Arbitration in Turkey 2022

Cetinkaya partners, Ural Özbek, Lale Defne Mete and Cansu Ak Yilmaz give their expert insight into arbitration laws and institutions, providing essential ‘need to know’ answers to the fundamental questions facing corporations and counsel. This question and answer guide for Turkey gives a comprehensive overview of the entire process, from the drafting of contractual clauses through to the enforcement of awards in court.

Laws and institutions

Multilateral conventions relating to arbitration

Is your jurisdiction a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Since when has the Convention been in force? Were any declarations or notifications made under articles I, X and XI of the Convention? What other multilateral conventions relating to international commercial and investment arbitration is your country a party to?

Turkey is a contracting state to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The New York Convention has been in force since 1992. Turkey has made two reservations to the New York Convention, namely, the reciprocity reservation and commercial reservation. Accordingly, the New York Convention shall only apply to disputes arising from commercial relationships and to awards rendered in the territory of another contracting state.

Also, Turkey is a party to the European Convention on International Commercial Arbitration and to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). 

Bilateral investment treaties

Do bilateral investment treaties exist with other countries?

There are 81 bilateral investment treaties (BITs) in force. The countries with which Turkey has entered into BITs are Afghanistan, Albania, Argentina, AustraliaAustriaAzerbaijanBahrainBangladeshBelarusBLEU (Belgium-Luxembourg Economic Union)Bosnia and HerzegovinaBulgariaChinaCroatiaCubaCzechiaDenmark, Djibouti, Egypt, Estonia, Ethiopia, Finland, France, Gambia, Georgia, Germany, Greece, Guatemala, Guinea, Hungary, Iran, Israel, ItalyJapan, Jordan, KazakhstanKuwaitKyrgyzstanLatviaLebanonLibyaLithuaniaMalaysiaMaltaMauritius, Mexico, Moldova, Mongolia, Morocco, NetherlandsNorth MacedoniaOman, Pakistan, PhilippinesPolandPortugalQatarRomania, Russia, Saudi ArabiaSenegalSerbia, Slovakia, Slovenia, Spain, Sweden, SwitzerlandSyrian Arab RepublicTajikistan, Tanzania, ThailandTunisiaTurkmenistanUkraineUnited Arab Emirates, theUnited Kingdom, the United StatesUzbekistan, Vietnam, Yemen and Zambia.

Domestic arbitration law

What are the primary domestic sources of law relating to domestic and foreign arbitral proceedings, and recognition and enforcement of awards?

Under Turkish law, arbitral proceedings seated in Turkey are regulated under Civil Procedure Law No. 6100 (CPL), whereby Turkey-seated arbitral proceedings with a foreign element are governed under International Arbitration Law No. 4686 (IAL). 

As per the IAL, a foreign element exists: 

  • if the parties to the arbitration agreement have their domiciles or regular residences or places of business in different states;
  • if the parties to the arbitration agreement have their domiciles or regular residences or places of business in a state other than the one indicated in the arbitration agreement or than the seat of arbitration;
  • if the parties to the arbitration agreement have their domiciles or regular residences or places of business in a state different than the one indicated in the arbitration agreement or than the seat of arbitration;
  • if the parties to the arbitration agreement have their domiciles or regular residences or places of business in a state different than the place where a substantial part of the obligations arising from the main agreement is performed or than the place where the dispute has the closest connection;
  • if a shareholder of the company which is a party to the main agreement has brought foreign capital to Turkey as per foreign capital incentive legislation or if a loan or guarantee agreement needs to be executed for the performance of the main agreement; or
  • if the main agreement or legal relationship causes the movement of capital or of goods from one country to another.

As for the recognition and enforcement of awards, the New York Convention and the Turkish International Private and Procedural Law (IPPL) No. 5718 are the primary legislation. Awards that fall outside the scope of application of the New York Convention are to be enforced pursuant to IPPL.

Domestic arbitration and UNCITRAL

Is your domestic arbitration law based on the UNCITRAL Model Law? What are the major differences between your domestic arbitration law and the UNCITRAL Model Law?

Both the CPL and IAL are based on the UNCITRAL Model Law. The major differences between domestic arbitration law and UNCITRAL Model Law are as follows:

  • Under domestic arbitration law, unless agreed otherwise by the parties, the arbitral tribunal should render its decision on the merits within one year as of the selection of the sole arbitrator or of the date of the first meeting minutes of the arbitral tribunal.
  • Under the CPL and the IAL, the application for setting aside award must be made within one month and 30 days, respectively.
  • As per the CPL and the IAL, arbitral tribunal’s decision on its jurisdiction can be a ground for setting aside the award but it cannot be appealed.

Mandatory provisions

What are the mandatory domestic arbitration law provisions on procedure from which parties may not deviate?

