Source: https://iclg.com/practice-areas/insurance-and-reinsurance-laws-and-regulations/turkey
Timestamp: 2019-04-23 08:32:09+00:00

Document:
The General Directorate of Insurance, which operates under the Minister of Treasury and Finance, is the state body that makes arrangements related to insurance. To prepare general conditions, tariffs and instructions related to insurance and to carry out the necessary activities for an effective functioning private pension system in Turkey, et cetera, are examples of the organisation’s activities. In addition, Insurance Supervisory Boards, which are operating under the same Ministry as a supervisory mechanism, whose main functions are to take necessary measures to protect policyholders and conduct inspection and investigation activities on them and to prepare consolidated reports on insurance and the private pension sector, amongst others.
Insurance companies operating in Turkey should be established as joint-stock companies or cooperative companies. Besides that, these companies are not allowed to work in any sector other than insurance.
For the founders of insurance companies established as a joint-stock company, the law introduces certain requirements. According to the Insurance Code Art. 3, these requirements are mainly related to the financial status and the criminal records of the founders.
Special requirements are regulated by law for the entities who plan to carry out insurance/reinsurance activities in Turkey.
The activities of foreign companies are regulated under the Foreign Direct Investment Code. According to Art. 3, foreign companies have the liberty to make investments in the Turkish Law System unless otherwise provided by international conventions or special provisions of law. The conditions are the same for foreign insurers and domestic insurers.
There is freedom of contract in accordance with the Turkish Code of Obligations. However, there are some obligatory regulations as well. According to Art. 1404 of the Turkish Commercial Code (TCC), a contract cannot be against the mandatory rules, moral values, public policy or rights of personality. In case there is such contract, the same shall be considered null and void.
Generally, the Turkish Commercial Code regulations are composed of rules to be applied if there is no provision in the contract, nonetheless there are issues that will be deemed invalid when written.
For instance, according to Art. 1429, if the policyholder directly causes the risk to occur, the insurer will be discharged from liability and contracts against this provision are invalid.
There is no such regulation provided regarding this matter in Turkish Law. Therefore, there is no legal barrier for indemnifying directors and officers.
Yes. Some types of insurance are compulsory under Turkish Law. Examples of compulsory insurance are traffic insurance, earthquake insurance, land transportation financial liability insurance, compulsory liability insurance for dangerous substance and hazardous wastes, etc. In general, there is compulsory insurance in cases where there is a high likelihood of harm.
The insureds are considered to be the weak party of a legal relation and the Turkish Law system gives priority to the rights of the weaker party as it aims to ensure equity.
Yes. According to Art. 1478 of the TCC, the victim may claim its loss up to the insured amount directly to the insurer within the period of limitations of the insurance contract.
No. The terms regarding reinsurance are regulated in Art. 1403 of the TCC. Sub-article 2 of the Article states that an insured cannot claim any rights directly from a reinsurer. However, reinsurance does not affect an insured’s rights and claims from an insurer.
Based on the principle of Turkish Commercial Code Art. 1439, if circumstances of importance to the insurer are not disclosed at all or disclosed incorrectly, the insurer may terminate the contract within 15 days or request an additional premium. In case the request for an additional premium is not accepted within 10 days by the policy holder, the insurer shall be discharged of its obligation regarding the contract.
According to the Turkish Commercial Code Art. 1435, the policyholder shall inform the insurer of all important circumstances of which it is or ought to be aware at the time of conclusion of the contract. Circumstances that are not so disclosed at all or disclosed insufficiently or wrongly to the insurer shall be deemed of importance if they could lead to the non-conclusion of the contract or to its conclusion with different terms (had the insurer known the truth). If the insurer has given to the policyholder a list of questions to be answered, the policyholder shall not be liable for any circumstances remaining outside the scope of the questions contained in that list, unless the policyholder has hidden an important issue in bad faith.
Pursuant to Art. 1472 of the TCC, the insurer shall legally succeed the insured upon payment of the insurance indemnity. If legal action or enforcement proceedings had already been initiated against the parties liable, the insurer may continue these proceedings as per the rule of subrogation without the Court’s or defendants’ consent provided that it proves the payment effected to the insured.
According to Art. 5 of the TCC, the competent courts for commercial insurance disputes are Commercial Courts. This authorisation does not depend on the value of the dispute and the hearings take place before a judge in the court not a jury in Turkish Law. However, it should be noted that with a recent alteration, a difference has been made regarding the value of the dispute and the procedure to be applied to such dispute. If the value of the dispute is under a hundred thousand Turkish Lira, “simple procedure” is applied in the instant case, which means that procedure takes less time than the alternative proceeding.
