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Legal Path for Your International Claims: Bankruptcy and Jurisdiction Issues

Many individuals who invest in international financial markets or hold claims may encounter complex legal obstacles in the collection process of claims arising from foreign securities such as Eurobonds. This Court of Cassation decision is particularly significant as a guide for those who wish to initiate bankruptcy proceedings or file lawsuits in Turkey when the debtor fails to make payment. The decision reveals the critical impact of "jurisdiction" and "applicable law" clauses in international bond agreements on legal processes in Turkey. If an agreement relating to a Eurobond or similar international financial instrument stipulates that disputes shall be resolved in a specific foreign court (for example, English Courts) and that specific law (for example, English Law) shall apply, the binding nature of these provisions is significant. The Regional Court of Justice decision, which was upheld by this Court of Cassation ruling, emphasizes that before initiating bankruptcy proceedings or filing a lawsuit in Turkey, a decision must be obtained from the competent foreign court designated in the international agreement, proving the existence and collectability of the claim. This situation may lead to the procedural rejection of bankruptcy proceedings directly initiated in Turkey. Therefore, if you hold a Eurobond and the debtor is not making payments, you should carefully examine the terms of the agreement first and determine whether you need to use foreign judicial proceedings. Obtaining support from a lawyer specialized in this field is of vital importance for managing such international claims with correct legal steps, preventing loss of rights, and ensuring the process proceeds effectively. Otherwise, Turkish courts may reject your case without considering the merits due to the jurisdiction clause in the agreement.

 

Court of Cassation 6th Civil Chamber dated 21.05.2025 File No. 2025/1184 Decision No. 2025/2116

(Law No. 6100 Articles 17, 18, 369, 370, 371)

 

The decision of the Regional Court of Justice was appealed with a request for hearing by the plaintiff's attorney; following the preliminary examination regarding finality, time limit, appeal conditions and other procedural deficiencies, it was determined that the nature of the appealed decision was not among cases for which a hearing could be requested.

 

Pursuant to the second paragraph of Article 369 of the Civil Procedure Law No. 6100, it was decided to reject the request for hearing, to accept the appeal petition and to conduct the examination on file, and after listening to the report prepared by the Examining Judge, the documents in the file were examined and the following was considered:

 

I. LAWSUIT

 

The plaintiff's attorney stated in the petition that; defendant .... İnşaat A.Ş. (... İnşaat) issued a Eurobond (Bond) with ISIN Code XS0558618384 in the amount of USD 200,000,000.00 on 10.11.2010; ... Holding A.Ş. (... Holding) and... Sanayi ve Ticaret A.Ş. (... Elektromekanik) also guaranteed the repayment of the bond with final payment on 10.11.2015, that his client held bonds with a nominal value of USD 1,440,000.00 issued by ... İnşaat held at Bank Audi, that although the final payment date of the bond was 10.11.2015, the bond amount was not paid on maturity, that they initiated ordinary proceedings through bankruptcy, that the defendants objected to the proceedings, asserting that the objection was unjustified, and requested that the defendants' objection to the proceedings be removed and their bankruptcy be decided.

 

II. RESPONSE

 

The defendants' attorney stated in the response petition that; his client company ... İnşaat issued bonds in Luxembourg through an international agreement dated 10.11.2010 and its annexes (Bond Agreement), that the parties to the bond agreement were foreign banks and financial companies that collected bond amounts and foreign banks that were authorized holders and bond owners, that pursuant to the bond agreement and supplementary bond agreement, it was stipulated that the court authorized to resolve legal transactions and actions related to the bond agreement was the English Courts and the applicable law was English Law, that the plaintiff must first prove that he is a creditor, that this could only be done with a court decision obtained from English Courts according to English Law pursuant to the Bond Agreement, that the claim was time-barred, that the plaintiff did not have standing to sue and therefore did not have capacity to be sued, that ... Holding A.Ş. was not a party to the agreement on which the plaintiff's claim was based, that the lawsuit against his client company ... Holding should be rejected due to lack of standing, and defended that the lawsuit was filed unjustly and unlawfully, requesting rejection of the lawsuit.

 

III. FIRST INSTANCE COURT DECISION

 

Although a lawsuit was filed against defendant .... by the First Instance Court's decision with the date and number specified above, the defendant was not a party to the bond agreement, there was no signature on the agreement, and therefore was not responsible for payment of the issued bond amounts; that jurisdiction agreements cannot be made for bankruptcy cases and bankruptcy lawsuits must necessarily be filed in the commercial court where the debtor's center of business is located; that the claim was not time-barred; according to the expert report obtained within the scope of the file, according to the portfolio breakdown table dated 22.07.2022 transmitted to the plaintiff by Bank Audi, bonds with a nominal value of USD 1,440,000.00 that were overdue/defaulted were registered in the plaintiff's account at Bank Audi; apart from this, no valid document, letter, or documentation issued by the institution responsible for keeping records, ... Global Markets Deutschland AG, was submitted to the case file; in the precedent case seen under File No. 2021/69 of Ankara 1st Commercial Court of First Instance, it was stated that to prove ownership rights regarding bonds issued by defendant ... İnşaat, a document issued by the institution responsible for keeping records, ... Global Markets Deutschland AG, must be submitted, that bank records regarding coupon payments made to the plaintiff were not sufficient to prove ownership rights; the decision to reject the bankruptcy case was upheld by the 6th Civil Chamber of the Court of Cassation and the decision became final; therefore, the coupon payments submitted by the plaintiff and Bank Audi documents regarding registered bonds were not sufficient to prove ownership rights; ownership rights to bonds issued by the defendant could only be proven with a valid document issued by the institution responsible for keeping records, ... Global Markets Deutschland AG; no such evidentiary document was submitted by the plaintiff within the scope of the current file; the plaintiff could not prove ownership rights; and was unjustified in the bankruptcy request; therefore, it was decided to reject the lawsuit filed against defendant .... due to lack of standing and to reject the lawsuit filed against other defendants on the merits.