The CPL and the IAL include the following similar mandatory provisions on procedure from which parties may not deviate:

  • applying to the court for the extension of the period of arbitration;
  • non-arbitrable disputes;
  • the principle of equal treatment (ie, equality of arms); and
  • the preliminary objection procedure on applying to the court regarding non-existence of arbitration agreement.

Substantive law

Is there any rule in your domestic arbitration law that provides the arbitral tribunal with guidance as to which substantive law to apply to the merits of the dispute?

The CPL does not contain any provision regarding the substantive law applicable to the merits of the dispute. To the extent they are allowed under the IPPL, the parties to an arbitration under the CPL can freely determine the law applicable to the merits of the case. If no such agreement between the parties exists, the arbitral tribunal can apply Turkish law or foreign law to the merits of the case.

In parallel, under the IAL, the parties are free to decide on the law applicable to the merits of the case. If parties are silent, the arbitral tribunal determines the law applicable to the merits of the dispute. While making such determination, the arbitral tribunal shall apply the substantive law of the state that has the closest connection with the dispute.

Arbitral institutions

What are the most prominent arbitral institutions situated in your jurisdiction?

The most prominent arbitral institutions are the Istanbul Arbitration Center (ISTAC) (http://istac.org.tr/en/) and theIstanbul Chamber of Commerce Arbitration and Mediation Center (www.itotam.com/en/), both located in Istanbul.

As per ISTAC arbitration rules, unless otherwise agreed by the parties, the seat of arbitration shall be Istanbul and the parties can determine the language of the arbitration. In the absence of such agreement between the parties, the sole arbitrator or arbitral tribunal shall determine the language or languages of the arbitration considering all circumstances and conditions. The parties are free to agree on the number of arbitrators, which must be an odd number. In cases where the parties have not agreed on the number of arbitrators, the Board of Arbitration shall decide that the dispute be resolved by either a sole arbitrator or by an arbitral tribunal consisting of three arbitrators. As for applicable law, the arbitral tribunal shall make their decision in accordance with the rules of law chosen by the parties as applicable to the merits of the dispute. In the absence of such agreement, the sole arbitrator or the arbitral tribunal shall apply the rules of law that is deemed to be appropriate.

The Istanbul Chamber of Commerce Arbitration and Mediation Center has similar provisions regarding seat of arbitration, language and number of arbitrators. As for the applicable law, the arbitral tribunal must render the award in accordance with the provisions of the agreement entered into by and between the parties and with the applicable rules of law chosen by the parties. Where the parties fail to agree upon the rules of law to be applied to the merits of the dispute, the arbitral tribunal must apply the rules of substantive law that it finds to be most closely related with the dispute.

Arbitration agreement

Arbitrability

Are there any types of disputes that are not arbitrable?

Under International Arbitration Law No. 4686 (IAL) and Civil Procedure Law No. 6100 (CPL), disputes related to in rem rights in immovable properties and disputes that are not subject to the will of the parties are not arbitrable. To that effect, in general, disputes relating to family law, bankruptcy law, criminal law or administrative law, as a rule, are not arbitrable.

In terms of IP disputes, the Court of Appeal’s interpretation is that such disputes are arbitrable.

The disputes relating to cancellation of a general assembly meeting and dissolution of company are considered as non-arbitrable by the Court of Cassation. Istanbul Chamber of Commerce has recently sent its members an email containing a model arbitration clause that companies may insert in their articles of association for the settlement of intra-corporate disputes. However, the Court of Cassation’s position on the issue has not yet changed. 

As for the arbitrability of disputes regarding competition law, the issue remains controversial as there are no court decisions explicitly allowing or prohibiting arbitrability of competition law disputes.

Requirements

What formal and other requirements exist for an arbitration agreement?

In parallel with New York Convention, as per the CPL and the IAL, the arbitration agreement must be in writing. 

Pursuant to the IAL and the CPL, if the agreement is included in a document signed by the parties or is made by an exchange of letters, fax or other means of telecommunication or in electronic form, it will be deemed as a written arbitration agreement. Also, if the plaintiff argues for the existence of an arbitration agreement in its statement of claimand the defendant does not object to the arbitration agreement in its response petition, the lack of an agreement in-writing will be considered cured.

The arbitration agreements governed under the CPL shall either be manually signed or signed by means of e-signature in accordance with Law on Electronic Signature No. 5070.

Law No. 805 mandates parties seated in Turkey to execute commercial contracts and transactions in the Turkish language. Despite the outdated character of the Law, there have been instances where the Court of Cassation has denied enforcement of an arbitral award as violation of Law No. 805. Despite the recent pro-arbitration decision, such matters should be handled with care.

If the parties agree on general terms and conditions and refer explicitly to the arbitration clause included in the general terms and conditions, the existence of an arbitration agreement will be undisputable. However, the existence of an arbitration agreement is controversial in the case of a simple reference by the parties to general terms and conditions without referring explicitly to the arbitration clause.

