Aceris Law

International Arbitration Law Firm

International Arbitration in Turkey

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International arbitration in Turkey is governed by the International Arbitration Law (Law No. 4686), which entered into force on 5 July 2001.[1] Turkey’s International Arbitration Law was largely modelled on the UNCITRAL Model Law and Chapter 12 of the Swiss International Private Law Act. Domestic arbitration in Turkey, on the other hand, is governed by the Code of Civil Procedure (“CCP”),[2] which is also to a large extent, with some minor modifications, based on the UNCITRAL Model Law.

International Arbitration in Turkey

International vs. Domestic Arbitration in Turkey

The International Arbitration Law applies to arbitrations with their seat (place) in Turkey and where a “foreign” element is found to exist. As provided in Article 2 of the International Arbitration Law, a “foreign element” exists in one of the following circumstances:

  • the domicile, permanent residence or place of business of the parties are in different countries;
  • the domicile, permanent residence or place of business of the parties are in a country other than the place (seat) of arbitration stated in the arbitration agreement or the place (seat) of arbitration determined in accordance with the arbitration agreement; or in a country other than where the substantial portion of the underlying agreement is to be performed, or to where the subject-matter of the dispute is closely connected;
  • at least one of the companies’ shareholders, who is a party to the principal agreement underlying the arbitration agreement, has brought foreign capital to Turkey under the foreign investment regulations, or where it is necessary to enter into a loan or security agreement to provide foreign capital from abroad for the implementation of the agreement; or
  • the principal agreement or legal relationship underlying the arbitration agreement causes the movement of capital or goods from one country to another.

The International Arbitration Law also applies when the parties have agreed to its application or the arbitral tribunal decides that arbitration proceedings shall be conducted in accordance with the said law. In this case, the mandatory rules of the seat of arbitration also apply.[3] The mandatory rules that are provided under the Turkish International Arbitration Law include, inter alia, the following:

  • The parties must be given equal rights and powers in the arbitration proceedings (Article 8);
  • The number of arbitrators must be uneven (Article 7(A));
  • If a party has obtained interim relief from court before commencing arbitration proceedings, the proceedings must be automatically commenced within 30 days, otherwise, the interim relief will be removed automatically (Article 10(A));
  • The award must include the elements as provided by law (Article 14);
  • An action for the setting aside of an arbitration award has to be filed within 30 days (Article 15).

Arbitrability of Disputes in Turkey

Both the International Arbitration Law and the CCP provide that disputes in rem over immovable property and disputes that are not subject to the parties’ intention are not arbitrable, i.e., must be heard before State courts.[4] In accordance with Turkish Court of Cassation decisions, these include, primarily:

  • Bankruptcy proceedings;
  • Disputes falling within jurisdiction of administrative courts;
  • Disputes concerning public policy;
  • Disputes related to family law;
  • Disputes related to criminal law;
  • Disputes related to foundations and associations;
  • Land cancellation or registration cases;
  • Disputes arising out of determination of rent or evacuation related to immoveable property lease contracts.

Arbitration Agreements

Pursuant to Article 4 of the International Arbitration Law, arbitration agreements have to be in writing and may take form of a written document signed by the parties, a letter, a telegram, a telex, a fax exchanged between the parties or an electronic medium. A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the reference is such as to make that clause part of the contract.

In case a claimant claims the existence of a valid arbitration agreement in its statement of claim, and the respondent fails to object this in its statement of defence, the requirement of a valid arbitration agreement is deemed fulfilled. In addition, Turkish courts have held that for an arbitration agreement to be valid, the parties’ intention to refer the dispute to arbitration must be clear and without doubt. The representative signing the arbitration agreement has to have special authority to enter into an arbitration agreement.[5]

Appointment of Arbitrators Pursuant to Turkish International Arbitration Law

Pursuant to Article 7(B) of the Turkish International Arbitration Law, in the absence of the parties’ agreement, the default procedure for the appointment of arbitrators provided in the International Arbitration Law is as follows:

  • If the parties fail to agree on the sole arbitrator to be appointed, the arbitrator is appointed by the court upon the request of one of the parties;
  • If three arbitrators are to be appointed, each party shall appoint one arbitrator, and the two arbitrators appointed by the parties shall then appoint the third arbitrator. In case a party fails to appoint an arbitrator within 30 days of the receipt of the request from the other party, or if the two party-appointed arbitrators fail to appoint the third arbitrator within the same time limit, the arbitrator shall be appointed by the court upon the application of the requesting party;
  • If more than three arbitrators are to be appointed, the arbitrators, who will appoint the last arbitrator, shall be determined by the parties in equal numbers in accordance with the same procedure.

Upon the request of a party, arbitrators may also be appointed by the court if one of the parties fails to follow the agreed procedure, or if the parties or the arbitrators are unable to reach an agreement, or the third party, body or institution is authorized to make the selection and fails to do so.

Pursuant to Article 7(C) of the Turkish International Arbitration Law, an arbitrator may be challenged if:

1) He/she does not possess the qualifications that were agreed to by the parties;

2) If there exists a reason for challenge in accordance with the arbitration procedure agreed by the parties; or

3) If the existing circumstances give rise to justifiable doubts as to his impartiality or independence.

The parties are also free to agree on the procedure for challenging an arbitrator. The Turkish International Arbitration Law provides that the party that intends to challenge an arbitrator may bring a challenge within 30 days after the appointment of the arbitrator or after becoming aware of the circumstances that give rise to the challenge. In case the arbitral tribunal rejects the requesting party’s challenge of one or more arbitrators, such party may apply to the court within 30 days and request the court to set aside the arbitral tribunal’s decision. In practice, most arbitral tribunals take into account the IBA Guidelines on Conflicts of Interest in International Arbitration, which, however, are not binding on tribunals but are used merely as guidelines.

