1. Introduction: The Challenge of Cross-Border Insolvency
Globalization has led to corporate structures operating across multiple jurisdictions. When such entities become insolvent, their assets—often dispersed across several countries—raise the question of which insolvency estate has the right to manage and liquidate them.
For Türkiye, a jurisdiction with significant foreign investment and trade volume, the authority of foreign insolvency representatives is not merely theoretical—it is a daily practical issue involving bank accounts, real estate, and shares in Turkish corporations.
Unlike jurisdictions adopting the UNCITRAL Model Law on Cross-Border Insolvency, Türkiye has not yet enacted a special law governing foreign insolvency recognition. Therefore, disputes are resolved through general private international law principles and judicial interpretation.
2. Legal Framework in Türkiye: The Absence of a Dedicated Regime
2.1. No Direct Implementation of the Model Law
Türkiye has not incorporated the UNCITRAL Model Law on Cross-Border Insolvency (1997) into its domestic legal order. There is no equivalent to a “foreign main proceeding recognition” as seen in the EU Insolvency Regulation or Chapter 15 of the U.S. Bankruptcy Code.
This legal vacuum leads courts and practitioners to rely on the Law on Private International Law and Procedural Law (MÖHUK, Law No. 5718) for any recognition or enforcement of foreign insolvency judgments.
2.2. MÖHUK Articles 50–59: Recognition and Enforcement Rules
According to Articles 50–59 of MÖHUK, a foreign judgment may only have legal force in Türkiye after either:
- Recognition (tanıma): acknowledgment of the decision’s res judicata effect, or
- Enforcement (tenfiz): granting executory power so that the decision may be enforced through Turkish authorities.
Foreign insolvency decisions—such as bankruptcy declarations, liquidation orders, or administrator appointments—are treated as foreign court judgments within this framework.
3. The Territorial Principle and Its Implications
3.1. Territoriality as the Default Rule
Under Turkish law, the effects of foreign insolvency proceedings are territorial—that is, limited to the jurisdiction of the foreign court unless Türkiye expressly recognizes the decision.
The reasoning is twofold:
- To protect local creditors and ensure equal treatment within Turkish territory;
- To preserve the exclusive jurisdiction of Turkish courts over domestic assets, particularly immovable property.
3.2. Yargıtay’s Approach
Yargıtay (the Turkish Supreme Court of Cassation) has repeatedly emphasized that foreign bankruptcy judgments do not automatically produce legal consequences in Türkiye.
Without a recognition or enforcement decision, the foreign insolvency administrator lacks standing (ehliyet) to dispose of Turkish-located property, initiate lawsuits, or act before registries and banks.
4. Recognition and Enforcement of Foreign Insolvency Judgments
4.1. Procedural Prerequisites
A recognition or enforcement petition must be filed before a Turkish civil court of first instance located in the district where:
- The debtor has assets, or
- If none, the applicant resides.
The applicant must present:
- A duly legalized (apostilled) copy of the foreign decision,
- Evidence of finality (kesinleşme belgesi),
- Official translation into Turkish,
- Documents identifying the administrator’s authority and capacity.
4.2. Substantive Conditions (MÖHUK Article 54)
To be recognized or enforced, the foreign judgment must:
- Be issued by a competent court according to conflict-of-law rules,
- Not infringe exclusive Turkish jurisdiction,
- Not contradict Turkish public order,
- Be rendered under due process,
- And, for enforcement, meet the reciprocity condition (mutual enforceability).
Recognition (tanıma) is possible without reciprocity, but enforcement (tenfiz) requires it.
5. The Foreign Insolvency Administrator’s Position in Türkiye
5.1. Lack of Automatic Legal Standing
Until the relevant foreign decision is recognized, the administrator cannot:
- File lawsuits in Türkiye,
- Represent the debtor before public institutions,
- Dispose of or encumber Turkish assets, or
- Withdraw funds from Turkish bank accounts.
In other words, the administrator’s powers stop at the border until formally extended by a Turkish court.
5.2. Standing After Recognition
Once the foreign bankruptcy order and administrator appointment are recognized, the administrator gains procedural and substantive standing equivalent to that of a Turkish bankruptcy trustee (iflas idaresi). However, this authority is still subject to Turkish mandatory rules governing each asset type.
6. The Lex Rei Sitae Principle: Governing Law of Assets
6.1. Real Property (Immovables)
Under MÖHUK Article 21, real rights over immovable property are governed exclusively by the law of the place where the property is located—that is, Turkish law (lex rei sitae).
Thus, a foreign administrator cannot transfer, mortgage, or cancel ownership rights over Turkish real estate merely based on a foreign judgment.
The transaction must:
- Be executed in accordance with Turkish Land Registry formalities,
- Be supported by a recognized decision, and
- Comply with tax and public policy obligations.
6.2. Movable Property
Movables are more flexible. Under MÖHUK Article 22, ownership of movable property is generally determined by the law of the country where the movable was located at the time of the transaction.
Nevertheless, physical possession and enforcement actions are governed by Turkish law once the property is in Türkiye.
6.3. Bank Accounts and Receivables
A bank account in Türkiye is legally a claim against the bank, governed by Turkish banking and enforcement law.
