Privileged foreign individuals can request the issuance of a document called a “Blue Card” to prove that they have renounced their citizenship by obtaining an exit permit from the foreign missions abroad or from provincial directorates within the country. In necessary cases, the General Directorate of Civil Registration and Citizenship can also issue Blue Cards. Additionally, individuals who lose Turkish citizenship by obtaining an exit permit and have a statement to this effect in their civil registry records can also exercise their rights with a population registration extract or a document obtained from the system.
Individuals who have obtained an exit permit from the Ministry of Interior and have renounced their Turkish citizenship are generally treated as foreigners from the date they lost their Turkish citizenship. However, since these individuals have privileged status, as regulated in Article 28 of the Turkish Citizenship Law, they are not obliged to deposit collateral under Article 48 of the International Private Law and Procedure. In short, Blue Card holders are not required to deposit collateral under Article 48 of the Law when initiating lawsuits or execution proceedings in Turkey. However, the provisions on depositing collateral for Turkish citizens provided in the Code of Civil Procedure remain applicable.
Whether legal entities are foreign is determined according to the “location of their headquarters” as stipulated in the fourth paragraph of Article 9 of the Law on International Private Law and Procedure. Therefore, legal entities whose headquarters are located outside Turkey are also required to provide collateral.
2. Filing Lawsuits, Participating in Lawsuits, and Initiating Execution Proceedings in Turkish Courts
Another condition for the obligation to deposit collateral is to file lawsuits, participate in lawsuits, and initiate execution proceedings in Turkish courts or enforcement directorates. If the plaintiff is a foreigner as mentioned above, they are obliged to deposit collateral. Whether the defendant is a Turkish citizen or a foreigner does not matter to the plaintiff. However, if the defendant is in a foreigner’s position and has filed a counterclaim in the same lawsuit, they are also obliged to deposit collateral.
Foreign participants in lawsuits heard in Turkish courts are also obliged to deposit collateral. To explain, in our legal system, participation in a lawsuit occurs in two ways: principal intervention and accessory intervention. When an individual asserts a right over the subject matter of a pending lawsuit by partially or entirely claiming a right or property in the court where the lawsuit is pending, it is called principal intervention. Therefore, a foreign person who intervenes as a principal party to the lawsuit is also obligated to deposit collateral under Article 48 of the International Private Law and Procedure because, as an intervening party, they are responsible for the same obligations as the plaintiff in the main lawsuit.
In a lawsuit between two parties, the outcome of the lawsuit may
closely concern a third person. In such cases, the third person has a legal interest in joining the lawsuit. When a third party joins the lawsuit on the side of one of the parties, it is called accessory intervention. However, the person is obliged to deposit collateral only when intervening as an accessory party on the side of the plaintiff. They are not obliged to deposit collateral when intervening on the side of the defendant. While collateral is not required from a foreign defendant, it cannot be expected from a party intervening on the side of the defendant.
Foreigners are required to provide collateral when initiating execution proceedings in Turkey, both for executory and non-executory judgments.
Regarding whether the collateral deposited for precautionary measures substitutes for the collateral specified in Article 48 of the International Private Law and Procedure, the answer has been provided by the 12th Civil Chamber of the Court of Cassation. Article 48, unlike the precautionary seizure provision, also covers litigation costs. Therefore, according to the 12th Civil Chamber of the Court of Cassation’s decision dated 02/12/1987, with file no. 1987/1034 Esas, 1987/9973 Karar, it is a requirement for a foreign person to deposit collateral separately to initiate substantive execution against them.
3. Not Being Exempt from Providing Collateral
The second paragraph of the article regulating the exemption from collateral states that the court will exempt the plaintiff, intervenor, or execution agent from providing collateral on a reciprocal basis.
Reciprocity means that nationals of the state to which the foreign plaintiff, intervenor, or executing party belongs may also be granted the same exemption from collateral in that state.
Reciprocity can be ensured in three different ways under Turkish International Private Law: contractual, legal, and factual.
Thus, if there is a bilateral or multilateral agreement between the Republic of Turkey and the state whose citizens must provide collateral, stipulating an exemption from collateral, contractual reciprocity will be established.
IV. Exemption Agreements
Multilateral agreements providing exemption from collateral:
a) The Hague Convention on Civil Procedure of 1954
Nationals of countries party to this convention will be exempt from providing collateral when filing lawsuits in countries party to the convention.
The countries party to the convention are as follows:
- Germany
- Argentina
- Albania
- Austria*
- Belarus (Belarus)
- Belgium
- Bosnia and Herzegovina
- Czech Republic
- China (only Macau Autonomous Region)
- Denmark
- Armenia
- Morocco
- Finland
- France
- Croatia
- Netherlands
- Spain
- Israel
- Sweden
- Switzerland
- Italy
- Iceland
- Japan
- Montenegro
- Kazakhstan
- Kyrgyzstan
- North Macedonia
- Latvia
- Lithuania
- Lebanon
- Luxembourg
- Hungary
- Egypt
- Mongolia
- Moldova
- Norway
- Uzbekistan
- Poland
- Portugal
- Romania
- Russian Federation
- Serbia
- Slovakia
- Slovenia
- Suriname
- Turkey
- Ukraine
- Vatican
b) European Convention on Residence
The countries party to the convention are as follows:
- Germany
- Belgium
- Denmark
- Netherlands
- England*
- Ireland*
- Sweden
- Italy
- Luxembourg
- Norway
- Turkey
- Ukraine
- Greece
Apart from the above-mentioned agreements, there are also judicial aid, residence, or friendship agreements between Turkey and Albania, Australia, Austria, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Algeria, Czech Republic, China, Morocco, Georgia, Croatia, India, Iraq, England, Iran, Switzerland, Italy, Montenegro, Kazakhstan, Kyrgyzstan, Kuwait, Turkish Republic of Northern Cyprus, Lithuania, Macedonia, Egypt, Mongolia, Moldova, Uzbekistan, Pakistan, Poland, Romania, Serbia, Slovakia, Slovenia, Saudi Arabia, Tajikistan, Tunisia, Turkmenistan, Ukraine, Oman, and Jordan, which provide exemptions from collateral.
V. Amount of Collateral to be Provided
The Law on International Private Law and Procedure does not contain a provision regarding the amount and type of collateral. Therefore, the relevant provisions of the Code of Civil Procedure are applied by analogy. Accordingly, as regulated in Article 87 of the Code of Civil Procedure, “The judge determines the amount and form of the collateral to be provided freely. However, if the parties agree on the form of the collateral by contract, the collateral is determined accordingly.”
Therefore, the judge uses discretion when determining the type of collateral. Depending on the specific circumstances of the case, the judge may freely determine any type of collateral, such as cash, stocks, bonds, real estate mortgage, a reputable bank guarantee, and a guarantee agreement certified by a notary. In practice, the most common type of collateral is cash.
When collateral is deposited in cash, it can be deposited in foreign currency or Turkish lira. However, the Court of Cassation has ruled on depositing collateral in foreign currency. The Court of Cassation has also ruled that collateral must be deposited with the central bank. These decisions are based on the Law on the Protection of the Value of Turkish Currency. However, there is no such obligation in the mentioned law. Consequently, in practice, it is accepted that collateral must be deposited in foreign currency.
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