Arbitration laws and practice in Turkey

Hergüner Bilgen Özeke

Legal framework

National arbitration laws

What legislation applies to arbitration in your jurisdiction?

The main piece of legislation governing domestic arbitration in Turkey is the Civil Procedural Code (6100), which entered into force in 2011. International arbitration is governed by the International Arbitration Law (4686), which came into force in 2001 and which is modelled on the UNCITRAL Model Law and the international arbitration section of the Swiss Federal Private International Law 1987. 

The International Arbitration Law governs arbitrations that are based in Turkey but which involve a foreign element. Even if the seat of arbitration is not Turkey, the parties can contractually subject the arbitration to this law, provided that there is still a 'foreign element' present. In addition, the recognition and enforcement of foreign arbitral awards is regulated separately under the International Private Procedure Law (5718).

Mandatory laws

Are there any mandatory laws?

Yes, there are mandatory laws. In both local and international arbitrations, the main principle is the parties’ freedom of choice – unless this is contrary to the mandatory provisions of the Civil Procedural Code or the International Arbitration Law. The main limits lie in public order and the mandatory principles of equal treatment and due process.

New York Convention

Is your country a signatory to the New York Convention? If so, what is the date of entry into force?

Turkey ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards on July 2 1992; it entered into force on September 30 1992. 

Are there any reservations to the general obligations of the convention?

Turkey signed the New York Convention with two reservations: those pertaining to ‘reciprocity’ and what qualifies as ‘commercial’. Accordingly, only foreign arbitral awards rendered in other contracting states will be recognised and enforced under the convention. In addition, the dispute must be of a commercial nature under Turkish law.

Treaties and conventions

What other treaties and conventions in relation to arbitration is your jurisdiction party to?

Turkey is a party to the European Convention on International Commercial Arbitration 1961 and the Washington Convention on the Settlement of Investment Disputes 1965. In addition, Turkey is a party to various other bilateral agreements.

UNCITRAL

Has your jurisdiction adopted the UNCITRAL Model Law?

The International Arbitration Law is based on the UNCITRAL Model Law. 

Consequently the general principles set out in the Turkish law are the same as those enshrined in the UNCITRAL Model Law, namely:

equality of parties;

party autonomy;

non-intervention by courts;

impartiality; and

independence of arbitrators.

Reform

Are there any impending plans to reform the arbitration laws in your jurisdiction?

One of the latest developments in this area is the establishment of the Istanbul Arbitration Centre (ISTAC) under the Law on the ISTAC (6570), which entered into force on January 1 2015. Shortly after, the ISTAC approved its Rules of Arbitration (ie, the ISTAC Rules which also includes fast-track arbitration rules). Further, the Istanbul Chamber of Commerce Arbitration Centre (ITOTAM) has been a fully functional institution since 2015 with its newly amended ITOTAM Arbitration Rules which came into force on April 9 2015 and were revised on April 14 2016 by introduction of emergency arbitration rules and expedited arbitration rules.

In addition, Turkey has been contributing to the United Nations Commission on International Trade Law Online Dispute Resolution project via the Bilgi University Institute of Technology.

Arbitration agreements

Validity

What are the validity requirements for an arbitration agreement?

Under Article 4 of the International Arbitration Law and Article 412 of the Civil Procedural Code, an arbitration agreement may either be included in the main contract as an arbitration clause or be in the form of a separate agreement, regardless of whether the legal relationship between the parties is contractual in nature. The arbitration agreement must be made in writing and must be a written document signed by the parties or in the form of a letter, telegram, telex or fax exchanged between the parties or via an electronic medium, reflecting the parties’ agreement. Alternatively, if in its statement of defence the defendant does not object to the existence of an arbitration agreement referred to in the statement of claim, or where there is reference to a document containing an arbitration clause that is intended to constitute part of the main contract, a valid arbitration agreement will be considered to have been made. 

