Arbitration in Turkey

Laws and institutions
Arbitration agreement
Constitution of arbitral tribunal
Jurisdiction and competence of arbitral tribunal
Arbitral proceedings
Interim measures and sanctioning powers
Awards
Proceedings subsequent to issuance of award
Other
Update and trends

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 (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 (ICSID Convention).

Bilateral investment treaties

Do bilateral investment treaties exist with other countries?

There are 76 bilateral investment treaties (BIT) in force. The countries with which Turkey has entered into BIT are Afghanistan, Albania, Argentina, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, BLEU (Belgium-Luxembourg Economic Union), Bosnia and Herzegovina, Bulgaria, China, Croatia, Cuba, Czechia, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, Iran, Italy, Japan, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Malaysia, Malta, Mauritius, Mexico, Moldova, Mongolia, Morocco, Netherlands, North Macedonia, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uzbekistan and Yemen.

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, domestic arbitral proceedings are regulated as per the Civil Procedure Law No. 6100 (CPL) whereas foreign arbitral proceedings are governed under International Arbitration Law No. 4686 (IAL).

IAL shall be applicable to disputes having a foreign element and where the seat of arbitration is Turkey. As per the IAL, foreign element exists if:

  • the parties to the arbitration agreement have their domiciles or regular residences or places of business in different states;
  • 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;
  • 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;
  • 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;
  • 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
  • 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 No. 5718 are the primary legislation.

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; 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 stipulate any 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 foreign law to the merits of the case.

Similarly, under IAL, the parties are free to decide on the law applicable to the merits of the case. In case of the silence of parties, the arbitral tribunal shall apply the substantive law of a state, which 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 the Istanbul 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 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. If 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.

Istanbul Chamber of Commerce Arbitration and Mediation Centre has similar provisions regarding the 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 which it finds to be most closely related to the dispute.

Arbitration agreement

Arbitrability

Are there any types of disputes that are not arbitrable?

Under the IAL and the 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 Cassation’ interpretation is that such disputes are arbitrable.

The disputes relating to the cancellation of a general assembly meeting and dissolution of the company are considered as non-arbitrable by the Court of Cassation. 

Requirements

What formal and other requirements exist for an arbitration agreement?

As per the CPL and the IAL, the arbitration agreement must be in writing. 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 plaint petition and the defendant has not objected to the arbitration agreement in its response petition, the lack of an agreement in writing will be considered cured.

In case 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 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?

Apart from the above-mentioned requirements, the violation of general principles on the validity of agreements such as error, deception, coercion, legal incapacity, etc. will result in the non-enforceability of the arbitration agreement. Regarding the legal incapacity, the principal must 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 an 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?

Under Turkish law, whether third parties are bound by an arbitration agreement is controversial. In terms of singular succession, in general, the Court of Cassation’s precedents accept that third parties be bound by an arbitration agreement in the following cases: transfer of bill of lading, assignment of claims and succession of the insurer.

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 doctrine.

Multiparty arbitration agreements

What are the requirements for a valid multiparty arbitration agreement?

In domestic arbitration law, no specific requirements regarding the validity of multiparty arbitration agreement exist. 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 decide for the consolidation of the proceedings as long as principles of due process and judicial economy are duly respected.

Also, Istanbul Arbitration Center (ISTAC) rules provide for the consolidation of separate arbitral proceedings pending under the ISTAC rules, provided that the following conditions are satisfied: if the parties to the arbitrations that are requested to be consolidated are different, and all parties have agreed to the consolidation; or if the parties to the arbitrations that are requested to be consolidated are the same and the parties have (1) agreed to consolidation, (2) all of the claims in the arbitrations are based on the same arbitration agreement, or (3) 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 the IAL and the 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 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, in case 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 the 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.

In case the parties have agreed on the appointment of sole arbitrator but have not designated the arbitrator, the court will intervene as per 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;
  • in case a reason of dismissal specified under the arbitration procedure agreed by the parties exists; or
  • impartiality or independence of the arbitrator is impaired.

The parties are free to determine the procedure of dismissal of the arbitrators. In case of the silence of the parties on the procedure, the parties to the agreement must request for the dismissal within 30 days as of the date of being aware of the 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 requests 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 the appointment of arbitrators will be applied also for the replacement.

The IBA Guidelines on Conflicts of Interest in International Arbitration will be applied with the agreement of the parties.

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.

