TURKEY: An Introduction to Shipping

The Impact of Fluctuations in the Turkish Lira on Security Deposits Under Maritime Law

Introduction

The ongoing financial situation in Turkey has significantly devalued the Turkish lira (TRY), particularly against major currencies such as the euro and the USD. To illustrate the extent of this depreciation, in early 2018, 1USD was equivalent to TRY3.78, and 1EUR was equivalent to TRY4.54. By early 2025, however, these rates have soared to 35.3TRY per USD and TRY36.5 per EUR.

This substantial decline has rendered the TRY increasingly unreliable compared to its global counterparts. While numerous factors have contributed to this depreciation, its profound fluctuations have amplified perceptions of instability in the currency.

These fluctuations have had far-reaching negative consequences, but this article will specifically explore their impact on security deposits under maritime law, particularly in the context of judicial procedures such as vessel arrests.

The procedure of a vessel’s arrest

Under Turkish regulations, arresting a vessel requires the creditor – the party seeking the arrest – to deposit a counter-security before the court even evaluates the request. According to Article 1363 of the Turkish Commercial Code (TCC), this security is set at 10,000 Special Drawing Rights (SDR), equivalent to approximately USD13,500.

Once the counter-security is lodged, the court reviews the arrest application. If the court determines that there is prima facie evidence regarding the existence of a receivable owed by the debtor and that the current owner of the vessel is the debtor of the subject unpaid amount, the court will issue an arrest order to safeguard the creditor’s interests. Following the issuance of the arrest order, the creditor shall initiate execution proceedings or initiate substantive proceedings before the competent court within one month from the date of service of the arrest order. Failure to do so results in the arrest order being lifted.

While an arrest benefits the creditor for the reasons mentioned, it places the debtor at a significant financial disadvantage. When a vessel is arrested, it is prohibited from navigating, depriving the debtor of any potential income the vessel might generate. To mitigate this disadvantage, the debtor may request the court to substitute the arrest with collateral. In such cases, the debtor can deposit the amount claimed by the creditor with the court as security. This action lifts the arrest on the vessel, allowing her to resume operations.

The obligation to deposit securities in Turkish lira and its impact

As outlined above, two key securities play a central role in this context: (i) the security deposited by the creditor when requesting the arrest of a vessel, and (ii) the security deposited by the debtor to lift the arrest on the arrested vessel and resume her operations.

Article 58 of the Enforcement and Bankruptcy Code (EBC) mandates that securities in general shall be deposited in TRY, irrespective of whether the underlying receivable is denominated in another currency. This requirement reflects an effort to standardise the currency used in legal and enforcement proceedings within Turkey. However, it also introduces significant challenges, particularly given the current state of the TRY and its history of volatility.

The primary issue with this requirement stems from TRY’s unpredictable nature. While the currency experienced relative stability during the latter half of 2024, its historical fluctuations leave considerable uncertainty about its future performance.

It is important to highlight that the securities in question cannot be easily or quickly recovered. There are only two circumstances under which these amounts can be withdrawn:

• The parties involved in the dispute reach a settlement, effectively resolving the matter without further judicial intervention.
• The judicial proceedings are fully concluded, either by a final court decision or by the enforcement office.

Both scenarios might cause significant delays. Legal proceedings can take months or even years to resolve. During this time, the deposited securities are held in TRY, exposing them to the risk of depreciation if the currency loses value against more stable currencies.

This situation poses significant challenges for both Turkish and foreign parties involved in maritime disputes. However, the impact is especially pronounced for foreign parties, particularly when the receivable is denominated in a foreign currency that tends to depreciate at a slower rate than the TRY. This issue is frequently encountered in the shipping industry, where transactions are often conducted in globally stable currencies such as the USD or the euro. As a result, foreign parties may face greater financial strain, not only due to currency volatility but also because of the legal and procedural hurdles involved in navigating such disputes.

The disparity between the stability of these foreign currencies and the volatility of the TRY creates a significant financial burden. Between 2021 and 2024, there were numerous documented cases where securities deposited in TRY lost up to 50% of their value during the course of judicial proceedings. Such losses can have a devastating effect on parties relying on the security to recover their receivables, effectively reducing the amount they are entitled to collect once the dispute is resolved.

In certain cases, however, our firm successfully persuaded judicial authorities to approve the deposit of securities in their original currency rather than requiring conversion to TRY. Maintaining the security in its original currency preserves the value of the deposited funds and aligns it with the underlying receivable, benefiting both the creditor and the debtor. Nonetheless, such instances should be regarded as exceptions rather than the norm, as most courts adhere strictly to the legal framework and accept deposited securities only in TRY.