Enforceability

In what circumstances is an arbitration agreement no longer enforceable?

As a general rule the arbitration agreement must display parties’ will to arbitrate clearly and explicitly. 

Apart from the formal requirements, the violation of general principles on the validity of agreements such as error, deception, coercion and legal incapacity will result in the non-enforceability of the arbitration agreement. 

On a separate but related note, as per the CPL, the principal must specifically authorise the attorney to execute an arbitration agreement. 

Separability

Are there any provisions on the separability of arbitration agreements from the main agreement?

The separability of arbitration agreement from the main agreement is regulated under the IAL and CPL according to which the arbitration agreement is separate from the main agreement. Therefore, it is not possible to challenge the arbitration agreement arguing the invalidity of the main agreement.

Third parties – bound by arbitration agreement

In which instances can third parties or non-signatories be bound by an arbitration agreement?

In principle, an arbitration agreement is only binding for the parties who have signed it. If the contractual rights are transferred as a whole, the transferee will be bound by the arbitration agreement.

In terms of agency, the courts interpret that third parties cannot be bound by an arbitration agreement through agency relationship. 

In cases of succession and insolvency, third parties will be bound by the arbitration agreement. 

Third parties – participation

Does your domestic arbitration law make any provisions with respect to third-party participation in arbitration, such as joinder or third-party notice?

In the CPL and the IAL, there is no specific regulation on the involvement of third-party participation in arbitration.

Groups of companies

Do courts and arbitral tribunals in your jurisdiction extend an arbitration agreement to non-signatory parent or subsidiary companies of a signatory company, provided that the non-signatory was somehow involved in the conclusion, performance or termination of the contract in dispute, under the ‘group of companies’ doctrine?

Under the CPL and IAL, there is no specific regulation regarding ‘group of companies’ doctrine’, nor is it recognised by the dominant opinion in the doctrine.

Multiparty arbitration agreements

What are the requirements for a valid multiparty arbitration agreement?

There are no specific requirements regarding the validity of multiparty arbitration agreements under Turkish Law. However, upon the consent of the parties, the multiparty arbitration agreement can be executed.

Consolidation

Can an arbitral tribunal in your jurisdiction consolidate separate arbitral proceedings? In which circumstances?

Although consolidation of separate arbitral proceedings is not regulated under the CPL or the IAL, upon the consent of parties to arbitration, the arbitral tribunal may – at its own discretion – decide for the consolidation of the proceedings as long as the principles enshrined in the IAL (or the CPL) are followed.

Also, ISTAC rules provide for the consolidation of separate arbitral proceedings pending under the ISTAC rules, provided that the following conditions are satisfied: (1) if the parties to the arbitrations that are requested to be consolidated are different, and all parties have agreed to the consolidation; or (2) if the parties to the arbitrations thatare requested to be consolidated are the same; and the parties have agreed to consolidation; all of the claims in the arbitrations are based on the same arbitration agreement; or if the claims in the arbitrations are based on more than one arbitration agreement, the disputes in the arbitrations arise in connection with the same legal relationship and the arbitration agreements are compatible.

Constitution of arbitral tribunal

Eligibility of arbitrators

Are there any restrictions as to who may act as an arbitrator? Would any contractually stipulated requirement for arbitrators based on nationality, religion or gender be recognised by the courts in your jurisdiction?

In principle, there is no specific condition stated under under International Arbitration Law No. 4686 (IAL) and Civil Procedure Law No. 6100 (CPL) imposing restrictions as to who may act as an arbitrator. 

As per the Turkish Constitution, active judges and public prosecutors are prohibited from performing duties other than the official ones stated in law and therefore cannot act as arbitrators, whereas retired judges and public prosecutors can act as arbitrators.

Background of arbitrators

Who regularly sit as arbitrators in your jurisdiction?

Generally, law professors and senior lawyers sit as arbitrators in Turkey. 

ISTAC has been promoting gender diversity. Around 30 per cent of ISTAC arbitrations were chaired by female arbitrators. 

Default appointment of arbitrators

Failing prior agreement of the parties, what is the default mechanism for the appointment of arbitrators?

As per the IAL and the CPL, if the parties to the agreement have not included a provision on the number and appointment of arbitrators, the arbitral tribunal will consist of three arbitrators. In such a case, as per the IAL and CPL, the claimant will appoint an arbitrator, notify respondent and the respondent will appoint an arbitrator within 30 days and one month respectively. If the respondent does not appoint an arbitrator, the court will intervene and appoint an arbitrator on behalf of the respondent.

If the parties have agreed on the appointment of sole arbitrator but have not designated the arbitrator, the court will intervene upon the request of one of the parties.

