Arbitration

UNCITRAL Model Law

Is the arbitration law based on the UNCITRAL Model Law?

Yes, international arbitration in Turkey is governed by the International Arbitration Law (IAL) (Law No. 4686 of 21 June 2001), which is based on the UNCITRAL Model Law. Domestic Arbitration in Turkey is governed by the Turkish Code of Civil Procedure (CCP) and the new CCP enacted on 4 February 2011, with amendments for domestic arbitration legislated in line with the IAL.

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

Under article 4 of the IAL and article 412 of the CCP, arbitration agreements are defined as ‘an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not’. This means that a dispute that is subject to arbitration must be determined, otherwise the arbitration agreement will be invalid. However, parties cannot agree to arbitrate in disputes related to real rights concerning immovables and to disputes that are not within the parties’ disposal.

The IAL and the CCP also foresee that an agreement needs to be in writing, whether in a separate arbitration agreement or in an arbitration clause in the contract. A party’s intention to arbitrate needs to be clear. ‘In writing’ means parties signed a document or an agreement is documented in an exchange of letters, telex, telegrams or other means of telecommunication, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

Choice of arbitrator

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

Parties are free to appoint any number of arbitrators as long as the number is odd. If the arbitration agreement and relevant rules do not stipulate otherwise, three arbitrators will be appointed.

In an arbitration with three arbitrators, unless parties have agreed otherwise, each party will appoint one arbitrator and the two appointed arbitrators will then appoint a third arbitrator. If parties fail to appoint the arbitrator or two arbitrators fail to appoint a chairman, upon a party’s request, the court will appoint the arbitrator.

Parties can freely agree on the procedure for challenging an arbitrator. Parties may challenge an arbitrator if: an arbitrator does not meet with the agreed qualifications given by the parties; there are grounds for a challenge in the agreed rules of arbitration; or if an arbitrator’s impartiality and independence give rise to justifiable doubts under the circumstances.

Arbitrator options

What are the options when choosing an arbitrator or arbitrators?

Parties may freely choose their arbitrators in line with the agreed qualifications.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

Parties may freely choose the procedures to be followed by the arbitral tribunal and they may refer to any law or international or arbitral rules. If parties are silent on the matter, procedural rules of the IAL (or the CCP for domestic arbitration) will be conducted with the limitation of the mandatory provisions under the Law.

Court intervention

On what grounds can the court intervene during an arbitration?

The court may intervene during an arbitration for several reasons. After 20 July 2016, the court system changed from a two-tier system to a three-tier system and the regional courts of appeal were established as second instance courts. The new CCP gives jurisdiction to the regional courts of appeal for domestic arbitration; however, the IAL has not been amended in line with this new system. Consequently, the civil courts of first instance still have jurisdiction for international arbitration. As a result, regional courts of appeal will intervene in domestic arbitration proceedings and civil courts of first instance will intervene in international arbitration proceedings.

In International arbitration, parties may request that the court take interim measures at any time during or before the arbitration proceedings. In addition, if one of the parties does not comply with the interim measure or attachment ordered by the tribunal, the other party may request that the court order interim measures or an attachment, although in domestic arbitration parties may only request that the court take interim measures when the arbitral tribunal cannot take timely or effective action. Otherwise, a party needs the approval of the arbitral tribunal or the parties need to agree that one may request interim relief from the courts.

Upon a party’s request, the court will appoint the arbitrators. Parties may challenge the arbitrators, and if the challenge is rejected by the arbitral tribunal, a party can apply to the court and request the decision to be lifted and the arbitrator removed. The decision of the court will be final.

The terms of the arbitration may be extended upon the parties’ agreement; if the parties fail to agree, upon request, the court can extend the terms.

The arbitral tribunal may also ask the court to assist in taking evidence and in such circumstances the CCP will apply to the procedure.

Interim relief

Do arbitrators have powers to grant interim relief?