For an arbitration agreement to be valid, it must comply with the governing law; if there is no choice of law, it must comply with Turkish law. The Court of Appeals has established that the parties’ intention to resolve their dispute through arbitration must be clear and must leave no room for doubt. Finally, if an arbitration agreement is signed by a representative, he or she must have been granted special authority to sign an arbitration agreement or to bind his or her principal to arbitrate.

Enforcement of agreements

How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?

Where a dispute subject to arbitration is brought before a Turkish court and the defendant objects to it being resolved by arbitration, it must submit a preliminary objection to this effect in its statement of defence. Under Turkish law, preliminary objections cannot be made after the statement of defence has been submitted. The court will examine any objection to arbitration as a preliminary matter and seek the parties’ clear intent by reviewing their arbitration agreement, if any. If the arbitration objection is accepted, the court will dismiss the case on procedural grounds.

Consolidation

Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?

The International Arbitration Law and the Civil Procedural Code are silent about the consolidation of separate arbitration procedures. If the arbitration rules referred to in the arbitration agreement govern consolidation, these would apply. Otherwise, a decision on consolidation would be at the discretion of the arbitral tribunal. Since there is no restriction on consolidation, the arbitral tribunal may determine this based on whether the disputes arise from the same arbitration agreement or same legal relationship, and whether the parties are the same.

Choice of law

How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

According to Article 24 of the International Private Procedure Law, disputes arising from a contractual relationship are subject to the parties’ explicit choice of law. However, the choice of foreign governing law is valid for matters of private law involving a foreign element, so long as this is not contrary to public order. If the substantive law is unclear, the contract will be governed by the law with which it is most closely connected. This will be presumed to be the applicable law where the party who will perform the characteristic obligation under the contract has, at the time the contract is concluded, his or her habitual residence, or principal place of business for contracts concluded for commercial or professional activities. If the party who will perform the characteristic obligation under the contract has more than one place of business, the one which is more closely connected with the contract will apply. Considering all the circumstances of the case, the law which is more closely connected with the contract will be determined to apply.

Separability

Are there any provisions on the separability of arbitration agreements?

Under the International Arbitration Law and the Civil Procedural Code, arbitration agreements are accepted as distinct, independent agreements, separate from the underlying agreement, meaning that the validity of one agreement will not affect the other one.

Multiparty agreements

Are multiparty agreements recognised?

The International Arbitration Law and the Civil Procedural Code contain no specific provisions regarding multiparty arbitration agreements. For a multiparty arbitration agreement to be valid, it must fulfil the conditions set out in the International Arbitration Law and the Civil Procedural Code which apply to all arbitration agreements.

Arbitral tribunal

Criteria for arbitrators

Are there any restrictions?

There is no statutory criterion as to the educational and professional background of arbitrators and the law establishes no qualifications or restrictions for those fulfilling the role. Non-nationals may also act as arbitrators.

Contractual stipulations

What can be stipulated about the tribunal in the agreement?

The parties have the freedom to select arbitrators under Turkish law. This includes the freedom to determine the appointing authority to nominate the arbitrators as well as their number, nationalities and qualifications.

Default requirements

Are there any default legal requirements as to the selection of a tribunal - for example, concerning the number of arbitrators or their characteristics?

An odd number of arbitrators should always be appointed. If the parties have not agreed on the number, three will be selected. Only real persons can be selected as arbitrators. If the dispute is to be resolved by a sole arbitrator but the parties fail to agree on an appointment, they may ask the first-instance court to appoint a sole arbitrator. In an arbitration with three arbitrators, if a party fails to appoint its arbitrator within 30 days of receiving the other party’s request to do so, or if the two party-appointed arbitrators fail to appoint a third within 30 days of their appointment, the first-instance court will make the appointment.

Challenging the appointment of an arbitrator

Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this?

Yes, the appointment of an arbitrator can be challenged if any of the following statutory or contractual grounds (as determined by the parties) apply:

he or she does not have the necessary qualifications requested by the parties;

there are justifiable doubts as to his or her impartiality and independence; or

the conditions have been met under any of the challenge provisions set out in the arbitration procedure chosen by the parties.

