Press Release No: Individual Application 58/23

Press Release concerning the Judgment Finding a Violation of the Right to an Effective Remedy due to Deprival of the Opportunity to Employ Legal Mechanisms

On 14 September 2023, the Plenary of the Constitutional Court found a violation of the right to an effective remedy safeguarded by Article 40 of the Constitution, in conjunction with the right to property safeguarded by Article 35 of the Constitution, in the individual application lodged by Kenan Yıldırım (no. 2017/28711).

The Facts

The applicant invested US dollars on different dates and in different amounts in a private financial institution, namely İhlas Finans Kurumu (“the Company”), under a participation account agreement. Upon the revocation of the Company’s operating license with the decision of the Banking Regulation and Supervision Agency, the applicant issued a notice to the Company, requesting the payment of his receivables, and then initiated enforcement proceedings without judgment. The payment order issued was challenged on the grounds that the applicant did not have receivables due, that the Company was in the process of liquidation, and that the enforcement office was not authorised. Following an objection regarding authorisation, the enforcement file was referred to the incumbent enforcement directorate. As the Company subsequently objected to the payment order communicated by the authorised enforcement directorate, the relevant enforcement proceedings were suspended.

The applicant brought an action before the commercial court, requesting the annulment of the Company’s objection, claiming that the latter arbitrarily failed to complete the liquidation process and that a number of persons whose receivables had not been due and payable received payment unlawfully. However, the applicant’s action was dismissed by the commercial court. Having examined the applicant’s appeal, the Court of Cassation upheld the commercial court’s decision. The applicant’s subsequent request for rectification of the decision was also dismissed.

The Applicant’s Allegations

The applicant claimed that his right to an effective remedy had been violated in conjunction with his right to property due to the non-payment of his receivables under the participation account agreement.

The Court’s Assessment

In the present case, the reasoning of the commercial court’s decision underlined that the liquidation process was ongoing. It was also stated therein that any kind of execution and bankruptcy proceedings against the Company would be terminated as of the date of publication of the decision on the revocation of the operating license in the Official Gazette, and that the provisions included in the Bankruptcy and Enforcement Law no. 2004 would not be applicable in the liquidation process. In this respect, it was pointed out that the liquidation process in question had to be completed in order for the applicant to claim his rights. On the other hand, it was observed that the commercial court’s decision included no examination or assessment regarding the applicant’s allegations. Besides, the relevant judgments of the Court of Cassation merely stated that the commercial court’s decision had been reasonable.

The Court has examined whether there was an effective remedy available to the applicant for the recovery of the amount claimed to be due and whether such a remedy had been actually employed in the action brought by the applicant. In the examination of the provisions on liquidation embodied in the repealed Law no. 6762, which had been in force on the date when the liquidation process had started, and in Law no. 6102, which entered into force during the said process, it has been observed that the legislator did not set a time limit for the completion of the liquidation process, and contended himself with emphasizing that the relevant process should be finalised as soon as possible.

It is one of the positive obligations incumbent on the State to establish appropriate legal mechanisms enabling the collection of the creditor’s receivables and to ensure the effectiveness of these legal remedies and mechanisms. In the present case, it has been noted that there was uncertainty as to when the ongoing liquidation process, which was initiated in 2001, would end and that the commercial court carried out neither an inspection nor an examination regarding the liquidation process. In consideration of the grounds relied on by the commercial court, it has been understood that the actions or enforcement proceedings to be initiated prior to the completion of the liquidation process would not serve the purpose of collecting receivables. It is also clear that the liquidation process, which has been in place more than twenty years, was unbearable and unforeseeable for the applicant. Thus, although the applicant resorted to the enforcement proceedings as well as bringing an action to collect his receivables, he was deprived of the opportunity to employ legal mechanisms due to the uncompleted liquidation process ongoing for a considerable period of time. Accordingly, the relevant legal remedy, which was considered to be effective in theory, did not provide an effective solution in the present case.

Consequently, the Court has found a violation of the right to an effective remedy in conjunction with the right to property.

This press release prepared by the General Secretariat intends to inform the public and has no binding effect.