ARTICLE – INTERNATIONAL ARBITRATION IN TÜRKİYE

Abstract

Arbitration is an alternative form of adjudication to state proceedings in dispute resolution. In order to refer to arbitration, the dispute must meet certain conditions. In addition, the main reason for choosing arbitration as an alternative is the advantages which it offers to the parties. Arbitration, which has many types, is subject to recognition and enforcement in Türkiye if the arbitral awards are rendered abroad.

Keywords: Arbitration, Institutional Arbitration, Ad Hoc Arbitration, Arbitration Board, Arbitrator, Arbitral Award, Recognition and Enforcement

I. INTRODUCTION

Arbitration is the agreement of the parties, to the extent permitted by law, for the final and binding settlement of disputes that have arisen or may arise between the parties by arbitrators instead of courts.

The settlement of any dispute by arbitration is subject to two conditions. The first of these is that the dispute is arbitrable and the second is that the parties have agreed that the dispute will be resolved by arbitration.

The parties cannot arbitrate every dispute between them. In order for a dispute to be resolved by arbitration, it must be arbitrable and there must be a legally valid subject. Pursuant to Article 408 of Code of Civil Procedure numbered 6100¹, disputes arising out of real rights over immovable property, or disputes arising out of works that are not subject to the will of the two parties are not arbitrable. Considering this article, circumstances on which the parties cannot freely dispose, disputes that are expressly stated in the legislation as not arbitrable, or disputes where the principle of ex officio investigation is applied are not arbitrable². Examples of such cases include settlement or acceptance, cases relating to the real rights of  immovable property, divorce, denial of paternity, and custody³. In addition to these, arbitrability cannot be mentioned in cases where there is a public interest or a superior interest. Lastly, disputes in criminal proceedings, administrative proceedings, enforcement law and non-contentious judicial proceedings are also not arbitrable⁴.

II. ADVANTAGES OF ARBITRATION

Arbitration has many advantages over other alternative dispute resolution methods such as judicial remedy or mediation and reconciliation. One of the most important advantages is that these alternative methods are not binding unless the parties have agreed that they are binding, whereas arbitration proceedings are binding. Especially in cases where non-binding alternative methods of resolution do not achieve results, the time spent and costs incurred during the use of these methods will be to the detriment of the parties to the dispute. In this respect, the binding character of arbitration proceedings is advantageous for the parties in terms of time and costs incurred⁵.

Another advantage of arbitration is that it is subject to confidentiality. The confidential resolution of the dispute, the protection of trade secrets, the non-publication of arbitral awards as a rule, and therefore the publication of arbitral awards to the extent permitted by the parties make arbitration more advantageous than other dispute resolution methods.

Arbitration proceedings are resolved by experts. Pursuant to the principle of natural judge in state proceedings, disputes are resolved by the competent and authorized courts⁶. Therefore, the parties are not able to choose the competent and authorized court for the resolution of the dispute, and therefore they are not able to choose the judge of their choice. However, arbitration proceedings are more advantageous compared to other judicial remedies, as the parties can choose an arbitrator who is specialized and knowledgeable in the subject matter of the dispute in arbitration proceedings.

In this context, unlike in state proceedings, since the parties have freedom of will in arbitration proceedings, the parties can choose the procedural rules to be applied in arbitration proceedings, the country where the proceedings will be held and the arbitrators⁷.

Another advantage of arbitration is that it is easier to enforce arbitral awards compared to the enforcement of court decisions. Under Turkish law, as per Act on Private International Law and International Civil Procedure numbered 5718 ⁸(“APILICP“), enforcement of foreign court decisions and enforcement of foreign arbitral awards are regulated by different provisions. In order for a foreign court decision to be enforced in Türkiye, there must be reciprocity between the country where the foreign court decision was rendered and Türkiye. However, the international agreements that Türkiye has concluded in this regard are bilateral agreements, the number of which is quite limited. However, in terms of enforcement of foreign arbitral awards, since Türkiye is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ⁹(“New York Convention“), arbitral awards can be enforced in any country that is a party to the New York Convention, including Türkiye¹⁰. Thus, the enforcement of arbitral awards is made easier compared to the enforcement of court decisions.

Besides, from Türkiye’s perspective, arbitration is much more advantageous than other dispute resolution methods in terms of time, considering the length of the process together with the state proceedings, cassation and appeal phases.