The parties have the freedom to determine any mechanism for challenging an arbitrator. Unless otherwise agreed, the International Arbitration Law establishes that a party may challenge an arbitrator within 30 days of becoming aware of grounds which give rise to the challenge and submit its request to challenge stating its grounds to the other party and the arbitral tribunal. If this request is accepted, a new arbitrator will be appointed. If it is declined, the challenging party may request the first-instance court to overturn this decision within 30 days of receiving it. If the challenge is against a sole arbitrator, the whole arbitral tribunal or a voting majority, then the challenging party may directly apply to the first-instance court, whose decision will be deemed final. If the first-instance court accepts the grounds for challenge, the arbitration will be terminated and new arbitrators will be appointed, unless their names are specifically stated in the arbitration agreement.

Jurisdictional objections

How should an objection to jurisdiction be raised?

Under Article 7(H) of the International Arbitration Law, arbitrators may rule on their own jurisdiction, as well as any objections to the existence or validity of the arbitration agreement. Any jurisdictional objection should be made in the statement of defence, at the latest. This will be examined by the sole arbitrator or the arbitral tribunal as a preliminary matter. If the sole arbitrator or the arbitral tribunal concludes that it has jurisdiction, it will continue with the arbitration proceedings.

Replacement of an arbitrator

Why and how can an arbitrator be replaced?

An arbitrator may be replaced:

if any of the following grounds for challenge apply:

he or she does not have the necessary qualifications requested by the parties;

there are justifiable doubts as to his or her impartiality and independence; or

the conditions have been met under any of the challenge provisions set out in the arbitration procedure chosen by the parties;

if he or she fails to fulfil his or her duties entirely or in due time for any legal or factual reason; or

his or her duty ends for any reason.

The same procedures that apply to the appointment of arbitrators applies to their replacement.

Powers and obligations

What powers and obligations do arbitrators have?

As per the Court of Appeals’ precedent, the relationship between an arbitrator and the parties is a mandated one and therefore an arbitrator must act with due care. Arbitrators must be independent and impartial and are obliged to inform the parties of any situation that calls their independency or impartiality into question.

Liability of arbitrators

Are arbitrators immune from liability?

Arbitrators may make their decisions freely and independently, and will not held liable for misinterpreting the law. However, they will bear civil liability for any intentional acts or grossly negligent behaviour that causes damage to the parties. On the other hand, under Article 7(E) of the International Arbitration Law an arbitrator who fails to carry out the duties entrusted to him or her without just cause will be obliged to pay compensation for any damages caused, unless otherwise agreed. Article 419 of the Civil Procedural Code has the same effect for domestic arbitration. 

Communicating with the tribunal

How do the parties communicate with the tribunal?

The parties are free to determine the language in which the arbitral proceedings will be conducted, provided that it is spoken in a country recognised by Turkey. If the parties have not agreed on a language, the arbitrators will determine it. The parties may agree on the means of communication throughout the arbitration proceedings, either in the arbitration agreement or the terms of reference.

Reaching decisions

Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this?

The parties may decide in the arbitration agreement that the award is to be rendered unanimously. However, such agreements are not common and the will of the majority will suffice. Indeed, Article 7(A) of the International Arbitration Law (Article 415 of the Civil Procedural Code has the same effect) requires that there be an odd number of arbitrators so that an arbitral tribunal can always render a majority decision. Arriving at a decision with a majority vote will not affect the award’s enforceability or binding effect on the parties.

Arbitrability

Are there any disputes incapable of being referred to arbitration?

Disputes relating to rights in rem over immovables in Turkey and disputes which cannot be subject to the parties’ will (eg, those arising from family law, employment law – except for disputes arising from termination of employment contract – administrative law, criminal law and bankruptcy law) are non-arbitral, as set out in Article 1(4) of the International Arbitration Law and Article 408 of the Civil Procedural Codes.

Can the arbitrability of a dispute be challenged?