Challenge and replacement of arbitrators

On what grounds and how can an arbitrator be challenged and replaced? Please discuss in particular the grounds for challenge and replacement, and the procedure, including challenge in court. Is there a tendency to apply or seek guidance from the IBA Guidelines on Conflicts of Interest in International Arbitration?

As per the IAL, the arbitrator can be dismissed:

  • if the arbitrator does not bear the qualifications agreed by the parties;
  • if a reason of dismissal specified under the arbitration procedure agreed by the parties exists; or
  • impartiality or independency of the arbitrator is impaired.

The parties are free to determine the procedure of dismissal of the arbitrators. In the case of the silence of the parties on the procedure, the parties to the agreement must request the dismissal within 30 days as of the date of being aware of occurrence of the reason of dismissal. The request of dismissal should be notified to the other party in writing. If one of the party’s request of dismissal is not accepted, the party is entitled to apply to the court of first instance within 30 days as of the date of refusal.

The reasons for dismissal and its procedure stated in the CPL are similar to the above apart from the period of times to apply for dismissal.

As for the replacement of arbitrators, the IAL and the CPL stipulate that the procedure for appointment of arbitrators will also be applied for the replacement.

The IBA Guidelines on Conflicts of Interest in International Arbitration will be applied with the agreement of the parties. If there is no such agreement between the parties, the tribunal may at its discretion follow the principles enshrined in the IBA Guidelines on Conflicts of Interest in International Arbitration.

Relationship between parties and arbitrators

What is the relationship between parties and arbitrators? Please elaborate on the contractual relationship between parties and arbitrators, neutrality of party-appointed arbitrators, remuneration and expenses of arbitrators.

Neither the CPC nor the IAL define the relationship between parties and arbitrators. There are diverging opinions as to classification of the relationship between parties and arbitrators. A group of scholars argue that it is a service agreement while others classify it as a freelance agreement. There is a third group that defines it as a sui generis agreement.

The impartiality and independence of arbitrators is an essential requirement for having a valid and enforceable award.

The parties are free to agree on the remuneration of arbitrators. If it is not agreed by the parties, the arbitrator and the parties will determine it by taking into consideration the quantum, the duration of the proceeding and nature of the dispute. 

In the case of absence of such an agreement, the tariff published by the Ministry of Justice applies. 

Duties of arbitrators

What are arbitrators’ duties of disclosure regarding impartiality and independence throughout the arbitral proceedings?

Under the IAL and the CPL, the arbitrator is obliged to disclose any reasons causing any justifiable doubt of his or her impartiality and independence before accepting the appointment. This obligation of disclosure continues throughout the arbitral proceedings.

A similar obligation of disclosure is also enshrined in the ISTAC arbitration rules.

Immunity of arbitrators from liability

To what extent are arbitrators immune from liability for their conduct in the course of the arbitration?

Under the IAL and the CPL, unless otherwise agreed by the parties, an arbitrator is obliged to compensate the parties for the loss caused due to his or her failure to carry out his or her duties. 

Jurisdiction and competence of arbitral tribunal

Court proceedings contrary to arbitration agreements

What is the procedure for disputes over jurisdiction if court proceedings are initiated despite an existing arbitration agreement, and what time limits exist for jurisdictional objections?

If court proceedings are initiated despite an existing arbitration agreement, the respondent is entitled to raise a preliminary objection (ie, the arbitration objection) as a rule, within two weeks from receiving the claimant’s complaint. 

Unless the arbitration agreement is invalid or its application is impossible, the court will dismiss the case on procedural grounds. It should be noted that such objection is necessary for the dismissal of the claim. The courts do not examine arbitration clauses ex officio.

Jurisdiction of arbitral tribunal

What is the procedure for disputes over jurisdiction of the arbitral tribunal once arbitral proceedings have been initiated, and what time limits exist for jurisdictional objections?

The principle of competence-competence exists under International Arbitration Law No. 4686 (IAL) and Civil Procedure Law No. 6100 (CPL). Accordingly, the arbitral tribunal is entitled to rule on its own jurisdiction. The preliminary objection must be included in the statement of defence. 

As per the IAL and the CPL, parties cannot apply to the courts for challenging an arbitral tribunal’s ruling on its jurisdiction. Instead, jurisdictional objection can be a ground for setting aside the award.

Arbitral proceedings

Place and language of arbitration, and choice of law

Failing prior agreement of the parties, what is the default mechanism for the place of arbitration and the language of the arbitral proceedings? How is the substantive law of the dispute determined?

As per International Arbitration Law No. 4686 (IAL) and Civil Procedure Law No. 6100 (CPL), failing prior agreement of the parties, the place of arbitration will be determined by the sole arbitrator or the arbitral tribunal depending on the specifics of the case.

Under the IAL, if the parties have not agreed on the language of the arbitral proceedings, the language will be determined by the sole arbitrator or the arbitral tribunal.