The relationship between parties and arbitrators is defined neither in the CPL or the IAL. In the doctrine, three opinions are prominent. Some argue that it is a service agreement while others classify it as a freelance agreement. The third group 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 determine 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 the nature of the dispute. In case of the absence of such an agreement, the tariff published by the Ministry of Justice will apply.

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 also exists 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 the duties, without a valid reason.

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 counterparty is entitled to raise an arbitration objection, as a rule, within two weeks from receiving the plaint petition. Unless the arbitration agreement is invalid or its application is impossible, the court will dismiss the case on procedural grounds.

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 the IAL and the CPL. Accordingly, the arbitral tribunal is entitled to rule on its jurisdiction. The jurisdictional objection must be included in the statement of defence, at the latest. As per the IAL and the CPL, parties cannot apply to the courts for challenging the ruling of the arbitral tribunal 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 the IAL and 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 foreign law to the merits of the case.

Similarly, under IAL, the parties are free to decide on the law applicable to the merits of the case. In case of the silence of parties, the sole arbitrator or the arbitral tribunal will apply the substantive law of the state, 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 an arbitration clause or an 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 Istanbul Arbitration Center (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;
  • a brief explanation 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, which are considered necessary;
  • statements concerning the number of arbitrators, the choice of arbitrators, the seat of arbitration, the language of the 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. 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.

In April 2020, ISTAC introduced online hearing rules and procedures. The rules regulate the 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?

Generally, the procedure for taking evidence can be determined by the parties referring to the procedural rules in the domestic law or institutional rules. The parties often 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 the arbitrator;
  • extension of the arbitration period;
  • evidence collection or witness statement; or
  • 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.

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 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 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?

Domestic arbitration law does not provide for an emergency arbitrator prior to the constitution of the arbitral tribunal.

Istanbul Arbitration Center (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 from using guerilla 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 the IAL and the 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 a 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 Istanbul Arbitration Center (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 the continuation of the arbitral proceeding;
  • 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 the 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 the CPL and the IAL, 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; or
  • an award violating public policy.

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

The grounds for refusing enforcement of foreign awards are invalidity of the arbitration agreement or incapacity of one of the parties, violation of the principle of due process, the award being out of the scope of the arbitration agreement and the request of the parties, non-binding award or an award that has been set aside, non-arbitrability and violation of public policy.

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.

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 the New York Convention and Turkish International Private and Civil Procedure Law, foreign awards set aside by the courts at the place of arbitration will not be enforced.

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 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?

Under Turkish law, a fixed court fee is less than $50 and the proportional court fee is 6.831 per cent of the quantum. Regarding the enforcement of awards, there is no specific provision in the legislation on the application of fixed or proportional court fees and the application of the courts varies.

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. Also, witness statements are not common practice.

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 under Turkish law. 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.

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. Thus, there is no minimum or maximum threshold determined for third-party funding. The third-party funder can fund any of the expenses arisen from or in connection with a litigation proceeding including legal fees, counsel fee and expert costs.

Regulation of activities

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

Certain countries' citizens are required to obtain a visa; a list of those countries, which is listed at http://www.mfa.gov.tr/general-information-about-turkish-visas.en.mfa, should be checked before travelling to Turkey. 

Under the IAL, the parties can be represented by foreign real persons or legal entities in arbitral proceedings. However, attorneys who are not qualified under Turkish law will not be able to represent their clients in court 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?

Recently, the Court of Cassation rendered a decision on the issue of an agreement subject to arbitration executed between two Turkish parties having a foreign element, and the law on the compulsory use of Turkish (Law No. 805) which stipulates that Turkish companies should have their agreements in Turkish.

Accordingly, the court has decided that in case 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. Although there are still contradictory opinions on the issue, the recent decision of the Court of Cassation is considered as a pro-arbitration approach. 

Coronavirus

What emergency legislation, relief programmes and other initiatives specific to your practice area has your state implemented to address the pandemic? Have any existing government programs, laws or regulations been amended to address these concerns? What best practices are advisable for clients?

To address the pandemic, in April 2020, Istanbul Arbitration Center (ISTAC) arbitration rules introduced online hearing rules and procedures. Considering the paramount importance of working safely during the covid-19 pandemic, ISTAC’s initiative allows the practitioners to continue the arbitration work while reducing risk significantly.

Law stated date

Correct on:

Give the date on which the information above is accurate

23 November 2020

This article was first published on Lexology GTDT in February 2021. See our Lexology content here.