Pursuant to Article 7(H) of the International Arbitration Law and Article 422(2) of the Civil Procedural Code, an objection against an arbitrator’s competence must be made along with the statement of defence at the latest. 

However, given that non-arbitral issues are considered within the scope of the public order, it is accepted that an objection regarding the non-arbitrability of a dispute may be made at any stage. If the dispute cannot be referred to arbitration under Turkish law, then this constitutes a ground for setting aside and will be taken into consideration by the court ex officio in the setting aside proceedings or enforcement proceedings.

Jurisdiction and competence-competence

Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?

The principle of competence-competence is recognised under Turkish law. An arbitral tribunal may decide on its own jurisdiction under Article 7(H) of the International Arbitration Law and Article 422 of the Civil Procedural Code, including any objections with respect to the existence and validity of the arbitration agreement.

Arbitral proceedings

Starting an arbitration proceeding

What is needed to commence arbitration?

Unless the parties have agreed otherwise, the arbitration proceedings will commence on the date when:

an application is made to the first-instance court or relevant person or institution which is entitled to appoint the arbitrator as per the parties’ agreement;

the claimant appoints its arbitrator and requests that the other party appoint its arbitrator (in cases where arbitrators must be mutually appointed); or

the request to resolve the dispute through arbitration is received by the other party (in cases where the identity of the arbitrators is determined in the arbitration agreement).

Limitation periods

Are there any limitation periods for the commencement of arbitration?

General provisions apply with respect to limitation periods, which may vary depending on the type of dispute. However, the general limitation period under Turkish law is 10 years unless a different limitation period applies.

Procedural rules

Are there any procedural rules that arbitrators must follow?

Arbitrators must follow the provisions of the arbitration agreement and the procedural rules chosen by the parties to govern the proceedings.

Dissenting arbitrators

Are dissenting opinions permitted under the law of your jurisdiction?

Yes, dissenting opinions are permitted under Turkish law.

Judicial assistance

Can local courts intervene in proceedings?

Under the International Arbitration Law and the Civil Procedural Code, an arbitrator or arbitral tribunal may seek the Turkish courts’ assistance in collecting evidence. Either the parties or the arbitral tribunal may ask the court to compel a witness to give testimony at the start of proceedings if there is a significant risk that it may be either impossible or extremely difficult to obtain a witness statement during these.

Can the local courts assist in choosing arbitrators?

Yes, if the dispute is to be resolved by a sole arbitrator but the parties fail to agree on an appointment, a party may ask the first-instance court to appoint a sole arbitrator. In arbitration with three arbitrators, if a party fails to appoint its arbitrator within 30 days of receipt of the other party’s request to do so, or if the two party-appointed arbitrators fail to appoint the third arbitrator within 30 days of their appointment, the first-instance court will make the appointment.

What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties?

The International Arbitration Law provides for certain procedural rules regarding the conduct of proceedings. For instance, if a claimant fails to submit its statement of claim in a timely manner or fails to fix deficiencies in its statement within the period determined by the arbitral tribunal, the arbitration proceedings will be concluded. However, if the defendant fails to submit its statement of defence this will be considered an admission of the claimant’s allegations and the arbitrator(s) will continue with the proceedings. 

Nevertheless, in such a scenario, the defendant must be provided with a proper opportunity to submit its defence and its right to defence should be strictly observed. Again, in the event of the failure of any party to be present at the hearings without any reasonable grounds or to submit evidence in a timely manner, the arbitrator(s) will continue with the proceedings and decide on the basis of the existing evidence in the file.

The participation of third parties in arbitral proceedings is subject to the approval of the parties and the third party concerned.

Third parties

In what instances can third parties be bound by an arbitration agreement or award?

In principle, an arbitration agreement and an arbitral award are binding only on the parties to the agreement. Under Article 6(2) of the International Arbitration Law, an arbitral tribunal cannot award an interim injunction or an interim attachment that is binding on third parties. However, it is accepted that an arbitration agreement will be binding on third parties in the event of a full succession (ie, insolvency) or a partial succession (ie, assignment).