CPL does not stipulate a provision regarding the substantive law to apply to the merits of the dispute. The parties to an arbitration can freely decide on the law applicable to the merits of the case. If no such agreement between the parties exists, the arbitral tribunal can apply Turkish law or a foreign law to the merits of the case.

Under the IAL, the parties are free to decide on the law applicable to the merits of the case. In the case of the silence of parties, the sole arbitrator or the arbitral tribunal will apply the substantive law, which has the closest connection with the dispute.

Commencement of arbitration

How are arbitral proceedings initiated?

As per the IAL and the CPL, unless the parties agree otherwise, arbitral proceedings are deemed to be initiated in the following cases:

  • when the claimant applies to the court, person or institution which will select the arbitrator and notifies the respondent;
  • when the claimant appoints his or her arbitrator and notifies the respondent; or
  • if the name of the arbitrator is indicated in the agreement, the date when the respondent receives the request of arbitration.

Under the CPL, the request for arbitration will include arbitration clause or arbitration agreement, main agreement, the facts upon which relief sought by the claimant is based and its request whereas under the IAL, the request of arbitration shall include full names, titles, addresses of each of the parties and, if any, of their representatives, the agreement or legal relationship related to the dispute, the facts leading to the claims, the subject of the dispute and the quantum in addition to the above.

As per ISTAC arbitration rules, any party wishing to commence an arbitration will submit its request for arbitration to the Secretariat along with one copy for each party, arbitrator and one copy for the Secretariat. The Secretariat will notify the claimant and the respondent of the receipt of the request and the date of such receipt. The request for arbitration will include the following:

  • full names, titles, addresses, telephone and facsimile numbers and email addresses of each of the parties and, if any, of their representatives;
  • brief explanations on the subject matter, nature and circumstances of the dispute;
  • general information of the facts upon which relief sought by the claimant is based;
  • along with the relief sought, the amount of any quantified claims, and for the claims for which the amount cannot be determined, an estimate of their monetary value;
  • a copy of the arbitration agreement and any other relevant documents that are considered necessary; and
  • statements concerning the number of arbitrators, the choice of arbitrators, the seat of arbitration, the language of arbitration and the applicable law.

Hearing

Is a hearing required and what rules apply?

Under both the IAL and the CPL, the arbitral tribunal can decide to conduct the proceedings through file examination or to hold hearings for submission of evidence, statements or expert explanations. In other words the arbitral tribunal is under no obligation to hold a hearing. Also, unless otherwise agreed by the parties, the arbitral tribunal may decide to hold a hearing upon the request of one of the parties at an appropriate stage of the proceeding.

The law does not provide a rule specific for hearings; however, the hearings should be held in line with general principles applicable to arbitral procedure, in particular principle of due process and equality of arms.

In April 2020, ISTAC introduced online hearing rules and procedures. The rules regulate main issues of online hearings. Live court online hearings using video or telephone conferencing technology may be instigated at the request of a party or at the discretion of the arbitrator or arbitral tribunal.

Evidence

By what rules is the arbitral tribunal bound in establishing the facts of the case? What types of evidence are admitted and how is the taking of evidence conducted?

As per article 12 of IAL, the arbitral tribunal may appoint an expert and carry out on-site inspection. It is also common practice for an arbitral tribunal to order ‘document production’ and ‘cross/direct examination of witnesses’ to establish the facts of the case. 

Generally, the procedure for taking evidence can be determined by the parties referring to the procedural rules underdomestic law or institutional rules. Often the parties apply or seek guidance from the IBA Rules on the Taking of Evidence in International Arbitration.

Court involvement

In what instances can the arbitral tribunal request assistance from a court, and in what instances may courts intervene?

The intervention of courts is possible in the following instances:

  • appointment or disqualification of arbitrator;
  • extension of the arbitration period;
  • evidence collection or witness statement; and 
  • enforcement of provisional injunction or attachment.

Confidentiality

Is confidentiality ensured?

The confidentiality of arbitration is not regulated under the CPL and the IAL. It is useful that the party who would like to ensure the confidentiality of the arbitral proceeding adds a confidentiality clause in the arbitration agreement.

As per the ISTAC Arbitration Rules, unless otherwise agreed by the parties, the arbitral proceedings are confidential.

The confidentiality of the award may be compromised at enforcement or annulment stage as the hearings are held publicly and the physical case file are available to other attorneys qualified in Turkey.

Interim measures and sanctioning powers

Interim measures by the courts

What interim measures may be ordered by courts before and after arbitration proceedings have been initiated?

Under the International Arbitration Law No. 4686 (IAL), the courts may order provisional injunction or attachment decisions before or during the arbitration proceedings upon the request of one of the parties. If the request is made prior to the arbitration proceedings, the applicant is obliged to start the arbitration proceedings in 30 days to prevent its cancellation.

