The Turkish rules on Conflict of Laws are set out in the “Code of International Private and Procedural Law⁸” (“CIPL”). All legal affairs that contain a foreign element are governed by the CIPL.

The “rights in rem ⁹” on ships are governed by the law of the place of registration. This rule covers ownership, mortgages, usufruct, rights of retention, and other rights in rem. Taking into consideration the shipping practice of flagging-in and flagging-out, the “place of registration¹⁰” is further specified as the “register where the rights in rem are registered”. Accordingly, where a ship under a foreign flag is allowed temporarily to fly the Turkish flag, the rights in rem on such a ship are still governed by the principal register. The same applies also in respect of ships registered in Turkey which are temporarily allowed to fly a foreign flag.

A new provision has been introduced in the N-TCC in respect of the law governing maritime liens. According to this rule,¹¹ which has been lifted from the ICAS,¹² maritime liens are subject to Turkish law if proceedings were brought in Turkey.¹³ This solution corresponds to the consistent practice of the Turkish Supreme Court.

The parties are left free to agree on the applicable law at the time of conclusion of the contract, or at any time thereafter.¹⁴ In the absence of such a choice, the “closest connection” criterion applies. It is presumed that the contract is most closely connected with the law of the place where the party, which is to perform the characteristic obligation, has its principal place of business at the time of conclusion of the contract.¹⁵

Turkish Civil law is primarily based on Swiss law.¹⁶ In particular, the “Turkish Civil Code¹⁷” (“TCivC”) has been largely translated and adopted from the “Swiss Civil Code¹⁸” (“ZGB”). Again, the “Turkish Code of Obligations¹⁹” (“TCO”) is essentially an abridged translation of the “Swiss Code of Obligations²⁰”. As such, the Turkish law of Rights in rem and Obligations is generally in line with the Swiss law on these subjects. In addition, supplementary legislation on, say, financial leasing, banking transactions, pledge on motor craft and the like, has also been developed on the basis of the Swiss–Turkish general provisions of Civil law.

Until midnight of 30 June 2012, the primary source of Maritime law has been the “Turkish Commercial Code²¹” (“TCC”) of 1956. The TCC had been drafted by the late Prof. Dr. Ernst Hirsch, who had been among the German academics those immigrated to Turkey before the Second World War. He has reported extensively about his work on Turkish law and legislation.²² In respect of the rights in rem on ships, Hirsch chose as his source the respective pieces of German legislation of 1940, including the “Act Concerning Rights on Ships and Ships under Construction²³” (“SchRG”), the “Ship Register Directive²⁴” (“SchRegO”) and other incidental legislation.²⁵ Hirsch has translated the essential rules from these German sources and used them, mostly verbatim, for the Turkish provisions. The N-TCC, which has come into force on 1 July 2012, has generally retained the same rules and provisions. Some changes and new rules have been introduced in connection with the incorporation of the ICML and ICAS into the N-TCC. Other changes reflect the explicit intention to create more harmony with the original German provisions. The provisions of the N-TCC are supplemented by the “Ship Register Directive²⁶” (“SRD”) of 1957, which is basically a translation of the SchRegO.²⁷

Together with the N-TCC, the new “Code of Implementation and Enforcement of the N-TCC²⁸” (“N-CIE”) has also been adopted.²⁹ This Code sets out the transitional provisions.³⁰ As of 1 July 2012, all references to the TCC are deemed to have been made to the corresponding provisions of the N-TCC.³¹ Other rules on Maritime law are to be found in particular Acts regarding, say, the International Register, financial leasing, and other incidental issues. These Acts will be considered later in their respective contexts.

The “Register for New Buildings⁵¹” (“NBR”) has been established as of 1 January 1957 under the provisions of the TCC, which is now kept pursuant to the N-TCC. Additional provisions are to be found in the SRD. The Turkish provisions⁵² have been generally adopted from the corresponding German provisions regarding the NBR.⁵³

Under current German and previous Turkish law, the registration of a “ship under construction” ( = “new building”) is admitted only if and whenever a mortgage or arrest is to be simultaneously registered.⁵⁴ This limitation is abandoned under the new Turkish law, which finally gives leave to the registration of new buildings for the sole purpose of making the ownership public.⁵⁵ This had been recognized as a pressing need in Turkish practice, because it was noted on several occasions that the ownership in the new building requires public information in cases where a person other than the shipyard is the owner. Particularly, if the shipyard went bankrupt, the prior registration of the ownership would ensure that the owner of the new building is protected against the creditors of the shipyard.

The information to be registered is identical with German law.⁵⁶ A ship under construction might even be registered if the owner was a foreign person or entity.⁵⁷ Other than the ownership, the only right in rem that might be entered with the NBR is the mortgage on a new building.⁵⁸ The registered mortgage on a new building carries the same legal effect as the ship mortgage.⁵⁹ Finally, priority notices are also admitted in respect of the NBR. The notices to be made to the NSR in enforcement proceedings apply to the NBR as well.

On the basis of German law,⁶⁰ Turkish law also recognizes the options of flagging-in and flagging-out of ships.⁶¹ Foreign ships that are temporarily allowed to fly the Turkish flag are recorded in a “Special (Flag-in) Register⁶²”. Technically, however, this list of ships is not a register, but simply a “roll⁶³” of the ships using this option. Therefore, rights in rem, such as mortgages, cannot be created or transferred by way of entry into this roll.⁶⁴

In Turkish practice, this roll is usually referred to as a “bareboat register,” because the bareboat charter is generally considered the primary agreement under which the ship may be let out to a Turkish interest. However, as a matter of law, the agreement may also be a financial leasing agreement⁶⁵ or a usufruct. In all these cases, the ownership in the vessel will still be maintained in the foreign principal register, whereas the possession will pass to a Turkish interest, enabling it to obtain permission to fly the Turkish flag. Therefore, this roll is better described with reference to the flag-in procedure rather than the underlying type of agreement.

