A vessel is subject to a mortgage of USD 1.5 million. Its appraised value is set at USD 1 million. The debtor applies to the enforcement office and says, “I will sell this vessel myself,” finds a buyer, and deposits USD 900,000 into the file. The enforcement court approves the transaction on the file within ten days. All mortgages and attachments on the vessel are removed and no legal remedy is available against this decision.

This scenario is not theoretical. The Article 111/a added to the Enforcement and Bankruptcy Law in 2021 makes this possible, and the Draft Compulsory Enforcement Law expressly makes the mechanism applicable to vessels. In this article, we examine how the mechanism works, the risks it creates for ship finance and maritime creditors, and the measures that may be taken.

1. What Is İİK Art. 111/a and How Does It Work?

İİK Art. 111/a, entitled “Granting the debtor authority to sell”, was added to the Enforcement and Bankruptcy Law by Article 12 of Law No. 7343 published in the Official Gazette dated 30 November 2021. A separate regulation governing its implementation was also issued.

The purpose of the provision is reasonable: sales by public auction take a long time, assets lose value while remaining idle, custodian fees accumulate, and applications to annul the auction can stall the process. Allowing the debtor to sell the asset personally may produce a faster result at a higher price.

The problem lies not in the purpose, but in the consequences when this mechanism is applied to vessels . A procedure that may be reasonable for a car or construction machine has an entirely different meaning for a vessel encumbered by foreign mortgages, maritime liens and international registry entries.

2. The Process Step by Step

The minimum price is determined as follows: whichever is higher between ninety per cent of the appraised value of the asset and the total amount of claims secured by that asset that rank ahead of the claim of the party requesting sale, plus enforcement expenses incurred up to that stage. In addition, the period for the creditor to request sale does not run between the beginning of the period granted to the debtor and the enforcement court’s decision.

3. Can the Provision Be Applied to Vessels?

Under current law, the issue is debatable. İİK Art. 111/a is drafted as a general method of conversion into money and uses the expression “attached property”; there is no provision expressly excluding vessels. On the other hand, forced sale of vessels is subject to a detailed and special regime under the TCC.

The development that removes the uncertainty is the prepared Draft Compulsory Enforcement Law. At the seminar held on 1 November 2025 by the Istanbul Bar Association Maritime Law Commission and the Chamber of Shipping, Attorney Savaş İnandıoğlu stated that Article 474 of the draft expressly provides that this rule will also apply to vessels, that the period is set at one month for vessels and, therefore, that the provision has been deliberately extended to vessels (Istanbul Bar Association – Chamber of Shipping Seminar, 1.11.2025).

İnandıoğlu stated that the provision had gone unnoticed for a long time, that many people may still not have noticed it, and asked judges whether it had ever come before them. This shows that the rule has not yet been tested in practice — the risks may not yet have materialised, but the mechanism is ready.

4. Why Vessels Are Different: the TCC Forced-Sale Regime

For forced sales of vessels, the TCC establishes a protection architecture very different from an ordinary sale of movables. It has three pillars:

• Publication and notice: Notice to the registered owner, other registered right holders and secured creditors; notice to the consulate of the flag state for foreign-flagged vessels; publication of the auction.
• Ranking schedule: A detailed ranking for preservation and sale costs, seafarer wages, maritime liens, shipyard possessory liens, secured claims, public claims and other maritime claims.
• Sale by auction: Competition among third parties raises the price and helps the vessel sell close to its true value.

This architecture was not created by accident. When the TCC provisions on maritime forced enforcement were drafted, the International Convention on Arrest of Ships dated 12 March 1999 and the International Convention on Maritime Liens and Mortgages dated 6 May 1993 were taken as models and their provisions were incorporated into domestic law. Türkiye’s accession to the 1999 Convention was approved by Law No. 6904 dated 2 March 2017, and accession was completed by Presidential Decree No. 1034. Both instruments pursue the same objective: ensuring that the buyer obtains clean title through a forced sale and that such title is recognised in other countries.

Under the procedure in İİK Art. 111/a, none of these three pillars exists. The sale takes place between the debtor and the buyer; there is no publication, no notice and no auction. A ten-day examination by the enforcement court on the file takes the place of these safeguards.

5. First Risk: No Competition, No Price Discovery

The function of an auction is not merely transparency; it is price discovery. In the vessel market, the true value of tonnage emerges only where multiple buyers compete.

That mechanism is absent in a voluntary sale. Provided that the debtor finds a buyer willing to pay at least ninety per cent of the appraised value, the debtor may sell to whomever it chooses. The example given by İnandıoğlu at the seminar makes the problem clear: a vessel appraised at USD 1 million is sold for USD 900,000 even though there is a USD 1.5 million claim secured over it. Can the unpaid creditor argue that “if it had gone to auction, it might have sold for USD 2 million”? The statute gives no clear answer (Istanbul Bar Association – Chamber of Shipping Seminar, 1.11.2025).