As per the Civil Procedure Law No. 6100 (CPL), the courts may order provisional injunction or attachment decisions before or during the arbitration proceedings only with the consent of the arbitral tribunal or with the agreement of the parties. The deadline for starting arbitration proceedings is two weeks.

Interim measures by an emergency arbitrator

Does your domestic arbitration law or do the rules of the domestic arbitration institutions mentioned above provide for an emergency arbitrator prior to the constitution of the arbitral tribunal?

ISTAC arbitration rules provide for an emergency arbitrator prior to the constitution of the arbitral tribunal except for the cases where the parties have agreed in writing that the emergency arbitrator rules will not apply.

Interim measures by the arbitral tribunal

What interim measures may the arbitral tribunal order after it is constituted? In which instances can security for costs be ordered by an arbitral tribunal?

As per the IAL and the CPL, unless otherwise agreed by the parties, the arbitral tribunal may order interim measures provided that the measures not to be enforced through execution offices or to be executed through other official authorities or that bind third parties.

As for the security for costs, under the IAL, the arbitral tribunal may ask the claimant to deposit security for costs. In case the claimant does not pay security for costs within 30 days as of the stay of proceedings, the arbitral proceedings will be terminated. As per the CPL, the claimant has one month as of the stay of proceedings to pay the security costs determined by the arbitral tribunal. In case of failure, the arbitral proceedings will be terminated.

Sanctioning powers of the arbitral tribunal

Pursuant to your domestic arbitration law or the rules of the domestic arbitration institutions mentioned above, is the arbitral tribunal competent to order sanctions against parties or their counsel who use ‘guerrilla tactics’ in arbitration? May counsel be subject to sanctions by the arbitral tribunal or domestic arbitral institutions?

In the IAL, the CPL or the ISTAC rules, there are no specific provisions giving the arbitral tribunal the authority to order sanctions against parties or their counsel who use ‘guerrilla tactics’ in arbitration. In such case, the arbitral tribunal may resort to general provisions of the law or arbitration rules and may request for an interim measure to put in place in order to refrain a party using ‘guerilla tactics’. 

Bar complaints and filing of criminal complaints are options available for those who are seeking sanctions against guerrilla tactics.

Awards

Decisions by the arbitral tribunal

Failing party agreement, is it sufficient if decisions by the arbitral tribunal are made by a majority of all its members or is a unanimous vote required? What are the consequences for the award if an arbitrator dissents?

As per International Arbitration Law No. 4686 (IAL) and Civil Procedure Law No. 6100 (CPL), unless agreed otherwise, the decisions by the arbitral tribunal are made by a majority of all its members. Also, certain procedural issues may be decided by the presiding arbitrator, if so authorised by the parties or the members of the arbitral tribunal.

Dissenting opinions

How does your domestic arbitration law deal with dissenting opinions?

Under the IAL and the CPL, it is possible that an award is rendered by majority of votes and that the dissenting opinion is included in the award. In practice, it is sometimes seen that the dissenting arbitrators do not sign the award or resign at the last stage of the proceedings. It is generally accepted that this would not affect the validity of the award.

Form and content requirements

What form and content requirements exist for an award?

As per the CPL and the IAL, names of the members of arbitral tribunal rendering the award; names, titles and addresses of the parties and their representatives, if any; legal reasons of the award and its reasoning; the parties’ rights and obligations, arbitration costs stated by the award; the period of time for cancellation; the seat of arbitration and the date of the award; the signatures and dissenting votes of arbitrators, if any are included in the award.

Time limit for award

Does the award have to be rendered within a certain time limit under your domestic arbitration law or under the rules of the domestic arbitration institutions mentioned above?

As per the IAL and the CPL, unless agreed otherwise by the parties, the arbitral tribunal should render its decision on the merits within one year as of the selection of the sole arbitrator or the date of the first meeting minutes of the arbitral tribunal. The time limit can be extended by the parties’ consent or by a court decision upon the request of one of the parties. The time extension to be granted by the court shall be final.

Under the ISTAC arbitration rules, the sole arbitrator or arbitral tribunal should render the award on the merits within six months from the date upon which the completion of the signatures on the terms of reference or, the date of notification to the sole arbitrator or arbitral tribunal by the secretariat of the approval of the terms of reference. The time limit can be extended either upon the agreement of the parties or if the parties fail to agree, the Board may extend the time limit upon the sole arbitrator or arbitral tribunal’s request or in cases where it deems necessary on its own initiative.

Date of award

For what time limits is the date of the award decisive and for what time limits is the date of delivery of the award decisive?

As per the IAL and the CPL, the time limits for a challenge or a request for correction of the award commence with the notification of the award to the parties. As per the IAL and CPL, for setting aside the award, the period of time of 30 days and one month, respectively, commences as of the notification of the award to the parties.