After the first petition is presented before the Commercial Court it is examined and served to the defendant(s) within a week. Parties exchange four petitions in total in this first stage (unless simple procedure is applied) and it usually takes about two months for the court to appoint a hearing date within that period of exchange of the petitions.
Due to the attribution made in the Turkish Commercial Code Art. 83 to the Turkish Code of Civil Procedure Art. 219, parties are required to include all the documents with submission of evidence, whether those documents are proof of theirs or the opposing side’s claims. The court also may request a real person or a legal entity to submit: a document that is related and may be proof of any transactions made between the parties; any document that is sent or received by either party; any document that forms a base to any claim or evidence already presented to the parties.
In the case of a party or a third party refusing the submission of any document that is required with the demand, the court offers an oath to such third party that this document does not exist or cannot be found. The court may require witnesses to be heard regarding such document. If the relevant party does not show an excuse with evidence for not submitting the document, the court may assume that the claims of the counterparty is proven. Other than these provisions, there is no certain remedy for this instance. Only a lawyer may refrain from submission of a document with attribution to the Attorneys Act. Furthermore, if a document is produced in the course of settlement negotiations/attempts, those documents may be confidential and considered as business secrets or parties may prefer to withhold those documents for ethical reasons.
According to the Turkish Code of Civil Procedure Art. 221, if the court renders a judgment that a document is needed for a claim to be proven, the court can require information or documents from a third party, real person or a legal entity. If the court decides on that and the information and documents provided by the parties are not sufficient, the court may summon third-party witnesses. As per the Turkish Code of Civil Procedure, the parties are required to prove their cases in civil actions. Accordingly, the parties are allowed to use witnesses to prove their cases and they are expected to present witness lists within a given time. Time given to the parties is final and parties are not allowed to amend other witnesses in the further stages of the litigation process.
This issue is regulated in Turkish Code of Civil Procedure Art. 221. The courts may order the disclosure of the document possessed by a third party or legal entity, if such document is deemed necessary to prove the allegations of the parties. If ordered by the court, third parties are obliged to disclose such documents and, if not, explain the reason for failure of such non-disclosure. If the court does not find the explanations sufficient, the court may hear the third party as a witness.
There are no restrictions on the appointment of experts in Turkish law. The court may appoint experts either on its own or upon a party’s request. However, as a consequence, the court is the final authority to decide whether or not to appoint an expert. In the case of an expert report submitted to the file, the court is not bound by this report and also grants the parties two weeks to submit their written statements regarding the report. Parties have the chance to appoint experts, yet, as an evidence, opinions of such experts and their findings cannot be on the same level as the court-appointed level.
Art. 257 of the 2004 numbered Enforcement and Bankruptcy Code regulates the precautionary lien for the money receivables. According to this article, the creditor of a debt, which has not been pledged and is due, may request for the precautionary attachment of the movable and immovable properties of the debtor, which are possessed either by the Debtor or a third party. Furthermore, Art. 389 of Turkish Civil Code of Procedure regulates the preliminary injunction for cases where serious damage might occur, or it would be impossible or difficult to obtain rights due to changes in the current situation.
There is a three-tier court system in Turkish Law; namely: First Instance Courts; Regional Courts of Appeal; and the Court of Appeal. The parties are entitled to appeal the decisions of the First Instance Courts, interim injunction decisions and decisions rendered upon objections to precautionary attachment orders before the Regional Courts of Appeal, if the disputed amount is over 3,560.00 TRY as of 01.01.2018 (there are no monetary limits in respect of non-pecuniary damage as per the Turkish Code of Civil Procedure).
Regional Courts of Appeal may either remove or approve the decision of the First Instance Courts. After that, it may either send the case to the relevant First Instance Court or consider the case itself.
As a third system, in certain cases where the disputed amount is over 41,530.00 TRY as of 01.01.2018, parties will have the right to appeal the decisions of the Regional Courts of Appeal before the Court of Appeal. As well as the amount limit, there are limited grounds for such appeal, e.g. contradictory statements in the decision, or insufficient evidence indicating the basis of the decision.
Yes, interest is generally recoverable in respect of claims. The current legal interest is 19.5% in commercial disputes and 9% in general disputes as of 01.07.2018. According to Art. 4/a of the Act numbered 3095, for disputes relating to foreign currency debts, the highest interest rate paid to one year maturity deposit accounts by the State Banks might be requested from the due date to the date of actual payment.
