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Arbitration

Turkey

Under the Code of Civil Procedure, in order to avoid uncertainty, the dispositive sections of court decisions should stand alone, without the need to repeat any statements included in the legal reasoning. The Court of Appeals has ruled that this provision of the code is mandatory. As a result, dispositive sections that give rise to doubt are in breach of the law. The same principle applies to the enforcement of foreign arbitral awards.

Establishment of a globally renowned arbitration centre in Istanbul has long been discussed, particularly in light of the increasing use of arbitration as an alternative dispute resolution mechanism. The recent preparation of a draft bill to create such a centre is a significant and concrete step towards reinforcing Istanbul's status as an international business centre.

The 19th Chamber of the Court of Appeals recently ruled that the enforcement of a foreign arbitral award was subject to progressive court fees, since the award related to the collection of debt. This decision is of great significance, as the Court of Appeals has clearly ruled that the enforcement of a foreign arbitral award is subject to proportional court fees if the award relates to debt collection.

Bilateral investment treaties signed by Turkey primarily provide for two international arbitration mechanisms for dispute resolution, one of which is that governed by the International Centre for Settlement of Investment Disputes (ICSID). However, only certain disputes shall be subject to ICSID jurisdiction. Disputes related to immovables and in rem rights therein are exclusively within the jurisdiction of the Turkish courts.

The Istanbul Chamber of Commerce (ICOC) has recently formed a working group for the purpose of updating its current rules on arbitration, which date from 1979. The new rules are expected to comply with the new Code of Civil Procedure and embody certain concepts of global arbitration rules. With the new rules, the ICOC aims to become a more appealing institution for parties using arbitration.

A new code of obligations comes into force in Turkey next year that prohibits purchasers residing in Turkey from concluding arbitration agreements in relation to disputes arising out of sales with instalment payments. The new code provides certain exceptions to the restriction on arbitration. The new code also applies the arbitration restriction, as well as its exceptions, to sales with instalment payments in advance.

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Competition

Turkey

Overview
Including: Competition Authority; Competition Board; Prohibited Activities; Penalties.

The Competition Authority has increased the fines applicable where the Competition Protection Law is infringed. Such fines can be imposed where parties fail to notify the Competition Board of any merger or acquisition exceeding certain thresholds. The fines have also been amended in light of the revaluation and renaming of the Turkish lira.

According to Annex 2 of the Criminal Law, fines payable for the prevention, distortion or restriction of competition between enterprises have been increased. The regulations apply to persons or legal entities that have the status of an enterprise, and associations of enterprises and their members.

This update discusses the concept of ancillary restraints, which, according to a recent judgment of the Competition Board, includes non-compete clauses of share transfer agreements. This and other judgments regarding ancillary restraints have been reached by applying the reasoning of the European Commission and the European Court of Justice.

Including: Purpose and Scope of the Law; Agreements, Concerted Practices and Decisions Restricting Competition; Abuse of Dominant Position; Mergers and Acquisitions; Penalties; Judicial Review of Competition Board Decisions

Litigation

Turkey

Following a recent court decision, the partial lawsuit mechanism introduced by Article 109 of the Code of Civil Procedure has been clarified. The mechanism can no longer be used solely for the purpose of avoiding payment of larger court fees and expenses. In addition, plaintiffs cannot simply file a routine partial lawsuit without fulfilling the conditions set forth in the code and defendants will be better equipped to make objections.

A plaintiff wishing to amend a claim at a later stage of a lawsuit is entitled to amend the claim only once, within the statute of limitations. Thus, where a plaintiff fails to do so within such limits, the defendant can object to any amendment made. However, after a recent decision of the Fourth Chamber of the Court of Appeals, the established practice of the Turkish courts might be likely to change.

The principle of good faith is not directly defined under Turkish law. The Court of Appeals recently reversed a first instance decision that the real right (ie, the right in rem) of a third party was not protected (and thus cancelled) as a result of the previous illegal registration of such right at the land title registry. The decision came despite the legal acquisition of such right by a third party in good faith.

In a recent decision the Eleventh Chamber of the Court of Appeals held that the post-contractual non-compete clause in a franchise agreement was unconstitutional, and thus invalid, for violating the freedom to work and contract guaranteed under Article 48 of the Constitution. Although this decision has not yet become established practice, it is significant and the court's future practice should be closely monitored.

In a recent decision the Court of Appeals ruled that in relation to an international company with a Turkish subsidiary, employees working abroad in the same business line should also be included when calculating the number of employees required for protection under work security provisions. This ruling departs from the past practice of the labour courts and the Court of Appeals.

A transfer pricing issue has come to light in a recent court case. Tax auditors considered that a pharmaceutical company which had purchased ingredients from its group companies abroad at inflated prices was engaging in disguised profit distribution. However, the Council of State ruled that the factors which may cause price differences between pharmaceutical ingredients should be taken into account.

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