Types of awards

What types of awards are possible and what types of relief may the arbitral tribunal grant?

Under the IAL and the CPL, final award and, unless otherwise agreed by the parties, partial awards are possible.

The arbitral tribunal may rule for damages; performance; declaratory judgment; costs; establishment; modification or termination of a legal relationship.

Termination of proceedings

By what other means than an award can proceedings be terminated?

As per the IAL and the CPL, the proceedings can be terminated in the following cases:

  • settlement of the parties;
  • claimant withdraws its claims, in principle;
  • parties’ agreement on termination of the proceeding;
  • arbitral tribunal decides that it is impossible or unnecessary to continue the arbitral proceeding;
  • the court decides not to extend the arbitration period;
  • the arbitral tribunal cannot render an award unanimously despite the parties’ agreement on rendering the award unanimously;
  • the incapacity of a party preventing continuation of the arbitral proceeding; and
  • non-payment of the advance costs.

Cost allocation and recovery

How are the costs of the arbitral proceedings allocated in awards? What costs are recoverable?

Under the IAL and the CPL, unless otherwise agreed by the parties, the losing party will pay the costs for arbitral proceedings. If the award is in favour of both parties, the costs will be allocated proportionally. As a rule, the recoverable costs include remuneration of arbitrators, expert fees and attorney fees. 

Interest

May interest be awarded for principal claims and for costs, and at what rate?

The interest is not stipulated in the IAL and the CPL; however, the arbitral tribunal can decide for an interest subject to applicable law.

Proceedings subsequent to issuance of award

Interpretation and correction of awards

Does the arbitral tribunal have the power to correct or interpret an award on its own or at the parties’ initiative? What time limits apply?

As per both International Arbitration Law No. 4686 (IAL) and Civil Procedure Law No. 6100 (CPL), the arbitral tribunal has the power to correct and interpret an award on its own or at the parties’ initiative within two weeks or 30 days as of the notification of the award, respectively.

Challenge of awards

How and on what grounds can awards be challenged and set aside?

Under the CPL and the IAL, the grounds for setting aside an award are as follows:

  • the incapacity of one of the parties or invalidity of the arbitration agreement;
  • non-compliance with the procedure of appointment of arbitrators stipulated under the arbitration agreement or the law;
  • non-issuance of an award within the time limits;
  • non-competence of the arbitral tribunal;
  • non-arbitrability; and
  • an award violating public order.

Under the IAL, the grounds that can be examined ex-officio by the court are non-arbitrability and violation of public order. Unlike the IAL, the CPL grants a broader authority to courts allowing them to examine all the aforementionedgrounds ex-officio.

Levels of appeal

How many levels of appeal are there? How long does it generally take until a challenge is decided at each level? Approximately what costs are incurred at each level? How are costs apportioned among the parties?

Under the IAL, to set aside an award, a party must apply to the regional court of justice within 30 days as of the notification of the award. The decision on annulment can take approximately two years. The decision to be rendered by the regional court can be appealed as per the CPL which can take one and a half years. At each level, the losing party will bear the costs.

As per the CPL, to set aside an award, a party must apply to the regional court of justice within one month as of the notification of the award which can take approximately two years. The decision to be rendered by the regional court can be appealed within one month which can take approximately one and a half years. Following the appeal, retrial by the court can be applied to the extent possible which can take two years.

Recognition and enforcement

What requirements exist for recognition and enforcement of domestic and foreign awards, what grounds exist for refusing recognition and enforcement, and what is the procedure?

Foreign arbitral awards are subject to recognition and enforcement proceedings that are initiated either pursuant to New York Convention or the Turkish International Private and Procedural Law (IPPL). If the requirements under New York Convention or IPPL (which reflects principles almost identical to those enshrined in New York Convention) are met, then the foreign arbitral awards are recognised or enforced (depending on the character of the award) by Turkish courts.

Domestic awards are not subject to recognition and enforcement proceedings.

In line with the framework set by UNCITRAL Model Law, New York Convention, the grounds for refusing enforcement of foreign awards are invalidity of the arbitration agreement or incapacity of one parties, violation of the principle of due process, the award being out of the scope the arbitration agreement and the request of the parties, non-binding award or an award that has been set aside, non-arbitrability, violation of public policy.

As the enforcement of arbitral awards is subject to a simple procedure according to the CCP, as a rule there will be only one round of exchange of petitions and parties will be allowed to submit their petition until the preliminary hearing.

Time limits for enforcement of arbitral awards

Is there a limitation period for the enforcement of arbitral awards?

Under the CPL, the time limit for enforcement of arbitral awards is 10 years as of the date of the award. As for the enforcement of foreign arbitral awards, a time limit of 10 years will commence as from the date of finalisation of the enforcement decision by the court.