The controversial issue in terms of arbitration is the cost of arbitration proceedings. Although the cost of arbitration is a concern for the parties’ preference for arbitration, arbitration is generally a more beneficial solution for the parties, especially when the importance of the dispute is taken into consideration, in addition to its advantages such as resolving the dispute in a shorter period of time and being more in line with the speed of commercial life and the expectations of the parties¹¹.

III. TYPES OF ARBITRATION

The parties to arbitration proceedings may choose either institutional arbitration or ad hoc arbitration to resolve the dispute between them.

A. Institutional Arbitration

Institutional arbitration is the conduct of arbitration proceedings by an arbitral institution that has rules applicable to the arbitration proceedings and includes regulations governing arbitration¹². Parties prefer institutional arbitration centers due to the more detailed regulation of arbitration proceedings and the existence of a regular, technical and administrative organization to manage the process¹³.

There are various arbitration institutions established for the resolution of disputes. International Chamber of Commerce (“ICC“) International Court of Arbitration, London Court of International Arbitration (“LCIA”), Permanent Court of Arbitration (“PCA”), Stockholm Chamber of Commerce (“SCC”), World Intellectual Property Organization (“WIPO”), Grain and Feed Trade Association (“GAFTA”), Court of Arbitration for Sport (“CAS”) and Istanbul Arbitration Center (“ISTAC”) are some examples of arbitration institutions.

Istanbul Arbitration Center Law numbered 6570¹⁴ paved the way for institutional arbitration in Türkiye in the international arena. ISTAC and the Istanbul Chamber of Commerce Arbitration and Mediation Center (“ITOTAM”) can be cited as arbitration board in Türkiye.

B. Ad Hoc Arbitration

Ad hoc arbitration is a type of arbitration in which the parties determine the arbitrator, the arbitral tribunal and the arbitration procedure without being subject to any arbitral institution, and which, by agreement of the parties, is temporarily determined solely to resolve the concrete dispute between those parties¹⁵.

In practice, in ad hoc arbitration, the parties more often choose the United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules. If the parties choose the UNCITRAL Arbitration Rules for dispute resolution or if they cannot agree on the arbitration rules applicable to the dispute, the UNCITRAL Arbitration Rules will be applied upon the decision of the arbitration tribunal. Pursuant to the UNCITRAL Arbitration Rules, if the parties have agreed that a dispute between them in respect of a particular legal relationship, whether contractual or not, shall be resolved in accordance with the UNCITRAL Arbitration Rules, such disputes shall be resolved in accordance with these rules, taking into account the amendments to be agreed by the parties¹⁶.

IV. RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

A. In General

APILICP and New York Convention are the main regulations on the recognition and enforcement of foreign arbitral awards. According to these regulations, for a foreign arbitral award to be recognized and enforced in Türkiye, it must be a foreign arbitral award¹⁷. Pursuant to the first article of the New York Convention, in order for an arbitral award to be considered a foreign arbitral award, it must have been rendered and recognized in a place other than the country where enforcement is sought and the procedural rules of the country where enforcement is sought must not have been applied to that arbitral award. In this regard, the Supreme Court does not recognize ICC arbitral awards that are sought to be enforced as foreign arbitral awards in some cases. In cases where ICC arbitral awards are recognized as domestic arbitral awards, there will be no need to seek enforcement in order to ensure that the award is enforceable in Türkiye¹⁸.

Supreme Court had a ruling¹⁹ that ICC arbitral awards rendered by applying Turkish procedural law will not be considered as foreign arbitral awards, and in the light of this ruling, it can be said that such awards will be deemed as domestic arbitral awards and, therefore, will not be subject to enforcement. In addition, it is important to note that it does not matter whether it is an institutional arbitration or an ad hoc arbitration when seeking recognition and enforcement of a foreign arbitral award.

Pursuant to the fifth paragraph of Article 90 of the Constitution of the Republic of Türkiye²⁰, as the New York Convention is an international treaty which Türkiye is a party, a foreign arbitral award falling within the scope of this Convention will no longer be enforced in accordance with the provisions of APILICP, but in accordance with the provisions of the New York Convention²¹. In other words, in order to apply the provisions of the APILICP to a foreign arbitral award that may be sought to be enforced, it must not fall within the scope of the New York Convention or the New York Convention must refer to the procedural law of the enforcing state. In the context of Türkiye, it must refer to APILICP.

