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13 September 2018
The United Nations Commission on International Trade Law Model Law 1985 (the Model Law) adopts the principles of competence-competence and the separability of arbitration agreements. Under these principles, an arbitral tribunal may rule on its own jurisdiction, including any objection with respect to the existence and validity of an arbitration agreement.
Consistent with the Model Law, in 2001 the International Arbitration Law (IAL)(1) introduced these principles to Turkish legislation. That said, the IAL did not follow the Model Law in its entirety. This update discusses the legal framework in Turkey prior to and under the IAL and the differences between the Model Law and the IAL.
Prior to the IAL, there was no distinction between international and domestic arbitration. The previous Civil Procedure Law(2) governed both international and domestic arbitration in Turkey and did not recognise the competence-competence principle. The courts had the authority to resolve disputes with respect to the jurisdiction of an arbitral tribunal, but the arbitral tribunals did not have the authority to rule on their own jurisdiction. In addition, the previous Civil Procedure Law did not recognise the principle of the separability of arbitration agreements. In other words, an arbitration agreement did not have to be treated as an agreement independent of the other contract terms.
In a 1994 decision, the 13th Chamber of the Turkish Court of Appeals held that if a party challenges the validity of a contract before the courts, an arbitral tribunal cannot decide the dispute with respect to a contract until the court decides that the contract containing the arbitration agreement is valid.(3) The reasoning behind this decision was that if the court decides that the contract containing the arbitration agreement is invalid, it entails the invalidity of the arbitration agreement and, consequently, the arbitral tribunal has no jurisdiction to resolve the dispute.
The IAL adopted the principles of competence-competence and the separability of arbitration agreements in accordance with the Model Law. That said, the IAL did not follow the Model Law in its entirety.
Under the Model Law, if an arbitral tribunal decides as a preliminary question that it has jurisdiction, this decision is subject to instant court control. Any party may request the court to decide whether an arbitral tribunal has jurisdiction within 30 days from service of this decision. The purpose of instant court control under the Model Law is to avoid the unnecessary waste of money and time.(4) The Model Law sets safeguards to prevent the risk of any delay due to instant court control. The court's decision is not subject to appeal and the arbitral tribunal can continue the proceedings at its own discretion and render an award while the matter is pending before the court.
Contrary to the Model Law, the IAL did not adopt the instant court control procedure. Under the IAL, if an arbitral tribunal decides as a preliminary question that it has jurisdiction, it will continue the proceedings and render an award on the merits. In this case, a party can challenge the decision on jurisdiction only in a set-aside lawsuit after the arbitral tribunal has made the award.
It would be advisable for lawmakers to introduce instant court control to Turkish law to avoid any unnecessary waste of money and time in addition to the principles of competence-competence and the separability of arbitration agreements. However, the time available for local courts to carry out such instant control must be limited to ensure that it is indeed 'instant'.
For further information on this topic please contact Okan Demirkan or Cihan Mercan at Kolcuoğlu Demirkan Koçaklı Attorneys at Law by telephone (+90 212 355 9900) or email (email@example.com or firstname.lastname@example.org). The Kolcuoğlu Demirkan Koçaklı Attorneys at Law website can be accessed at www.kolcuoglu.av.tr.
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