Turkish banks typically refuse to act on the instructions of a foreign administrator unless:
- The foreign decision has been recognized, or
- There is a Turkish court order authorizing the administrator.
Otherwise, the bank risks liability toward the account holder or other creditors.
7. Shares in Turkish Companies and Corporate Rights
Shares in Turkish companies (A.Ş. or Ltd. Şti.) represent a frequent cross-border challenge.
- For joint-stock companies (A.Ş.), dematerialized shares are controlled by the Central Securities Depository (MKK).
- For limited companies (Ltd. Şti.), share transfers must be approved by the general assembly and registered with the Trade Registry.
Therefore, the foreign insolvency administrator’s right to vote, transfer, or sell such shares requires proof of recognition of his/her authority under Turkish law. Without this, Turkish registries will reject filings.
8. Intellectual Property Rights and Other Intangibles
Turkish IP law follows the principle of territoriality.
Even if the insolvent entity owns trademarks or patents abroad, their registration and disposition within Türkiye fall under the Turkish Industrial Property Code.
Accordingly, any transfer or pledge of IP rights in Türkiye requires:
- Recognition of the foreign administrator’s authority, and
- Compliance with Turkish IP Office recordal procedures.
9. Avoidance Actions and Clawback (İptal Davaları)
Foreign insolvency administrators may wish to invalidate pre-bankruptcy transfers affecting assets located in Türkiye.
However, Turkish courts will only accept such actions if:
- The underlying foreign judgment or avoidance order is recognized, or
- A separate local avoidance claim is filed under Turkish Enforcement and Bankruptcy Law (İİK) Articles 277–284.
Hence, foreign clawback judgments do not self-execute in Türkiye—they must pass the recognition test.
10. Interim Measures and Protection of Assets
Recognition proceedings can take several months. Meanwhile, the foreign administrator may request interim protective measures (ihtiyati tedbir) under Turkish Civil Procedure Law (HMK Article 389) to prevent asset dissipation.
Such measures include:
- Freezing bank accounts,
- Blocking real estate transfers,
- Prohibiting third-party payments to the debtor.
Courts may grant interim relief pending recognition, provided there is strong prima facie evidence of urgency and risk of irreparable harm.
11. Competition with Local Creditors
Turkish creditors often initiate execution proceedings (icra takibi) before the foreign administrator secures recognition.
Since Türkiye lacks an automatic “stay” mechanism tied to foreign proceedings, the first creditor to act may obtain attachment or enforcement priority.
Thus, foreign administrators must act promptly—otherwise, local enforcement may deplete the Turkish assets before recognition is achieved.
12. Recognition Strategy: Practical Steps
- Asset Mapping – Identify all Turkish assets (land, shares, bank accounts, receivables).
- Document Legalization – Obtain apostilles and certified translations.
- File Recognition Petition – Apply to the competent civil court under MÖHUK Article 51.
- Request Interim Measures – Protect assets pending judgment.
- Proceed with Liquidation – Once recognition is granted, act through local procedures (Land Registry, MKK, Banks, etc.).
13. Comparative Perspective
Countries like the U.K., the U.S., and members of the EU allow automatic recognition of foreign main proceedings, granting foreign administrators powers across borders.
Türkiye’s non-adoption of the Model Law means its system remains protective, cautious, and creditor-oriented, emphasizing public policy and jurisdictional sovereignty.
This conservative stance protects Turkish creditors but creates friction for global insolvency cooperation.
14. Case Study Illustration
Imagine a German court declares a company bankrupt and appoints a Insolvenzverwalter. The debtor owns:
- An apartment in Istanbul,
- Shares in a Turkish subsidiary,
- €1 million in a Turkish bank account.
The administrator cannot automatically take possession.
They must:
- Apply for recognition of the German insolvency judgment in Türkiye;
- Secure an interim injunction to freeze the assets;
- After recognition, proceed to liquidate each asset under Turkish law.
Any Turkish creditor who begins execution earlier may still have priority.
15. Public Policy Considerations
Public order (kamu düzeni) under MÖHUK Article 54 acts as a safeguard against enforcement of foreign decisions that:
- Violate Turkish bankruptcy structure,
- Disregard mandatory creditor hierarchy, or
- Contradict national economic security.
Turkish courts can refuse recognition if they find the foreign insolvency process inconsistent with Turkish fundamental principles, such as equality of creditors or judicial fairness.
16. The Future: Toward Legislative Modernization
Legal scholars and practitioners have repeatedly urged the Turkish legislature to:
- Adopt a cross-border insolvency framework aligned with the UNCITRAL Model Law,
- Establish rules for cooperation between Turkish and foreign insolvency courts, and
- Introduce communication protocols for administrators.
Such reforms would bring Türkiye closer to global insolvency standards, enhance predictability, and attract foreign investment.
17. Conclusion
The power of disposal of a foreign insolvency administrator over assets in Türkiye remains strictly limited by Turkish territorial sovereignty and procedural formalities.
Until Türkiye enacts a dedicated cross-border insolvency framework, the administrator’s reach will depend entirely on recognition under MÖHUK and compliance with Turkish property, banking, and enforcement laws.
Thus, while Türkiye acknowledges the global nature of insolvency, its current practice preserves national control over domestic assets, reflecting a deliberate policy of creditor protection and legal certainty.
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