Default language and seat

Unless agreed by the parties, what is the default language and location for arbitrations?

As stated under Article 9(1) of the International Arbitration Law and Article 425 of the Civil Procedural Code, in the absence of the parties’ agreement on the seat of arbitration, this will be determined by the sole arbitrator or the arbitral tribunal, taking into consideration the circumstances of the case. As per Article 10(C) of the law, the sole arbitrator or arbitral tribunal will determine the language of arbitration unless otherwise agreed.

Gathering evidence

How is evidence obtained by the tribunal?

The parties may provide their evidence along with their submissions at the pleading stage and/or may refer to evidence to be submitted in the subsequent course of arbitration proceedings. They may also submit witness statements. The parties must submit their evidence within the timeframe granted by the arbitrator(s) by a procedural order. However, the arbitrator(s) must grant sufficient time and proportionate time limits for the parties, in strict compliance with the principles of due process and equal treatment.

The International Arbitration Law does not provide for a document production procedure. If one is provided in the arbitrator(s)’ procedural order or the parties’ agreement, this may be followed.

An arbitrator or arbitral tribunal may also seek the assistance of the Turkish courts when it comes to collecting evidence.

What kinds of evidence are acceptable?

Where they deem it necessary the arbitrator(s) may:

appoint one or more experts to give evidence on technical aspects of the dispute;

require a party to give any relevant information to the expert or provide access to any relevant documents, goods or other property for their inspection; and

request a site visit.

Confidentiality

Is confidentiality ensured?

Neither the International Arbitration Law nor the Civil Procedural Code contain any provisions as to the confidentiality of arbitral proceedings. However, one of the reasons for the parties to choose arbitration is that in practice proceedings tend to be private and confidential. The parties may also choose to include a confidentiality clause in the agreement or terms of reference, or may refer to certain institutional rules providing for confidentiality.

Can information in arbitral proceedings be disclosed in subsequent proceedings?

Unless the arbitral proceedings are confidential or the information to be disclosed is of a confidential nature (eg, involving trade secrets or personal data), there is no restriction on disclosing any information divulged in arbitral proceedings in subsequent proceedings.

Ethical codes

What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

The Attorney Law sets out the ethical and professional standards which apply to attorneys. These are in line with international ethical and professional principles, such as conflict of interest, confidentiality/professional secrecy, honesty, integrity and fairness.

Costs

Estimation & allocation

How are the costs of arbitration proceedings estimated and allocated?

The parties may refer to the established international rules or institutional arbitral rules to determine the arbitration fees. Otherwise, fees will be determined by the arbitrators and the parties, taking into consideration the amount in dispute, the nature of the dispute, the number of arbitrators and the duration of the arbitration. In the absence of any agreement between the parties and the arbitrator/arbitral tribunal, or a provision in the arbitration agreement regarding fees, the fees for domestic arbitration will be set according to the Civil Procedural Code’s arbitrator fee tariff, which is published in theOfficial Gazette every year. For international arbitration, fees are determined as per the arbitrator fee tariff set out in the International Arbitration Law, which is also published annually in the Official Gazette.

Security for costs

Can the national court or tribunal order security for costs under the law in your jurisdiction?

Yes, the national court or tribunal may order security for costs as an appropriate guarantee before rendering a preliminary injunction or attachment.

The award

Requirements

What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?

While domestic awards issued in Turkey can be set aside, a review of the request will be carried out on the file unless the court decides otherwise. The court may refuse to suspend the award’s execution unless the applicant deposits a security. Each party may appeal against the arbitral award through annulment proceedings, although an appeal will not suspend the award’s execution.

While the rules established by the New York Convention are the principal authority for enforcing foreign arbitral awards in Turkey, they do not apply to domestic arbitral awards or those related to non-commercial matters. In cases where a party is not a signatory to the New York Convention or is not a party to any of the international treaties, bilateral or multilateral, ratified by Turkey, the International Private Procedure Law governs the recognition and enforcement of arbitral awards and provides a mechanism parallel to that established by the convention.