This problem is much more serious for vessels than for land-based movables because vessel valuations can vary widely: market conditions, class status, survey schedule, flag and registry history, PSC detention records, hold condition and the vessel’s contractual portfolio can materially affect value. If the ninety-per-cent threshold is based on an inaccurate or low appraisal, the real loss is multiplied.

6. Second Risk: Mortgages Are Extinguished

This is the most severe consequence of the rule: upon acceptance, ownership passes to the buyer and all attachments are removed before transfer and delivery are completed.

A ship mortgage is the backbone of maritime finance. The principal security for a ship loan is the vessel itself, and the strength of the mortgage depends on its place in the ranking schedule upon forced sale and on the predictability of the sale process. Allowing the mortgage to be extinguished in a process that may proceed without even informing the mortgagee undermines the essence of that security.

Particularly striking is that the mortgagee is not a party to the process. The process begins with the debtor’s request, proceeds before the enforcement office and concludes before the enforcement court through review on the file. As İnandıoğlu observed, third parties may learn that the vessel is being sold only if the enforcement court opens a hearing and summons them (Istanbul Bar Association – Chamber of Shipping Seminar, 1.11.2025). Since the statute allows the court to decide on the file, that notice may never occur.

7. Third Risk: the Decision Is Final, with No Legal Remedy

The enforcement court decides on acceptance or rejection of the request with final effect . In other words, no appeal lies against an acceptance decision.

The legislature’s objective is understandable: in a system where proceedings to annul auctions can block a sale for years, it wishes to prevent the voluntary-sale mechanism from suffering the same fate. In relation to vessels, however, the balance is substantially disturbed. An asset worth millions of dollars, together with all rights in rem over it, may change hands after a ten-day examination on the file and by a decision closed to review.

The unanswered question is what third parties may object to. Only formal conditions — whether the ninety-per-cent threshold was met, whether the authorization period expired — or also substantive matters such as inadequacy of the price? The statutory text is silent and no settled judicial practice yet exists.

8. Fourth Risk: Collusive-Transaction Scenario

When the three risks above are combined, the result is a structure highly susceptible to abuse. The scenario raised at the seminar is this: bad-faith parties create a fictitious claim and attach the vessel; the debtor then requests authority for a voluntary sale and sells the vessel to a related person at a low price; ninety per cent is deposited and all mortgages over the vessel are extinguished (Istanbul Bar Association – Chamber of Shipping Seminar, 1.11.2025).

It should be noted that this scenario does not work under the existing auction system. At a public auction, a third party may enter and submit a higher bid; a bad-faith debtor cannot control who buys the asset. In a voluntary sale, the debtor chooses the buyer.

9. Fifth Risk: Uncertainty over Appraisal and Time Limits

İnandıoğlu identified another technical problem. The draft provides that registered vessels must be appraised through an expert; thus, even when the enforcement officer attaches the vessel, appraisal is to be carried out by an expert. Yet the time limit for requesting authority for a voluntary sale starts to run from “delivery of the attachment record against signature” (Istanbul Bar Association – Chamber of Shipping Seminar, 1.11.2025).

The relationship between these two provisions is unclear. If delivery of the attachment record also includes the appraisal, this should be stated expressly; otherwise the unusual result may arise of requesting authority to sell an asset whose value is not yet known .

10. Sixth Risk: Will the Sale Be Recognised Abroad? The Beijing Convention

This is the least discussed but, in practice, potentially the most decisive aspect of the issue.

The United Nations Convention on the International Effects of Judicial Sales of Ships (Beijing Convention), adopted by the United Nations General Assembly on 7 December 2022 and opened for signature on 5 September 2023, entered into force on 17 February 2026. The Convention establishes the principle that a judicial sale conducted in one State Party produces clean title in other States Parties; the buyer acquires the vessel free and clear of mortgages and encumbrances, and the vessel cannot be arrested for claims arising before the sale.

Under the Convention’s definition, a judicial sale is a sale ordered, approved or confirmed by a court and carried out under court supervision, with the proceeds made available to creditors. Against that definition, the character of an İİK Art. 111/a sale is open to debate: the sale is approved by the enforcement court and the price is deposited into the file.

However, the Convention requires two documents for clean title to have international effect: a notice of judicial sale issued and delivered to interested persons before the sale, and a certificate of judicial saleissued after the sale. Notice must in particular be given to the registered owner, mortgagees and the registry authority.

The fact that, as of March 2026, the Convention had been ratified by only three States limits its present practical effect. However, considering expectations that major flag states such as Panama and Liberia may join, the issue may become decisive for vessel purchasers in the medium term.

11. The Position from a Ship-Finance Perspective

At the opening of the same seminar, Chamber of Shipping President Tamer Kıran stated that foreign banks were reluctant to finance Turkish-flagged vessels, mainly because of uncertainty in the forced-enforcement system, and that at one time foreign banks had directed shipowners toward open-registry jurisdictions (Istanbul Bar Association – Chamber of Shipping Seminar, 1.11.2025).

Against that background, allowing a mortgage to be extinguished through a procedure closed to appellate review sends exactly the opposite signal. Finance institutions focus on the predictability of security; if it is uncertain when and under what level of review security may be terminated, the risk premium rises or credit is not extended at all.