In this connection, Art. 16 of ICLM ought to be given due consideration whenever the Convention comes into force for Turkey.

Finally, a package of legislative measures adopted in 2009 has established yet another register that may be translated as the “Home Port Log⁸¹” (“HPL”). The HPL is primarily intended for the registration of pleasure boats, yachts, other water craft, as well as all ships and vessels of inland navigation. As the result of a severe error made by the legislative bodies, mortgages cannot currently be entered with the HPL. Also, the legal qualities attached to the NSR, NBR and TISR have not been explicitly repeated in respect of the HPL. As such, the HPL will not be of any interest to international financial markets, and will therefore not be further considered in this paper.

According to the latest official statistics,⁸² the number of vessels registered with the NSR totals 11,328 with a total deadweight tonnage (DWT) of 864,315. On the other hand, whereas the total number of ships entered with the TISR is only 1,362, their collective DWT of 9,089,000 is roughly 11 times higher compared to the ships registered with the NSR.

Following a recent restructuring in the Government, the “Undersecretariat of Shipping” has been merged, as of 1 November 2011, into the Ministry of Transportation, which has formally assumed the name of the “Ministry of Transportation, Shipping Affairs and Communication⁸³”. One of the administrative units established within this Ministry is the “General Directorate of Maritime Affairs⁸⁴”. The list of duties assigned to this Directorate includes all issues relating to the registration of ships and all other water craft.⁸⁵ It follows that, as of 1 November 2011, the five registers described above are all kept under the authority of the Ministry of Transportation, Shipping Affairs and Communication.

In a direct adaptation of the German rule, the NSR, NBR, and TISR are all described explicitly as public⁸⁶ registers.⁸⁷ Accordingly, any person can review the entries in the NSR. However, as for the NBR and TISR, it is additionally required that a legitimate interest⁸⁸ is demonstrated.⁸⁹ To obtain certified copies from the NSR and NBR, it is required in accordance with the German original that a legitimate interest can be shown.⁹⁰

Concerning the State’s liability for properly keeping and maintaining the registers, the NSR, NBR, and the TISR are all governed⁹¹ by the general provisions of Civil law.⁹² As such, the State is liable for all damages arising from maintenance of the registers. It is settled under Swiss and Turkish law that this provision calls for the strict liability of the State. As such, any negligence of the registrar is not required to be proved for such liability to arise. However, it must be shown that the registrar must have acted in breach of the law.⁹³ These principles apply in exactly the same terms to the NSR, NBR, and TISR. Where liability is established in accordance with these provisions, it is ultimately the Turkish Treasury that will pay out any indemnity adjudged by the Court.

As was mentioned already, previous and new Turkish law of ship mortgages¹⁰² is largely based on the German reform legislation of 1940. Considering further the fact that the German provisions on the ship mortgage have been copied directly from the “security mortgage on real estate¹⁰³” of the “German Civil Code¹⁰⁴” (“BGB”), it follows that the current Turkish ship mortgage is essentially identical with the German security mortgage on ships and real estate. Only a few exceptions have been admitted. Indeed, to achieve some degree of harmony with the general rules of Turkish law on real estate mortgages as set out in the TCivC, a few references were made to those rules. Notable examples are the provisions on the ranking and scope of Turkish ship mortgages. However, as those provisions have their origins in the ZGB, the Turkish ship mortgage can be qualified as a German “security mortgage on ships and real estate¹⁰⁵” with a flavor of the Swiss “mortgage on real estate¹⁰⁶”. Nevertheless, the principal nature and character of the Turkish ship mortgage as an offspring of the German original is no way prejudiced. This legal state of affairs has been generally retained in the N-TCC. However, several amendments have been made to bring the Turkish provisions even closer in line with the German originals.

The original Turkish name for a ship mortgage is “gemi ipoteği”. As the word “ipotek” implies, it is a translation of the German word “Hypothek”. As a matter of law, “Hypothek” denotes the Roman law terminology that a pledge is created without transfer of possession.¹⁰⁷ As such, the widespread practice to translate the term “Hypothek” as “mortgage” into English is not necessarily accurate. A better translation would be “hypothèque” as is used in Art. 1 ICLM. Nevertheless, to follow established practice, the Turkish “ipotek” will be described as a “mortgage” in this paper, as well.

The ship mortgage is defined on the basis of the German original¹⁰⁸ as a right created to secure a claim, which right entitles the mortgagee to seek recovery from the proceeds of the ship.¹⁰⁹ It follows that the mortgage grants the mortgagee a right in rem in the ship as opposed to a mere contractual claim against the ship-owner. Indeed, a ship-owner may agree to a mortgage on his/her ship for a debt, for which he/she is not personally liable, in which case the owner will be held liable exclusively to tolerate enforcement¹¹⁰ into the ship. The extensive scholarly discussions on this important point in German law¹¹¹ are obsolete in Turkish law because if the proceeds of the judicial sale do not fully cover the claim, a “certificate of insolvency¹¹²” will be issued only as against the personal debtor, not the owner of the real estate or ship on which the mortgage was created. Accordingly, the owner of a ship who agrees to provide a mortgage for a third party’s debt does not become thereby personally liable for that debt.

The mortgage and the claim secured thereby are strictly intertwined. Accordingly, one cannot be transferred without the other.¹¹³