In order for a foreign arbitration award to be executed in Turkey, a competent Turkish court must render an enforcement decision. Courts may do this without reviewing the award’s merits, should the foreign judgment meet the following criteria:

There must be a valid arbitration agreement or arbitration clause.

The judgment must comply with Turkish public order and morality rules.

The subject matter of the foreign judgment must not fall under the exclusive jurisdiction of Turkish courts (eg, disputes arising from immovable assets or concerning public order).

The right of defence must be conferred to the parties and they must have been duly served or made fully aware of the proceedings throughout the whole process. In line with the principle of public order, due process must have been observed.

The party against whom the award is invoked must have been made fully aware that arbitrator(s) were being appointed and granted the right to defence.

The appointment of arbitrator(s) or the procedure that the arbitrator(s) apply must comply with the parties’ agreement or in the absence of such an agreement, with the law of country where the award was rendered.

The award must deal with matters within the scope of the parties’ agreement.

The judgment must be final and binding with no recourse to appeal or similar review under the laws of the respective country.

Like domestic arbitral awards, arbitral awards subject to the International Arbitration Law are also subject to setting-aside and appeal proceedings.

Timeframe for delivery

Are there any time limits on delivery of the award?

Both the Civil Procedural Code and the International Arbitration Law establish that unless otherwise agreed between the parties, the arbitrators shall render the award on the merits within one year from the date on which the sole arbitrator was appointed; or in cases where an arbitral tribunal is constituted, from the date on which the minutes of the first meeting of the arbitral tribunal were issued. The term of the arbitral proceedings may be extended by the parties’ mutual agreement or, if they fail to agree, by a competent court of first instance on the application of either party. If the court does not grant an extension, the arbitral proceedings will be terminated upon the expiration of the statutory arbitration term. The decision of the first-instance court is final and binding.

Remedies

Does the law impose limits on the available remedies? Are some remedies not enforceable by the court?

An arbitral tribunal that is strictly bound by the parties’ request will not grant remedies or relief with respect to matters that are not within the scope of the arbitration agreement and the parties’ request. In addition, since punitive damages are not recognised under Turkish law, any arbitral award that includes these would be contrary to Turkish public order and would thus be set aside.

What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?

At the request of one of the parties, the arbitral tribunal may issue a preliminary injunction or attachment during the arbitral proceedings and demand appropriate guarantees or security from the requesting party. The International Arbitration Law limits the tribunal’s authority when it comes to ordering a preliminary injunction or attachment by prohibiting it from issuing preliminary injunctions or attachments that are solely enforceable by governmental authorities. For example, real property owned by the respondent may not be seized based on a preliminary attachment ordered by an arbitral tribunal because the seizure of real property requires the involvement of execution officers.

The arbitral tribunal is prohibited from issuing preliminary injunctions or attachments which are binding on third parties because it may not participate in the arbitral proceedings and thus could not properly object to the decision rendered by the arbitral tribunal.

Either party may request the court to impose a preliminary injunction or provisional attachment during the arbitral proceedings in cases where the arbitrator or arbitral tribunal is unable to act effectively and in a timely manner. If such conditions do not exist, an application to the court during the ongoing arbitration proceedings would be made only upon the approval of the sole arbitrator or arbitral tribunal or in the presence of a written agreement between the parties.

It is also possible for either party to request that the court impose a preliminary injunction or provisional attachment prior to the arbitral proceedings. If a party has obtained a preliminary injunction or attachment from a domestic court with respect to a matter that is subject to an arbitration agreement prior to arbitral proceedings, it must initiate arbitral proceedings within 30 days of obtaining or the preliminary injunction or attachment will automatically become null and void.

The preliminary injunction or attachment decision may be amended or revoked by the arbitrator or arbitral tribunal.