12. What Should Mortgagees and Maritime Creditors Do?

Monitor the file; do not wait for notice

The process may not be served on you. If you hold a mortgage or attachment over a vessel, regularly monitor the relevant enforcement files through UYAP; in particular, the moment the appraisal report enters the file is a critical threshold. A voluntary-sale request may be made within seven days from that point.

Object to the appraisal

Because the minimum voluntary-sale price depends on the appraisal, this is the first line of defence. Once an undervaluation becomes final, little may remain to be done. In vessel valuation, class, survey schedule, PSC records and market comparables should be examined in detail.

Document your priority status in the file

Because preferential claims are taken into account in calculating the minimum price, notifying the file early and with documentary proof of the existence and amount of your mortgage or maritime lien helps ensure that the calculation is made in your favour. For mortgages recorded in a foreign registry, a certified and translated copy of the registry entry is required.

Request judicial review of the conditions

When the file is sent to the enforcement court, request a hearing and that interested parties be heard; specifically raise whether the minimum price has been correctly calculated, the relationship between the buyer and debtor, and indicators of collusion. Although the statute permits a decision on the file, it does not prohibit the court from holding a hearing.

Take contractual precautions

Ship-loan and mortgage agreements should require the shipowner to give immediate notice if the vessel is attached or appraised, with acceleration consequences for failure to do so. For lenders in Türkiye, this is currently one of the most effective contractual safeguards.

13. Proposed Solutions

• Vessels should be excluded from the scope or a voluntary sale should be permitted only with the written consent of mortgagees and preferential creditors.
• Mandatory notice should be introduced: Notice to the registered owner, registered right holders, secured creditors and, for foreign-flagged vessels, the consulate should be a condition of validity of the sale.
• A hearing should be mandatory: For vessels, the enforcement court should decide after hearing interested persons, not merely on the file.
• A legal remedy should be available: It is disproportionate for a decision extinguishing rights in rem to be entirely closed to review; at minimum, mortgagees should be given a right of appeal.
• Compliance with the Beijing Convention should be ensured: The procedure should be structured so that a notice of judicial sale and certificate of judicial sale can be issued; otherwise the buyer’s title remains unprotected internationally.
• The buyer–debtor relationship should be scrutinised: The court should investigate ex officio whether there is an organic connection between the buyer and debtor, including corporate and management relationships.

14. Frequently Asked Questions

Can the debtor sell its vessel itself?

İİK Art. 111/a regulates granting the debtor authority for a voluntary sale of attached property and does not expressly exclude vessels. The prepared Draft Compulsory Enforcement Law expressly provides that the mechanism will apply to vessels as well. Because no settled case law yet exists in practice, disputes may arise in individual cases.

At what price can a vessel be sold in a voluntary sale?

The price may not be lower than whichever is higher between ninety per cent of the appraised value and the total amount of claims secured by the asset that rank ahead of the claim of the party requesting sale, plus enforcement expenses.

Will my ship mortgage be extinguished in a voluntary sale?

Upon the enforcement court’s acceptance decision, ownership passes to the buyer and transfer and delivery are completed after attachments are removed. It is therefore critically important for the mortgagee to monitor the process from the outset and document its priority status in the file.

Can I appeal against the acceptance decision?

The statute provides that the enforcement court shall decide finally on acceptance or rejection of the request. Defence efforts should therefore be concentrated on the stages before the decision — objecting to the appraisal and requesting review of the statutory conditions.

Can a vessel sold through this route be arrested abroad?

Potentially yes. To benefit from the clean-title protection under the Beijing Convention, notice must be given before the sale and a certificate must be issued afterwards. Because the İİK Art. 111/a procedure does not contain these steps, the buyer may still face former creditors in foreign ports.

As a creditor, how can I learn about the process?

The legislation does not provide mandatory advance notice to mortgagees and third parties. Creditors holding rights over a vessel should therefore regularly monitor the relevant enforcement files and require contractual notice obligations in loan documentation.

Why Is It Important to Conduct the Process Correctly?

Rights over vessels, unlike rights over ordinary land-based movables, are part of an international chain: they are registered in a registry, may engage the laws of several countries and, once the vessel moves, must continue to have effect in those jurisdictions. For this reason, even a seemingly minor procedural issue in vessel-arrest and sale proceedings can result in the loss of the entire right.

Our related publications: main guide to provisional attachment of vessels, conditions of TCC Art. 1369 in provisional attachment of vessels, disputed items within the concept of maritime claims, seafarer claims and claims for provisions and fuel supplied to vessels.

2M Law Firm, based in Tuzla, practises in maritime law in port and shipyard disputes along Tuzla, Pendik, Kartal, Maltepe, Ataşehir and Üsküdar on Istanbul’s Anatolian Side, and Gebze, Dilovası, Çayırova, Darıca, Körfez, İzmit and Başiskele in Kocaeli.

This article has been prepared for general informational purposes and does not constitute legal advice. Since each case has its own specific circumstances, obtaining legal assistance for your particular dispute is recommended.