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11 June 2020
The fair and swift resolution of consumer disputes serves the interests of not only the consumers, but also the businesses involved. Consumers purchase more when they are confident that they will be treated fairly in a potential dispute. Businesses, on the other hand, become economically inoperable and unviable following systematic violations against consumers and the rapid and fair enforcement of consumer rights. In short, all market players are better off in an environment where consumer disputes are handled fairly and expeditiously. Further, fair treatment of such disputes can help countries to boost their economies.
In Turkey, a two-tier system exists for the resolution of consumer disputes. Consumer arbitration boards have compulsory jurisdiction over consumer disputes falling under a certain annually determined monetary threshold (TL10,390 for 2020). Parties are free to appeal board decisions before the consumer courts. Otherwise, board decisions are enforced as if they are court decisions. For all other disputes, parties must file a legal action before the consumer courts.
Consumer arbitration boards have jurisdiction over consumer disputes falling under the monetary threshold. Their decisions are subject to appeal before the consumer courts, which hold jurisdiction over all other consumer disputes above the monetary threshold.
Bill 2/2735, which has been presented to the president of the Grand National Assembly, proposes that actions filed directly before the consumer courts be subject to mandatory mediation before proceeding to court adjudication. If the bill is enacted as is, parties will need to exhaust mandatory mediation before having recourse to the consumer courts. The bill excludes the jurisdictional scope of consumer arbitration boards and appeals against the decisions of such boards. It also provides certain exceptions as to mandatory mediation before lawsuits – namely, in case of disputes arising from consumer transactions over immovable assets and actions that fall under Articles 73/6 and 74 of Law 6502 on Consumer Protection. The latter category has a narrower scope than other disputes as these actions can be filed only by the ministry, consumer organisations and other public institutions and authorities. Thus, if the bill is enacted, consumers will have to exhaust a mandatory mediation phase (unless an exception applies) before filing a lawsuit before the consumer courts.
This article examines Turkey's success with regard to the fair and swift resolution of consumer disputes and explores how the bill can add to this success.
The 2018 judicial statistics (2019 data has yet to be published) announced by the General Directorate of Judicial Record and Statistics, a branch of the Ministry of Justice, show that 56,991 lawsuits were filed before the consumer courts in 2018. The total number of lawsuits, including those that were reversed by a higher court and returned to the first-instance courts, was 137,333. The consumer courts rendered a final decision in only 64,607 of these cases. In other words, the consumer courts reduced only 47% of their caseload. Moreover, the consumer courts took an average of 437 days to render a final decision. Considering that the overall average time taken by the Turkish courts to render a final decision is 283 days, the consumer courts took well above average. Clearly, the consumer courts work slower than other courts due to their excessive caseload and other factors.
In 2018 29.15% of the lawsuits filed before the consumer courts consisted of appeals against decisions rendered by consumer arbitration boards. On the other hand, the registration and cancellation of deeds of immovable assets constituted only 4.19% of all cases. Therefore, 66.6% of all cases in 2018 would have first had to have undergone mediation had the bill passed prior to 2018, provided that all of the conditions remained the same.
Similar statistics show that even more cases would have been subject to mandatory mediation when calculated merely based on lawsuits filed by consumers. However, 32,983 of all cases concluded in 2018 were filed by consumers. Of them, 5,074 were appeals against the decisions of consumer boards, whereas 1,188 were cases arising from the registration and cancellation of deeds of immovable assets. Therefore, if mandatory mediation was required prior to 2018, 81% of cases filed by consumers and decided by the courts in 2018 would have been subject to mandatory mediation before litigation.
One of the major purposes of mediation is to reduce the courts' caseload. As per the 2018 statistics, the consumer courts work slowly, and mediation as a cause of action would apply in 66% of all cases and 81% of those filed by consumers. Therefore, introducing mediation as a cause of action will clearly affect consumers the most. Further, certain disputes may be expected to be resolved through settlement and therefore reduce the courts' caseload.