Correction and Clarification of Arbitration Awards

Pursuant to Article 14 of the International Arbitration Law, a party may request the tribunal to correct the award in case of errors in computation, clerical or typographical errors or similar errors within 30 days as of the issuance of the award. A party may also request the interpretation of the award, in whole or in part, within the same time limit. In addition, a party may also request the tribunal to issue an additional award in the event that it rendered the award infra petita (i.e., not deciding all issues submitted to the arbitral tribunal), with a possibility of the issuance of an additional award.

Recognition and Enforcement of Foreign Arbitral Awards in Turkey

Turkey, like most States today, is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“) since its entrance into force on 25 September 1992. In line with Article I(3), Turkey has made two common reservations in relation to the New York Convention, which have little impact on the enforceability of nearly all awards:

  • A declaration that it will apply the New York Convention only if the award was granted in a State that is a signatory to the New York Convention;
  • Turkey has limited the applicability of the New York Convention to conflicts arising from relationships that are categorized as commercial under Turkish law.[6]

Setting Aside of Arbitration Awards in Turkey

Under Turkish law both international and domestic arbitration awards are subject to setting aside/annulment proceedings. Article 15(A) of the International Arbitration Law provides that the competent court for a setting aside action is the civil court of first instance with jurisdiction (yetkili asliye hukuk mahkemesi in Turkish). Article 15(A) basically codifies the same grounds as provided in Article 34 of the UNCITRAL Model Law, which include:

Where the party making the application furnishes proof that:

a) a party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under Turkish law;

b) the composition of arbitral tribunal is not in accordance with the parties’ agreement, or, [failing such agreement] with this Law;

c) the arbitral award is not rendered within the term of arbitration;

d) the arbitral tribunal unlawfully found itself competent or incompetent;

e) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration;

f) the arbitral proceedings are not in compliance with the parties’ agreement [as to the procedure], or, failing such agreement, with this Law provided that such non-compliance affected the substance of the award;

g) the parties are not treated with equality; or

2. where the court finds that

a) the subject matter of the dispute is not capable of settlement by arbitration under Turkish law; [or]

b) the award is in conflict with the public policy.

Arbitrability and public order issues are considered ex officio by Turkish courts, whereas the other grounds should be proven by the party requesting the setting aside. An arbitration award may be annulled partially or fully.

Arbitral Institutions in Turkey

The most commonly used international arbitral institution chosen by Turkish parties is the International Chamber of Commerce (the “ICC”). Other frequently used choices include the Swiss Arbitration Centre (formerly the Swiss Chambers’ Arbitration Institution), the Stockholm Chamber of Commerce (the “SCC”), and the London Court of International Arbitration (the “LCIA”).

When it comes to local institutions, the Istanbul Arbitration Center has become a prominent institution over the past few years, in line with a notable increase of arbitration awareness in Turkey. The Istanbul Arbitration Center was established as an impartial institution in 2015, as part of a wider project of the Istanbul Finance Centre. The Istanbul Arbitration Center has its own set of modern arbitration rules, the ITSAC Arbitration and Mediation Rules, which entered into force on 26 October 2016. Other prominent arbitration institutions in Turkey include:

Future Prospects of International Arbitration in Turkey

By adopting an arbitration law based on the UNCITRAL Model Law and ratifying the main international conventions, Turkey has made its arbitration law very comprehensive and has undoubtedly taken a great step forward and created an investor-friendly environment for major infrastructure contracts.

There is always room for improvement, however, as the Turkish International Arbitration Law does not provide solutions to some modern problems faced by the parties in international arbitration. For instance, it does not contain provisions relating to third party intervention and/or joinder of additional parties, which are relevant considering that many disputes arising under the International Arbitration Law concern joint ventures, consortiums or similar agreements involving multiple parties. In addition, despite its attempt to limit the courts’ intervention and accelerate the arbitration process, the possibility to appeal the decision concerning the annulment action – and thus provide for a double control of the award – in reality seems to have had the opposite effect. Furthermore, while the arbitral tribunal can order preliminary injunctions or preliminary attachment, and require testimony at the request of a party, unless otherwise agreed it cannot grant interim remedies that bind third parties or that need to be executed by official authorities or execution offices. The arbitrators’ lack of power to grant executive measures is another example of the large role attributed to State courts whereas one may even inquire as to the usefulness of conferring power upon arbitrators to render provisional awards since their interim measures have no executive or enforcing effect.

[1]               International Arbitration Law, Law No. 4686 of 21 June 2001, published in the Official Gazette Numbered 24453 and dated 5 July 2001.

[2]               Code of Civil Procedure, Law No. 6100 of 12 January 2011, published in the Official Gazette Numbered 27836 and dated 4 February 2011, Chapter 11, Articles 407-444. The law entered into force on 1 October 2011.

[3]               Ali Yesilirmak, Ismail G. Esin, Arbitration in Turkey, (Wolters Kluwer, 2015), Chapter 1, p. 4.

[4]               Turkish International Arbitration Law, Article 1(4); CCP, Article 408.

[5]               Court of Appeals, 19th Civil Law Chamber, 21 May 2007, File No. 2007/380, Decision No. 2007/5114.

[6]               Whether a dispute arises from commercial issues is determined by taking into consideration the Turkish Commercial Code, Law No. 6102 of 13 January 2011, published in the Official Gazette Numbered 27846 and dated 14 February 2011, Article 3.