Collateral in Provisional Attachment

The provisional attachment is the process of temporarily seizing the property and rights of the debtor, at the request of the creditor, in order to guarantee the debtor’s payment of money debt. If the creditor files a lawsuit or initiates an enforcement proceeding in order to obtain the right to claim, he/she may request the court to take a provisional attachment decision within these processes. The creditor does not have to first file a lawsuit or initiate enforcement proceedings in order to request a provisional attachment. Before filing a lawsuit or initiating proceedings, the creditor may also request a provisional attachment. In this way, it secures the right to claim that it hopes to obtain as a result of litigation or proceedings.

With the court’s decision of lien, the debtor’s properties are temporarily seized, but they cannot be sold yet. In order for the goods to be converted into money and the creditor to receive the right to claim, the provisional attachment must turn into a final attachment. Even if the goods cannot be sold, the debtor’s power of disposition over the provisionally attached goods is restricted. To put it more clearly, the debtor is deprived of the authority to take legal action on the provisionally attached goods. The goods are removed from the debtor’s posession and kept by the enforcement office. In the event that the creditor is proved wrong as a result of this process, the damages incurred by the debtor due to the provisional attachment during the provisional attachment will have to be compensated. The creditor must compensate not only the debtor, but also the damages incurred by third parties due to the provisional attachment. This is called “compensation due to unjust provisional attachment”.

For this reason, the creditor requesting the provisional attachment is requested to deposit some security in order to ensure that the damages of the persons who will be harmed by the provisional attachment decision, which is given as a result of an approximate proof and which is likely to be unjust, will be covered. As a rule, the provisional attachment decision cannot be made without security.

In this bulletin, we have focused on the collateral requirements and features sought in issuing a provisional attachment decision.

1. Is it obligatory to deposit a guarantee for a Provisional Attachment Decision?

The creditor, who wants to place a provisional attachment on the debtor’s property rights or receivables, must make a request from the competent and authorized court in this regard. If a provisional attachment is to be requested at the next stage after the lawsuit is filed, it must be requested from the court where the case is pending. Upon this request, the court will examine whether the conditions for the provisional attachment have been met and will decide whether to accept or reject the provisional attachment request accordingly.

One of the conditions sought by the court in order for the court to issue a provisional attachment is that the creditor has deposited collateral. The court cannot rule a provisional attachment without collateral. This collateral is intended to cover the losses incurred by the debtor or third parties due to the provisional attachment.

The collateral must be obtained from the creditor. The exceptions to this rule are limited and will be discussed in the next section below. Except for these exceptions, it is not possible for the judge to issue a provisional attachment without collateral. If the judge wrongly rules a provisional attachment without collateral, this decision must be appealed. Upon the objection, the judge should change the decision and rule a provisional attachment decision in return for collateral. However, it is not possible for the judge to revoke the provisional attachment decision for this reason alone.

It is unlawful for the judge to give the creditor time to deposit the security and to decide whether the provisional attachment is released or continued depending on whether the creditor deposits the security within this period. The following Supreme Court decision clarifies the issue;

“According to Articles 259 and 260/5 of the EBL, the court that decides on the provisional attachment also decides to take security from the creditor who is not dependent on a judgment to be taken. In other words, the guarantee must be awarded together with the decision. However, unless the creditor deposits this security to the court cashier, she/he cannot demand the delivery and execution of this decision. ”[1]

If the creditor and debtor parties have concluded a contract between themselves that a provisional attachment decision can be made without obtaining a security, these records written in the contract become invalid. Because, the collateral taken for the provisional attachment decision is intended to protect not only the interests of the debtor, but also the interests of third parties. For this reason, it is not possible to eliminate this condition against third parties only by agreement of the debtor and creditor, in accordance with the principle of proportionality of contracts.

2. Circumstances in which a Provisional Attachment Without Collateral Decision Can Be Ruled

Exceptions to the provision of the provisional attachment against collateral are clearly stipulated in the Law. According to this;

• If a provisional attachment decision is demanded for receivables based on a judgment (court decision), the condition of security is not sought.

 

• The judge decides whether to show a guarantee or not for the receivables based on a document in the nature of a writ. The documents that are in the Nature of a verdict are specified in the 38th article of the EBL. For example; The settlements and acceptances made before the court, and the execution letter of guarantees are examples of documents that have the quality of a verdict.

 

• In case of rejection of the concordat approval request, a provisional attachment without collateral decision is made (EBL art. 301/II).

 

• No collateral is required for the provisional attachment requests of the Savings Deposit Insurance Fund (Banking Law No. 5411, art. 140/IV).