In addition, under Turkish law, the court will only examine whether the judgment for which recognition and enforcement is sought meets the conditions for recognition and enforcement. Under Turkish law, according to the decisions of the Supreme Court, there is a prohibition on reviewing the correctness of foreign arbitral awards (revision au fond)²². Therefore, the authorized court will only examine whether the conditions for enforcement exist.

The authorized court for the recognition and enforcement of foreign arbitral awards is the civil court of first instance²³. However, pursuant to the Code of Civil Procedure, the Supreme Court recognizes that the authorized court for the enforcement of foreign arbitral awards in commercial cases is the commercial court of first instance²⁴. In addition, the parties may agree in writing on the competent court for the enforcement of foreign arbitral awards²⁵.

B. Enforcement of Arbitral Awards in Türkiye

In order for foreign arbitral awards to be enforced in Türkiye, there must be no obstacle to the enforcement of the foreign arbitral award. Since the third article of the New York Convention refers to the procedural law of the enforcing state, the provisions of APILICP shall apply by analogy to the enforcement of foreign arbitral awards subject to the New York Convention²⁶.

Enforcement of foreign arbitral awards is requested by petition from the court of first instance in the place agreed upon in writing by the parties. In the absence of such an agreement between the parties, the court of the place of residence of the party against whom the award has been rendered in Türkiye, or if this is not the option, the court of the place where the properties that may be subject to enforcement are located, shall be deemed competent²⁷.

The reasons which will prevent the enforcement of foreign arbitral awards are regulated in the fifth article of the New York Convention, some of which are to be taken into account ex officio by the enforcement court and some of which are to be claimed and proved by the parties. Accordingly, the grounds that will be taken into consideration ex officio by the court are as follows:

• The impossibility of resolving the dispute that is the subject matter of the arbitral award through arbitration according to the law of the country where recognition or enforcement is sought,
• The arbitral award is contrary to public order.

The reasons preventing enforcement to be claimed and proved by the parties are as follows:

• The parties to the arbitration agreement are incompetent or the arbitration agreement is invalid,
• The party against whom enforcement of the award is sought has not been duly informed of the selection of the arbitrator or the arbitral proceedings or has been deprived of the opportunity to present evidence,
• The arbitral award relates to a matter not covered by the arbitration agreement or exceeds the limits of the arbitration agreement,
• The selection of the arbitrators or the procedure applied by the arbitrators is contrary to the agreement of the parties or, in the absence of such an agreement, to the law of the place where the award was rendered,
• The arbitral award has not become final or enforceable under the law of the jurisdiction to which it is subject or where it was rendered, or has been set aside by the court of the jurisdiction where it was rendered²⁸.

Foreign arbitral awards that are enforced shall be enforced in the same manner as Turkish arbitral awards. However, since the appeal of the enforcement decision will stay the enforcement of the arbitral award, the enforcement of the foreign arbitral award may be enforced after the court decision on enforcement becomes final. For the enforcement of a foreign arbitral award, a request for precautionary distraint may also be filed, if the conditions for it exist²⁹.

C. Recognition of Arbitral Awards in Türkiye

Neither the New York Convention nor the APILICP provides different provisions for the recognition and enforcement of foreign arbitral awards. Therefore, the recognition of any foreign arbitral award is subject to the provisions on enforcement³⁰.

Unlike the enforcement of a foreign arbitral award, there is no requirement to file a separate action for the recognition of a foreign arbitral award. A separate lawsuit may be filed for the recognition of the foreign arbitral award, or the recognition of the foreign arbitral award may be requested within a pending lawsuit³¹. This request must be made by way of a petition, and the petition must include the matters set forth in Article 52 of the APILICP and the documents set forth in Article 61 of the APILICP must be attached to the petition³².

If the Turkish court considers that the foreign arbitral award meets the conditions for recognition, the Turkish court will decide to recognize the foreign arbitral award and will decide either to consider the foreign arbitral award as conclusive evidence in that case or to dismiss the case due to res judicata. On the other hand, if it concludes that the foreign arbitral award does not meet the conditions for recognition, it will reject the request for recognition and proceed to examine the case on the merits. However, since the decision on the rejection of the request for recognition is an interim decision, it cannot be appealed on its own, but can only be appealed together with the final award³³.

References

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