Application fees, advance on expenses, expert fees, witness fees as litigation expenses and attorney fees are the main costs at the court. In principle, litigation costs should be paid by the plaintiff. During trial proceedings, the court may decide the party requesting a procedural transaction should pay the relevant expenses. At the end of the proceedings, the losing party will be required to pay the winning party’s costs. For the attorney fees, it is determined according to the Tariff of Minimum Fees of Lawyers. However, if there is an agreement regarding the attorney fee between a party and attorney of such party prior to the court proceedings and such fee is paid to the attorney, the party cannot refund such fee even in the event of rejection of the case by the Court.
For the Commercial Courts, Courts are not entitled to force parties to mediate as a cause of action. But the court invites the parties to settle or to mediate in a preliminary hearing.
As is mentioned in answer to question 4.10, the Court encourages the parties to mediate but there is no article regarding the cause of action. Hence, if the parties refuse to mediate, the Court shall continue the proceedings as mediation is not mandatory.
It should be stressed that as the arbitration is an alternative dispute resolution system which is conducted upon the agreement of the parties; intervention of the Courts may happen only in some circumstances and party autonomy is given a priority. The Courts may intervene when the parties fail to agree on the appointment of the arbitrators, upon the application of either party, or the parties may apply to the Courts so as to obtain interim relief, or the Court may extend the period that the arbitration process should be concluded, upon the application of either party. It should also be noted that in case there is an arbitration agreement between the parties and one of the parties commences a law suit before the Courts, the other party has the right to object the law suit and, upon the objection, the Court should refer the matter to arbitration.
The provisions of the Turkish Code of Civil Procedure and Code of International Arbitration, which are in relation with the arbitration, do not specify any form of words so as for an arbitration clause to be enforceable. An arbitration clause in written form containing the party’s unambiguous intention to arbitrate and stating the award shall be final and binding upon the parties and shall be adequate regardless of whether the agreement is concluded before or after a dispute arises. A reference to another agreement and/or document, which contains an arbitration clause, shall also constitute an enforceable arbitration agreement as per the TCCP and CIA if there is an intention to make such clause a part of the underlying agreement.
According to Art. 30 of the Insurance Code numbered 5684, if there is an insurer that is a member of the insurance arbitration system, persons, who have any disputes with such insurer, may benefit from the arbitration even there is no such special agreement between the parties.
As stated above, the requirements of an adequate arbitration clause are provided within the TCCP and CIA. Therefore, in the case that there is an arbitration agreement or clause in writing, containing the intention of the parties to arbitrate for the disputes which are specifically defined and capable of being settled by arbitration, that arbitration agreement shall be valid and enforceable.
As per the provisions of the TCCP and CIA, disputes arising out of or in connection with the rights in rem in relation to immovables in Turkey and matters which are not concerned with the intention of the parties, are not capable of being settled by arbitration.
The TCCP and CIA provide that the parties have the right to apply to the Courts in order to obtain interim forms of relief which are provided in Art. 389 of the TCCP and Art. 257 of the Code of Enforcement and Bankruptcy. The requirements to obtain such reliefs are explained in detail above in the answer to question 4.6. Furthermore, the CIA in Art. 6 regulates that such request will not constitute a breach of the arbitration agreement.
Art. 436 of the TCCP sets out the rules regarding the formal requirements of an award. According to which, an award ought to contain the legal reasons and grounds upon which the decision is made. Similarly, Art. 14 of the CIA provides that an award is to contain the legal reasons and grounds upon which the decision is made and the amount of compensation if requested. Even though the Insurance Code does not provide any rules regarding the formal requirements of an award, the Code itself refers to the TCCP in the event that there are no specific provisions for a matter. Therefore, where there is an insurance arbitration award, it should also contain the legal reasons and grounds.
The 5684 numbered Insurance Code in Art. 30 provides that the decisions relating to disputes amounting to less than 5,000.00 TRY are final. In the event that a decision relates to a dispute amounting to more than 5,000.00 TRY but less than 40,000.00 TRY, such decision can be objected before the Insurance Arbitration Committee. The decisions in relation with the disputes amounting to more than 40,000.00 TRY may be appealed before the Courts and can also be objected.
The TCCP and CIA regulate that only an action of set aside may be commenced against the awards given by the arbitral tribunal on the grounds provided in Art. 439 and 15 respectively, such as one of the parties is incapacitated or the arbitration agreement is null and void as per the law applicable to such agreement or the decision rendered is against public policy or the dispute is not arbitrable under Turkish law.

References: Art. 3
 Art. 3
 Art. 1404
 Art. 1429
 Art. 1478
 Art. 1403
 Art. 1439
 Art. 1435
 Art. 1472
 Art. 5
 Art. 83
 Art. 219
 Art. 221
 Art. 221

Art. 257
 Art. 389
 Art. 4
 Art. 30
 Art. 389
 Art. 257
 Art. 6

Art. 436
 Art. 14
 Art. 30
 Art. 439