What will be the Fate of the Guarantee Provided for the Preliminary Injunction Decision?

The Turkish Code of Civil Procedure No. 6100 (“CCP”) regulates the granting of a preliminary injunction in return of a guarantee. However, the focus of this study is on the fate of the guarantee provided for a preliminary injunction in the event that a compensation action is filed after the finalisation of the action in which guarantee is given. Yet there is neither a specific provision in the CCP on this issue, nor a concrete, established practice on how this important issue is resolved in practice.

Pursuant to Article 392 of the CCP, the court, which renders the decision to accept or decline a request for preliminary injunction, may award a guarantee by considering the possibility that the requesting party may be unjustified at the end of the action and the possible damages to be incurred by the counterparty and third parties. Again, according to Article 87 with reference to Article 395 of the CCP, in the event of a change in the circumstances and conditions requiring the guarantee, the judge may decide to reduce, increase, change or remove the guarantee. The CCP also partially regulates when the guarantee amount deposited for a preliminary injunction shall be returned. According to Article 392(2) of the CCP, “the guarantee shall be returned upon non-filing of a compensation action within one month following the finalisation of the judgment on the main action or the removal of the preliminary injunction”. Therefore, if there is a compensation action filed within the time limit, the guarantee shall not be returned.

Pursuant to Article 399(2) of the CCP, the competent court for the compensation case arising from an unfair preliminary injunction is the court that decides on the preliminary injunction. The legislator has introduced this provision considering that the court that first decided on the preliminary injunction and then rendered the judgment on the merits can best adjudicate the compensation action. The fact that the court deciding the action on the merits and the court deciding the compensation action are the same court is based on the fact that there is an organic connection between these two cases.

However, the legislator who established this connection, has not made any comment with respect to the assignment of the guarantee provided for the preliminary injunction in the main action to the compensation action. Therefore, the fate of the guarantee in the main case, which remains in the finalised and closed file.

Although there are opinions in the doctrine that in case the party in whose favour the unfair preliminary injunction is decided is obliged to pay compensation to the plaintiff as a result of the compensation action arising from the unfair preliminary injunction, the plaintiff will first receive this compensation from the guarantee paid   by the defendant for the  execution of the preliminary injunction, it is not clear how this connection will be established in practice.

If the court decides to accept the damages action arising from an unfair preliminary injunction, the plaintiff will be able to enforce the judgment through judicial enforcement. According to the procedure specified in Article 36 of the Execution and Bankruptcy Code, it is possible to stop the execution of the court decision that is subject to enforcement proceedings before it is finalised, if the decision is appealed. In this case, the defendant will be required to deposit a guarantee for the stay of execution in order to stop the execution of the decision when it is appealed. In other words, the defendant, must deposit the amount of the debt as guarantee.

In practice, the enforcement offices determine the amount of guarantee by calculating the outstanding debt of the file for 3 months later (the amount of debt and 3-month interest amount). Therefore, the party in favour of whom an injunction has been decided, who has already provided guarantee in order to pay the same possible debt in the main case, is faced with the obligation to provide guarantee once again for the same debt. This guarantee amount includes the debt, as well as the interest amount. On the other hand, the guarantee provided for the preliminary injunction continues to remain in another finalised file of the same court. In other words, the original file in which the guarantee was provided is not considered as an “accessory” of the ongoing compensation file.

In this case, the guarantee provided to ensure the possible damages of the defendant and third parties that may arise from the preliminary injunction and the even larger amount of guarantee provided for the second time in order to stop the execution of the decision given in the compensation action inevitably results in an unfair situation.

The fact that the guarantee provided in the main action in which the preliminary injunction was granted and the guarantee filed in the compensation action remain in the file for a long time to ensure the same possible damage, will lead to a result that is not in line with the purpose of the law, such as the right to property in the first place, as well as the almost punitive nature of the preliminary injunction.

On the other hand, in this process, the problem arises as to which the court will evaluate and decide on the requests such as reducing the amount or changing the type of guarantee provided pursuant to the preliminary injunction. This is because, in the event that the main case involving the guarantee is finalised, the requests regarding the guarantee may be rejected on this ground since the file is closed. Can the judge of the compensation action adjudicate the claims regarding the guarantee?

In our opinion, considering the intense cause-and-effect relationship between the action in which the guarantee is filed and the compensation action, the claims regarding the guarantee should be adjudicated by the court that hears the compensation claims.

In summary, the claims and problems within the scope of the guarantee between the compensation action filed based on the unfair preliminary injunction and the main file containing the preliminary injunction granted in return of a guarantee, the competent court, and the fate of the guarantee during the execution phase, and to point out the points that are expected to be resolved.

First published by ManagingIP in Jul 01, 2024.