If one of the parties refuses to comply with a preliminary injunction or attachment rendered by the arbitral tribunal, the other party may request the assistance of the competent court, which may enforce the arbitral tribunal’s decision by issuing a preliminary injunction or attachment. If necessary, the competent court may authorise another court to issue the injunction or attachment, when justified by geographical reasons.

Interest

Can interest be awarded?

There is no provision in the International Arbitration Law that precludes the arbitral tribunal from awarding interest. The arbitral tribunal may determine what interest should apply and whether a party is liable to pay interest under the applicable law.

At what rate?

The rate of interest applicable to the dispute will differ depending on the applicable law. Under Turkish law, the default interest rate is 9%, the default interest rate which applies to late payments in product service supply is 11.50% (unless otherwise is agreed by the parties) as of January 1 2016, and the advance interest rate is 10.50%.

Finality

Is the award final and binding?

The award should be final and binding in order to be recognised and enforced under Turkish law.

What if there are any mistakes?

Within 30 days under the International Arbitration Law (two weeks under the Civil Procedural Code) of the service of the award, either party may request that the arbitral tribunal correct it if there were errors made in the calculation or there are any other clerical, typographical or other errors of a similar nature. The arbitral tribunal may make such corrections on its own volition within 30 days (two weeks under the Civil Procedure Code) of the award date. Either party may request that the arbitral tribunal gives an interpretation of the award, either in whole or in part. After consulting the other party, if the arbitral tribunal considers the request to be justified, the correction shall be made or the award shall be interpreted within 30 days of receipt of such request by the arbitral tribunal (one month under the Civil Procedure Code).

Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

Pursuant to the International Arbitration Law, the parties may partially or fully waive their right to file an action to set aside the award. However, parties based abroad may only fully waive their right to file a setting aside action by an express declaration in writing or as provided by the arbitration agreement.

Appeal

What is the procedure for challenging awards?

Under the International Arbitration Law, an action for setting aside the award should be filed before the competent first-instance court within 30 days from delivery of the award or – as the case may be – within 30 days of the correction, interpretation or complementary award. This period is one month under the Civil Procedural Code for domestic arbitrations. The court will give priority to this action and conclude it promptly.

On what grounds can parties appeal an award?

The parties are entitled to appeal a decision to set aside an award in line with the provisions of the Civil Procedural Code, on the legal grounds limited to those that apply to setting aside an award.

An arbitral award may be set aside by the court if:

a party to the arbitration agreement lacks the necessary competence;

the arbitration agreement is invalid under the applicable law or the applicable law has not been agreed by the parties, under Turkish law;

the arbitrator or arbitral tribunal was not appointed in accordance with the procedure agreed between the parties or in accordance with the International Arbitration Law (or Civil Procedural Code in case of domestic arbitration);

the award was not rendered within the agreed or statutory term for arbitration;

the arbitrator or arbitral tribunal did not have jurisdiction to hear the dispute;

it deals with a dispute that is not contemplated by or does not fall within the terms of the submission to arbitration, contains decisions on matters beyond the scope of the submission to arbitration, or the arbitrator or the arbitral tribunal has exceeded its competence;

the arbitral proceedings were not carried out in accordance with the procedures agreed between the parties or, failing such agreement, in accordance with the procedures of the International Arbitration Law (or Civil Procedural Code in case of domestic arbitration) and this failure had an impact on the merits of the award;

the principle of equality for the parties was not respected;

the subject matter of the dispute is not capable of being settled by arbitration under Turkish law; or

it conflicts with Turkish public policy.

Enforcement

What steps can be taken to enforce the award if there is a failure to comply?

For the enforcement of final awards by parties, an action must be brought to the court of first instance. If the territorial jurisdiction of the competent court has not been determined by the parties under the contract, the defendant’s habitual residence or place of defendant’s assets may constitute the territorial jurisdiction of court.

Under Article 4 of the New York Convention and Article 61 of the International Private Procedure Law, at the time of the application for recognition and enforcement decision, the applicant shall provide the following to the Turkish court:

the original or a duly certified copy of the arbitration agreement or the arbitration clause;

the original or a duly authenticated copy of the enforceable final arbitral having binding effect on the parties; and

authenticated copies of the translations of the above-mentioned documents. 