 

IV. APPEAL

 

Upon the plaintiff's attorney filing an appeal application within the time limit against the First Instance Court's decision specified above, the Regional Court of Justice's decision with the date and number specified above stated that; in the bond agreement dated 10.11.2010 and the supplementary bond agreement dated 30.09.2015, it was agreed that English Courts were authorized to examine and resolve lawsuits, legal actions or legal transactions related to the bonds in question and English Law would be applied, and also according to the bond agreement and supplementary bond agreement, it was stipulated that the provisions of the bond agreement would be binding on bondholders as well; in this case, the plaintiff must first obtain a decision proving the existence of the claim in the jurisdiction determined in the supplementary bond agreement and based on this decision, initiate proceedings through bankruptcy against the debtor in Turkey and/or file a bankruptcy lawsuit; in a lawsuit filed with similar allegations by another plaintiff against defendant ... İnşaat A.Ş. to remove objection and for bankruptcy, upon appeal of the decision to reject the lawsuit on the grounds that the plaintiff could not prove bond ownership, the plaintiff's attorney's appeal application was rejected on the merits and upon approval of the decision by the 6th Civil Chamber of the Court of Cassation, the first instance court used this decision as precedent and decided to reject the current lawsuit; however, since the plaintiff must first obtain a decision proving the existence of the claim in the jurisdiction determined in the supplementary bond agreement and based on this decision, initiate proceedings through bankruptcy against the debtor in Turkey and file a bankruptcy lawsuit, the First Instance Court decision was amended in terms of justification and a new decision was made on the merits, deciding to reject the lawsuit.

 

V. CASSATION

 

A. Grounds for Cassation

 

The plaintiff's attorney stated in the cassation petition that; the jurisdiction provisions in the bond agreement are valid regarding disputes that may arise between parties to the bond agreement and are not binding on his client; the said article should be read as the English courts being exclusively authorized to examine and resolve all types of lawsuits, actions and legal transactions that may arise between the company and each guarantor and other persons party to the bond agreement, and it should be accepted that this provision regulating the relationship of persons subject to bond issuance cannot be applied to the investor; otherwise, the defendant companies and other persons party to the bond agreement would constantly change the applicable law and competent court, which could prevent investors from accessing their claims; within the framework of Articles 17 and 18 of the Civil Procedure Law No. 6100, the first condition for the validity of the jurisdiction agreement, being concluded between merchants or public legal entities, was not met; his client was neither a public legal entity nor a merchant, therefore the jurisdiction agreement was not valid; bankruptcy lawsuits are cases with public order consequences; if it is accepted that the request to remove objection in bankruptcy proceedings should be resolved in arbitration, applying to court for bankruptcy after the arbitral award would constitute a violation of procedural economy; furthermore, his client's ownership rights and the defendants' non-payment of bond amounts were proven beyond doubt by the evidence submitted; in the expert reports obtained within the scope of the file, the documents submitted by his client were carefully examined and it was concluded that the documents submitted were sufficient to prove his client's ownership rights; there is currently a decision dated 04.07.2017 from the English High Court (Chancery Division of the High Court of Justice) in the case file stating that the defendant companies did not pay the bond amounts; the appellate court did not take this into account; the appellate court's decision to reject the lawsuit was erroneous and the decision should be reversed; his client should be given time to file a lawsuit before English Courts and the decision to be obtained from this court should be made a pending issue.

 

B. Evaluation and Justification

 

The dispute concerns removal of objection to ordinary proceedings through bankruptcy and the bankruptcy request.

 

Reversal of final decisions of Regional Courts of Justice is possible if one of the grounds specified in Article 371 of the Civil Procedure Law No. 6100 exists.

 

The decision examined by cassation is in accordance with procedure and law in terms of the parties' mutual claims and defenses, the documents they relied on, the legal rules to be applied to the dispute and the characterization of the legal relationship, conditions of action, trial and evidence rules and the grounds stated in the decision, and the grounds put forward in the cassation petition by the plaintiff's attorney were not deemed to be of a nature to require reversal of the decision.

 

VI. DECISION

 

For the reasons explained;

 

It was decided unanimously on 21.05.2025 to UPHOLD the appealed Regional Court of Justice decision pursuant to Article 370/1 of the Civil Procedure Law No. 6100,

 

Since the cassation fee to be collected was paid in advance, there is no need to collect additional fees,

 

To send the file to the First Instance Court and a copy of the decision to the Regional Court of Justice.