Yes, arbitrators may grant interim relief, unless otherwise agreed by the parties. Upon a party’s request, the tribunal may grant interim relief during the arbitral proceedings. The only limitations on the arbitrators’ powers that prevent a tribunal granting interim relief are interim measures that affect third parties and interim measures that are required to be enforced through execution officers or the other authorities.

If one of the parties does not comply with the interim measure or attachment ordered by the tribunal, the other party may request that the court decide on interim measures or a provisional attachment. In essence, if a party does not comply, the execution offices will not enforce the arbitral tribunal decision without the court order regarding the interim measure. As a result, to avoid any delays, it may be more beneficial to directly request interim measures from the courts before or during the proceedings.

Award

When and in what form must the award be delivered?

The award must be delivered within the stipulated term of the arbitration that has been decided by the parties. An arbitral award must contain the names, titles and addresses of the parties and their representatives, reasoning for the award and the amount of compensation, the place of arbitration, the date of the award and that parties have a right to set aside the award. The arbitral tribunal can also render partial awards, unless otherwise agreed by the parties. For domestic arbitration, additionally, the award must contain the rights and obligation of the parties and the cost of the arbitral proceedings.

Appeal

On what grounds can an award be appealed to the court?

Arbitral awards are final and there is no option for appeal, although parties may request cancellation from the courts. This will not stop enforcement proceedings, however. In 2016, Turkey enacted a new appeals system and changed the two-tier court system to a three-tier court system.

For both domestic and international arbitration, the parties will request cancellation from the regional courts of appeal and the decision of the court will be appealed to the Court of Cassation.

Grounds for setting aside the award are listed in numerous principle clauses, which are:  the agreement is not valid if one of the parties was incapacitated; the appointment of arbitrators was not in accordance with the parties’ agreement; the arbitral award is not rendered within the term of arbitration; the decision on competency was unlawful; the arbitral tribunal rendered an award on matters beyond the parties’ claims, or did not rule on one of the party’s claims; the arbitral proceedings were not in line with the parties’ agreement or, in the absence of such agreement, Law No. 4686, and if this situation affects the substance of the award; if the parties’ equality was not respected; if the matter is non-arbitral under Turkish law; and if the award is incompatible with public policy.

Parties may waive their right to challenge the award and claim for setting aside the award.

A decision on setting aside rendered by the regional court of appeal may be appealed to the Court of Cassation based on provisions under the CCP for both international and domestic arbitration. Although grounds for appeal are limited to the grounds for setting aside the award.

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

Turkey has been party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1991. However, like many other states, Turkey made reservations under article I(3) of the Convention to the effect that only awards that are rendered in the territory of another member state will be enforceable.

Recognition and enforcement of a foreign award is also regulated under the International Private and Civil Procedure Law (Law No. 5718). Under article 60 of this Law, enforcement of a foreign arbitral award must be requested from the civil courts of first instance in Turkey. Under article 61, parties that seek enforcement of a foreign award must submit the original or duly certified copy of the arbitration agreement or the arbitration clause; the original or duly certified copy of the final and executable award; or a translation and duly certified copies of the mentioned documents.

Unlike foreign awards, domestic awards are enforceable without further proceedings.

Costs

Can a successful party recover its costs?

Yes, parties may agree on the rules of the costs of arbitration. If parties are silent on this, the arbitral tribunal will decide on the allocation of the costs based on the provisions under the IAL or the CCP relating to: the fees of the arbitrators; the arbitrators’ expenses; the fees of the experts; the witnesses’ expenses that are approved by the arbitral tribunal; the successful party’s attorneys’ fees, which are calculated by taking into account the minimum fee schedule approved by the tribunal; applications made to the courts that are subject to the IAL or the CCP; and notification expenses. Under the IAL and the CCP, the unsuccessful party will bear the costs unless otherwise agreed by the parties. 

Law stated date

Correct on

Give the date on which the above content is accurate.

14 August 2020.