 

• In accordance with the provisional 4/II provision of the Law No. 4603 on the Republic of Turkey Ziraat Bank, Türkiye Halk Bank Joint Stock Company and Türkiye Emlak Bank Joint Stock Company, no guarantee is sought in the provisional attachment for the demands of these banks.

 

• Although there is no clarity in the Law as to whether the beneficiaries of legal aid will be deemed exempt from this guarantee if they request a precautionary attachment decision, compared to the interim injunction provisions (HMK art. 392), it is adopted in the doctrine that they should be exempt from the collateral requirement in the precautionary attachment claims.

 

“According to Article 259 of the EBL, if the creditor requesting a provisional attachment is proved wrong in the attachment, it is obligatory to provide security for the damage that the debtor and the third party will suffer due to this. The purpose of the collateral regulated in the provision is to protect the debtor and third parties against possible damages. Since the judge has no discretion in this matter and the document on which the provisional attachment is based is not a judgment or a document in the nature of a verdict, a provisional attachment cannot be decided without a collateral.”[2]

3. What Can Be Provided as Collateral?

There is no clarity on what can be provided as collateral in the provisions regulating the provisional attachment. Therefore, possible and feasible collaterals will be ascertained by using the Code of Civil Procedure. In the old law, the court could decide on the collaterals from a limited number of options such as cash, real estate pledge to be accepted by the court, stocks, bonds, bank letters of guarantee. In the new CCP, what can be a collateral is not listed one by one, and this issue is left to the discretion of the judge. If there is an agreement between the parties on the form of the collateral, the judge decides accordingly. In case of a change in the circumstances and conditions that require the attachment the judge may decide to reduce, increase or change the guarantee (HMK art.87).

Banks cannot provide  their own letters of guarantee as collateral in their provisional attachment requests. Even if they do, this will not have any legal consequences. The rationale for this situation is explained below with a quote from the Supreme Court decision;

“With the letter of guarantee, the bank undertakes to fulfill the debt of a person and, if she/he does not fulfill it, the risks that may arise for the person receiving the guarantee, partially or completely. For this reason, the letter of guarantee given by the bank is not a formal condition to be fulfilled in order to take a provisional attachment decision, but has a function that partially or completely guarantees the risks that may arise for the debtor or third parties who may incur a loss in the future if the damage cannot be partially or completely covered. If it is accepted that the bank can provide its own letter of guarantee in provisional attachment requests, it cannot be claimed that the letter of guarantee guarantees a risk. On the contrary, an unacceptable result emerges that the risk is not guaranteed and that banks will not seek collateral in their provisional attachment requests. It is not acceptable to exempt a bank, which is a private law legal entity, from collateral with an interpretation that is incompatible with the nature of the letter of guarantee.”[3]

Conclusion

The provisional attachment decision allows the debtor’s property to be seized in advance, even before a trial is conducted. The creditor can seize the debtor’s properties, even temporarily, by proving that the conditions for the provisional attachment have been met approximately. The biggest drawback of this situation is that the creditor has taken a provisional attachment decision despite being unfair, and therefore the debtor or third parties whose goods have been seized have been damaged. In order to prevent this, the legislator regulates that the provisional attachment decision can be given by the creditor on the condition that an amount of collateral is provided to cover such damages. The cases in which the provisional attachment is ruled without collateral are exceptional.

You can contact our team regarding your provisional attachment request, compensation due to unjust provisional attachment or other related legal questions and problems.

Best Regards.

Solmaz Law and Consultancy Team.

References

DEYNEKLİ, Adnan/SALDIRIM, Mustafa, (2011), Öğretide ve Uygulamada İhtiyati Haciz, Turhan Kitabevi, Ankara, 3. Bası, s. 75-89,487-496.

KURU, Baki, (2016), İcra ve İflas Hukuku, Legal Yayıncılık, İstanbul, s. 340-347.

11th Civil Chamber of the Supreme Court, 31.03.2008, 2008/3493 E, 2008/4123 K.

19th Civil Chamber of the Supreme Court 10.03.2005, 2004/13067 E, 2005/2436 K.

19th Civil Chamber of the Supreme Court 19.11.2009, 2009/8910 E, 2009/10945 K.

[1] 11th Civil Chamber of the Supreme Court, 31.03.2008, 2008/3493 E, 2008/4123 K.

[2] 19th Civil Chamber of the Supreme Court 10.03.2005, 2004/13067 E, 2005/2436 K.

[3] 19th Civil Chamber of the Supreme Court 19.11.2009, 2009/8910 E, 2009/10945 K.