Moreover, as per the 2018 statistics, only 34 of all cases concluded in 2018 resulted in settlement. Thus, the ratio of disputes that resulted in settlement corresponds to 0.05% of all cases concluded in 2018. The procedural rule under the Civil Procedure Code 2011 as to judges' obligation to encourage parties to settle at the preliminary examination phase unfortunately seems to have been unsuccessful. Therefore, it is understandable that the legislature pushes parties to apply for mediation before filing a lawsuit. On the other hand, mandatory mediation is often criticised, with concerns that it could:
In particular, consumers who are inexperienced in understanding and implementing their rights may consent to receiving far less than the amount to which they are entitled at the mediation phase, rather than the full amount after a lengthy dispute. Similar situations arise in labour disputes.
Certain disputes will be precluded from evolving into lawsuits by mandatory mediation, which may lead to statistical success. Nonetheless, statistics will never show the burden placed on consumers or the compromises they agree to when enforcing their rights.
If Bill 2/2735 is enacted, participation in alternative dispute resolution for consumer disputes will be mandatory for both consumers and businesses in Turkey. The Ministry of Justice will cover the first two hours of this service in favour of consumers.
This reflects the depth of alternative dispute resolution methods for consumer disputes in Turkey. On the other hand, consumer arbitration boards have no specialisation. In out-of-court resolution methods, no distinctions in terms of participation and the binding effect of decisions in favour of consumers and no constitutional or legal basis are provided. Decisions rendered by consumer arbitration boards are binding on both consumers and businesses and participation in mediation will be mandatory for both. The fact that consumers are inexperienced in using legal remedies and often face difficulties accessing lawyers are neglected. In addition, the government funds most of the process.
The fact that consumer disputes are resolved by the courts within 427 days is effectively a form of low-interest commercial credit for businesses that often breach their contracts. Businesses often agree with advocates at advantageous conditions on a lump-sum basis or employ advocates, which lowers the legal costs of a case to such a degree that it is impossible for consumers to benefit. Businesses, with the help of their advocates, take most decisions granted by arbitration boards in favour of consumers to the courts and file urgent requests for a provisional stay of enforcement.
All of the above are reasonable causes for consumers to abstain from approaching the courts and businesses to resolve consumer disputes outside the courts. The bill does not consider what happens in the event of a consumer dispute deadlock. Businesses need only not settle during mediation in order to postpone the resolution of a dispute. In such cases, there are no efficient judicial remedies for businesses, as disputes will be brought before the courts that are overwhelmed by their caseload.
As per the statistics announced by the Ministry of Trade,(2) of the 547,235 applications filed before the consumer arbitration boards in 2019, 267,003 concerned the retail sector and 123,753 concerned the financial services sector. Consumer arbitration boards may be subject to specialisation for these two sectors, which take the lion's share of all applications. Therefore, specialised officers can be appointed to specialised chambers of consumer arbitration boards after necessary regulations have been introduced. The courts' caseload may be reduced by increasing the monetary threshold for disputes to be settled by specialised consumer arbitration boards.
However, the positive discrimination in favour of consumers may also be considered. In this regard, decisions of consumer arbitration boards or other alternative dispute resolution authorities may be deemed binding on businesses and discretionary for consumers. Disputes may also be governed through online platforms by way of enabling a portal on the e-government system, as currently adopted for consumer arbitration boards, to allow consumers to reach these services. Financial burdens, additional tax and contribution margins to be incurred when implementing the proposals may be distributed among businesses based on their size.
All of these proposals aim to give an affirmative answer to the question of whether reaching a settlement with consumers is economically advantageous for businesses. The enactment of Bill 2/2735 and mediation as a cause of action would not give an affirmative answer to this question. At most, the bill would allow businesses to inform consumers of what to expect if a dispute turns into a lawsuit and convince them to agree to settle for a lower amount than that to which they are entitled.
For further information on this topic please contact Pelin Baysal or Muzaffer Atar at Gün & Partners by telephone (+90 212 354 00 00) or email (email@example.com or firstname.lastname@example.org). The Gün & Partners website can be accessed at www.gun.av.tr.
(1) "Hukuk Muhakemeleri Kanunu ile Bazı Kanunlarda Değişiklik Yapılmasına Dair Kanun Teklifinin (2020) Değerlendirilmesi" by Prof Dr Hakan Pekcanıtez, Prof Dr Oğuz Atalay and Prof Dr Muhammet Özekes, 30 March 2020.
(2) See here.
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