Can awards be enforced in local courts?

In order for a foreign arbitration award to be executed in Turkey, a competent Turkish court must render an enforcement decision. Turkish courts do this without reviewing the award on its merits, should the foreign judgment meets certain criteria for enforcement.

How enforceable is the award internationally?

Arbitral awards issued in Turkey are generally enforceable internationally. As Turkey is a party to the New York Convention, an arbitral award rendered under this would be an arbitral award within the scope of the convention for the purposes of recognition and enforcement.

To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

While states or state entities may enjoy immunity in relation to their sovereign powers, they do not enjoy immunity with respect to private law disputes. States may also enter into arbitration agreements with respect to arbitrable matters.

Are there any other bases on which an award may be challenged, and if so, by what?

The parties may request the annulment of arbitral awards; the International Arbitration Law and the Civil Procedural Code provide an exclusive list of limited grounds on which an award may be set aside.

How enforceable are foreign arbitral awards in your jurisdiction?

Until recently, courts had a tendency to avoid recognising and enforcing foreign arbitral awards, particularly based on public policy concerns. ‘Public policy’ is often regarded as a vague concept and is interpreted by the Turkish courts on a case-by-case basis. Turkish courts face a dilemma between protecting the state’s authority to refuse to enforce awards which contravene domestic values in terms of public policy and, on the other hand, trying to respect the finality of foreign awards. However, courts rarely reject requests for recognition and enforcement of arbitral awards and more narrowly apply public order criterion.

Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

Turkey is a party to the New York Convention and under Article (V)(1)(e) of the convention, if the award has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made, recognition and enforcement of the award may be refused. Therefore, in line with this provision, Turkish courts may also reject the enforcement of such decisions. Also, if the setting-aside procedures have been initiated before the courts in the seat of arbitration, Turkish courts may suspend the enforcement proceedings and await the finalisation of the decision on setting aside as a preliminary question.

Third-party funding

Rules and restrictions
Are there rules or restrictions on third-party funders?

There is no specific regulation on third-party funding in arbitration under Turkish law. This is a relatively new area, but the system whereby a third-party funder partially or fully finances one of the parties’ arbitration costs is expanding rapidly.

Class-action or group arbitration

Concept

Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?

While multiparty litigation was previously allowed under Turkish law, the Civil Procedural Code has introduced the concept of ‘collective action’, which is probably the closest concept to a class action in Turkey. Pursuant to the code, legal associations and all other legal entities can file a case on behalf of their members or persons that they represent in order to:

determine the rights of those concerned;

prevent a future violation of the rights of those concerned; and

remedy a status that is not in compliance with the law.

However, there is no specific regulation for class action arbitration under Turkish law.

Hot topics

Emerging trends

Are there any hot topics or trends emerging in arbitration in your jurisdiction?
In the last decade, Istanbul has become a regional and international financial hub. The Istanbul Arbitration Centre (ISTAC) and the Istanbul Chamber of Commerce Arbitration Centre (ITOTAM) have become vital to global businesses and financial entities seeking cost-efficient, fast, effective methods of dispute resolution and aim to provide arbitration services in accordance with international standards and modern rules of arbitration.

The ISTAC’s duties are defined under Article 4 of the Law on the ISTAC as follows:

to set the rules regarding arbitration and alternative dispute resolution methods and to carry out related services;

to provide advertisement and publications, promote, support, realise scientific research on this matter; and

to cooperate with local and foreign persons and entities related to arbitration and alternative dispute resolution methods. 

Turkey’s prospects of becoming a major financial hub and international arbitration centre look promising. By establishing the ISTAC and introducing the ISTAC and ITOTAM Rules, Turkey has shown its serious intention of taking its place among its peers in the very near future.

Hergüner Bilgen Özeke - S. Asli Budak and Sule Uluç

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