London WC2A 2LL
B e f o r e :
|TASARRUFF MEVDUATI SIGORTA FONU||Claimant|
|YAHYA MURAT DEMIREL|
|MERRILL LYNCH INTERNATIONAL BANK LIMITED|
Mr Edward Cohen (instructed by Cartier & Co) for the First Defendant
Hearing: December 5 and 6, 2006
Crown Copyright ©
Mr Justice Lawrence Collins:
II Application for service out of the jurisdiction
III Application to set aside
IV The arguments
V Public law point
Jurisdiction: the assets point
"The critical question is whether in bringing a claim, a claimant is doing an act which is of a sovereign character or which is done by virtue of sovereign authority; and whether the claim involves the exercise or assertion of a sovereign right. If so, then the court will not determine or enforce the claim. On the other hand, if in bringing the claim the claimant is not doing an act which is of a sovereign character or by virtue of sovereign authority and the claim does not involve the exercise or assertion of a sovereign right and the claim does not seek to vindicate a sovereign act or acts, then the court will both determine and enforce it."
"Savings deposits at banks shall be insured by the "Savings Deposits Insurance Fund" which has been established as a public legal entity.
All monies, documents and all kinds of properties of the entity are deemed as state property."
" …provisions of the Law No. 6183 on Procedures for Recovery of Public Receivables shall apply to the Fund's resources and its all receivables and prosecution and recovery of receivables from any shareholder of a bank, whose shares have been transferred to the Fund in whole or in part, who manages and controls the bank directly or indirectly, whether individually or together with others, and from any company or associated undertaking, which such shareholder manages and controls directly or indirectly, whether individually or together with others, and from directors .., and receivables of any bank, whose shares have been transferred to the Fund, from any of the foregoing …. The Fund shall institute legal proceedings to recover any accumulated receivables consisting of the sum of principal, all types of interest, fees and other expenditures as shown in the bank's books, records and documents as at the day when such receivables were taken over. Such receivables shall be deemed to constitute a public receivable as of the date they were taken over by the Fund and a default interest at a rate defined in Article 51 of the Law No. 6183 on Procedure for Recovery of Public Receivables shall be calculated for the accrued receivable. However, the Fund may, at its sole discretion, proceed with any legal proceedings, which have been instituted against the debtor in accordance with provisions of the Enforcement and Bankruptcy Act No. 2004 in connection with its any receivables and those it has taken over or waive proceeding with such legal proceedings and/or action and decide to prosecute and recover the receivables it has taken over in accordance with provisions of the Law No. 6183 on Procedures for Recovery of Public Receivables …. For the purposes of application of the Law No. 6183 on Procedures for Recovery of Public Receivables the Fund shall exercise authorities vested by the said Law in the Ministry of Finance, collection offices and other authorities and committees… If the debtor or the receivables of the debtor are in another location, Fund can exercise the powers the provisions of the Law No. 6183 on Procedures for Recovery of Public Receivables through its own collection office as well as through the collection offices of the Ministry of Finance in that location when there is no collection office..."
"This law is applicable to the main public receivables such as tax, duty, charge, legal costs for penal investigations and executions, tax penalty, fines and supplementary public receivables or the same such as default fine and interest of the State, Special Provincial Administrations and municipalities, the other receivables of the same which arise from execution of public services excluding the ones arisen from contracts, torts and unjust enrichment and to execution costs of the foregoing."
"(1) The Savings Deposit Insurance Fund, which is a public legal entity and which has administrative and financial autonomy has been established to insure deposits in order to protect the rights and interests of depositors and to ensure confidence and stability in financial markets; insure deposits and contribution funds; manage the banks with the Fund; strengthen and restructure their financial standing; transfer, merge, sell or liquidate such banks; execute and conclude the follow-up and collection transactions of the receivables of the Fund, manage the Fund's assets and resources and perform other duties assigned thereto by the Law, within the framework of the powers given by this Law and other applicable legislation.
(5) The properties of the Fund shall be deemed as state property. The properties, rights and receivables of the Fund shall not be seized or pledged."
(1) The receivables which TMSF took over from the banks it seized when Bank Law 4389 was in effect and the receivables it took over from the banks it seized according to Bank Law 5411 which is currently in effect became state property and were transformed into public receivables.
(2) The receivables which are the subject of the judgments are not private law receivables, because the banks transferred to TMSF no longer exist and all the receivables of those banks were transferred to TMSF and were transformed into public receivables automatically as required by Article 15(3) of Bank Law 4389.
(3) The receivables taken over by TMSF are not categorised as public receivables simply because they are prosecuted according to Law 6183. The law explicitly provides that the receivables transferred to TMSF are deemed public receivables independent of the procedure for recovery or the area of law (public or civil) from which they originate.
(4) Consequently:(a) although the judgments which TMSF is seeking to enforce in England for the receivables of a bank which have been transferred to TMSF originated from the private law area, they automatically became "public receivables" upon their transfer to TMSF as provided by Article 15(3) of Bank Law 4389;(b) the absence of an explicit provision which provides that the receivables taken over by TMSF will be transformed into public receivables in the new Bank Law 5411 regulating banking activities does not cause any change in the nature of the receivables taken over by TMSF; and(c) the receivables which are the subject of the judgments TMSF is seeking to enforce in England are public receivables in nature.
(1) Article 15 of Bank Law 4389 provided that, for the purposes of the collection procedure under Law 6183, TMSF's receivables were classed as public receivables.
(2) The Turkish proceedings were not brought using the Law 6183 procedure, but were brought under the normal civil procedure in the civil courts.
(3) Under Turkish law a claim is a private law claim if it derives from private law civil relationships. The receivables derive from private law and were subject to the Turkish law of obligations.
(4) Although TMSF is a public legal entity, in seeking to enforce the three judgments it is not seeking to enforce any public law of Turkey. The judgments are civil judgments which have been obtained through civil actions in the civil court. The right to bring those actions lay with Bank Ekspres and Sümerbank, and once TMSF had taken over the banks and their receivables, the right to bring the actions passed to TMSF. Those causes of action did not turn into public law causes of action simply because TMSF is a public entity.
(5) Bank Law 5411 does not categorise TMSF's receivables as public receivables, and the law had been amended because it was thought that the Turkish legislature had exceeded its powers in treating the receivables as public receivables in Bank Law 4389, but it continues to allow the use of the procedure for collection under Law 6183 to make it easier for TMSF to collect receivables.
"A receivable for which Law no. 6183 applies, if transferred to third persons before prosecution is started according to Law no. 6183 then it can be claimed that this transfer is valid, and that the receivable will be subject to the provisions of Execution and Bankruptcy Law from then on. But, if the receivable has been transformed into a public receivable – upon transfer to the Fund some of the receivables of the bank transferred to the Fund – it can be said that the Fund is not authorised transform the receivable into private receivable by transferring the public receivable to third parties. In connection with a receivable transformed into a public law, if the Fund has started a prosecution or another legal proceeding in accordance with the provisions of Execution and Bankruptcy Law before the amendment in the subparagraph 3, it is authorised to prosecute and start an action in the capacity of plaintiff."
"very clear that the receivables which are the subject of the judgments are the receivables of a bank taken over by TMSF and became public receivable only as of the date of transfer of the receivables to the Fund as the judgments delivered by the courts are private law courts and the judgments are related to receivables arising from private laws. However, the important point from the dispute perspective is not which area of law these receivables arise from but that these receivables arising from private law area have automatically changed nature on the date they are taken over by TMSF as ruled by the clear provision of Banks Law."