In both domestic and international arbitrations in Turkey, parties are, in principle, free to choose their arbitrators. However, there are limits in this regard, including where the parties are of different nationalities. The Court of Appeals recently rendered an important decision in this regard, which provides an objective standard of proof for assessing doubts with regard to the independence and impartiality of arbitrators.
The Turkish Grand National Assembly recently authorised the creation of the Istanbul Arbitration Centre, a legal entity subject to civil law that will facilitate the settlement of national and international disputes by way of arbitration or other alternative dispute resolution mechanisms. Its establishment should reinforce Istanbul's status as an international business and arbitration centre.
The Istanbul Chamber of Commerce recently introduced new arbitration rules in an effort to make Istanbul-based arbitration more attractive and to provide arbitration services in accordance with international standards. Although the new rules introduce no drastic changes to the existing arbitration system, they provide for a more flexible and up-to-date arbitration service.
Recent amendments introduced by Article 45 of the Law on the Amendment of the Criminal Code and Some Other Laws should be taken into consideration before filing a lawsuit before the courts with regard to arbitral proceedings conducted under the Code on Civil Procedures and the International Arbitration Law, as well as requests for recognition and enforcement.
The Court of Appeals recently reversed a first-instance decision rejecting a request for a preliminary injunction on the grounds that the party seeking the injunction did not have a final decision on enforcement of the arbitral award on which the request was based. This decision is significant in that it protects the rights of a party seeking the enforcement of an arbitral award in Turkey.
A new communiqué concerning international arbitration fee tariffs recently entered into force. The new communiqué applies to the determination of arbitrators' fees where the parties and the arbitral tribunal could not agree on the fees to be set, or where the parties have made no provision or referral to international rules or institutional arbitration rules in the arbitration agreement.
The Court of Appeals has reversed a first-instance court decision dismissing a request for the enforcement of an arbitral award where the arbitral tribunal had ordered the prevailing party to pay the arbitration costs and expenses. The decision is a step forward by the Turkish courts in accepting specific procedures of different international arbitration institutions that do not comply with domestic practice.
The International Arbitration Law entered into force in 2001. However, its temporal application remains an issue. Although there is no clear provision in the law on such matters, the Court of Appeals has rejected arguments that the law has retroactive effect, deeming it inapplicable to arbitration agreements signed before the law entered into force, even in cases where the relevant dispute arose after such date.
The Court of Appeals recently annulled an arbitral award issued by the International Chamber of Commerce for being contrary to Turkish public policy. The dispute, which arose out of a concession agreement between the relevant authority and a mobile phone operator, is noteworthy due to the broad definition of public policy adopted by the court. Public policy is still an open-ended obstacle to the enforcement of arbitral awards.
In a recent Court of Appeals decision, the court overruled an arbitration objection based on the Law on the Obligatory Use of Turkish, which stipulates that two Turkish companies should execute their agreements in Turkey in Turkish. Although the intention of the parties to arbitrate their disputes was clear in the agreement, the court ruled that the effect of the law should have been considered.
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.
The Code of Civil Procedure and the International Arbitration Act provide the statutory basis for the settlement of disputes by arbitration in Turkey - domestic arbitration is subject to the code and international arbitration is governed by the act. An updated version of the code will come into force shortly, but there are still a number of differences between the new code and the International Arbitration Act.
The Court of Appeals has annulled an arbitral award for having been rendered after the expiration of the term for arbitration. The court found that the arbitral tribunal had rendered the award after the expiration of this term as provided for under Article 529 of the Code of Civil Procedure, which states that arbitrators must render their award within six months of the date of their first meeting.
The Ninth Civil Chamber of the Court of Appeals has found that arbitration agreements in employment contracts are null and void pursuant to the Code of Obligations. The employee had initiated the lawsuit alleging that the employer had terminated the employment contract without just cause. The employer argued that the court lacked jurisdiction since the employment contract included an arbitration clause.
The Turkish Court of Appeals has ruled that disputes regarding the establishment of liens should be resolved exclusively by the Turkish courts, despite the existence of an explicit arbitration agreement. Among other things, the court reasoned that the establishment of a lien over a ship, which is an immovable, is a right in rem under Turkish law and is governed by Article 23 of the International Private and Procedural Law.