The New York Convention does not dictate a time limit for the enforcement of foreign arbitral awards. Case law is also silent on the issue. The issue remains controversial in legal circles.

Enforcement of foreign awards

What is the attitude of domestic courts to the enforcement of foreign awards set aside by the courts at the place of arbitration?

As per article 62 of Turkish International Private and Civil Procedure Law, foreign awards set aside by the courts at the place of arbitration cannot be enforced in Turkey.

However, the vast majority of arbitral awards whose enforcement are sought in Turkey fall within the scope of the New York Convention. The wording of the New York Convention does not oblige the Turkish courts to refuse enforcement of foreign arbitral awards set aside at their seats. The issue remains controversial in legal circles.

Enforcement of orders by emergency arbitrators

Does your domestic arbitration legislation, case law or the rules of domestic arbitration institutions provide for the enforcement of orders by emergency arbitrators?

There is no specific regulation in the domestic arbitration stipulating the enforcement of orders by emergency arbitrators. The issue remains controversial in legal circles.  

Cost of enforcement

What costs are incurred in enforcing awards?

Apart from contractual and statutory attorney fees, claimants in enforcement proceedings incur the following costs.

 

Court fees

A claimant seeking the enforcement of a foreign arbitral award in Turkey will have to deposit court fees. There are two types of court fees in Turkey, namely the proportional fee and the fixed fee. The fee applicable to enforcement proceedings remained controversial for a long time. However, the enactment of the Code Amending Related Codes for the Improvement of the Investment Environment No. 6728 and the consequent judgment of the General Assembly of the Civil Chambers of the Court of Cassation brought the controversy to an end. Fixed fees apply to enforcement proceedings.

 

Collateral

Pursuant to article 48 of the IPPL, foreign plaintiffs – be they individuals or legal entities – initiating a lawsuit (including enforcement proceedings) before a Turkish court are required to provide collateral. The amount of collateral is to be determined by the court. The court may hold the plaintiff exempt from providing collateral on a reciprocity basis. Reciprocity can be established via bilateral or multilateral agreements on mutual judicial assistance in civil matters between the countries.

Other

Influence of legal traditions on arbitrators

What dominant features of your judicial system might exert an influence on an arbitrator from your jurisdiction?

Under Turkish law, US-style discovery does not exist. 

Professional or ethical rules

Are specific professional or ethical rules applicable to counsel and arbitrators in international arbitration in your jurisdiction? Does best practice in your jurisdiction reflect (or contradict) the IBA Guidelines on Party Representation in International Arbitration?

There are no specific professional or ethical rules applicable to counsel in international arbitration in Turkey. However, the attorneys registered before the Bar Associations in Turkey are bound with the ethical and professional rules stated in the Attorneyship Law and Professional Rules of the Union of Turkish Bar Associations.

Parties are free to agree on the application of the IBA Guidelines on Party Representation in International Arbitration. In the absence of the agreement, the arbitral tribunal may at its own discretion follow these rules as non-binding guidelines.

Third-party funding

Is third-party funding of arbitral claims in your jurisdiction subject to regulatory restrictions?

Under Turkish law, there are no regulatory restrictions regarding third-party funding of arbitral claims. 

Regulation of activities

What particularities exist in your jurisdiction that a foreign practitioner should be aware of?

Citizens of certain countries are required to obtain a visa. Attorneys who are not qualified practitioners under Turkish law are allowed to represent their clients in arbitration proceedings.

Update and trends

Legislative reform and investment treaty arbitration

Are there any emerging trends or hot topics in arbitration in your country? Is the arbitration law of your jurisdiction currently the subject of legislative reform? Are the rules of the domestic arbitration institutions mentioned above currently being revised? Have any bilateral investment treaties recently been terminated? If so, which ones? Is there any intention to terminate any of these bilateral investment treaties? If so, which ones? What are the main recent decisions in the field of international investment arbitration to which your country was a party? Are there any pending investment arbitration cases in which the country you are reporting about is a party?

The Court of Cassation has rendered a decision on the issue of agreements executed between two Turkish parties and the law on the compulsory use of Turkish. Accordingly, the court has decided that if an arbitration proceeding involves a foreign element, the foreign language would not constitute a violation of Law No. 805 and thus the violation of public policy. The 12th Chamber of Istanbul Regional Court, in its decisions in 2020 and 2021, followed thisapproach.  

Although there are still contradictory opinions on the issues, the recent decision of the Court of Cassation is considered as a pro-arbitration approach.  

In 2021, Turkey signed BITs with the Democratic Republic of the Congo and Angola. Turkey ratified its new BIT with Georgia in 2021.

A new BIT with China entered force in November 2020.

 

This article was republished on GTDT in March 2022. See the chapter here. See our Lexology content here.