In Turkish cross-border disputes, the demand for international arbitration as an alternative dispute resolution mechanism has escalated in recent years. The basis of arbitration depends on the nature and type of dispute. For example, in commercial disputes with a foreign element, arbitration is often stipulated in the contracts, in cases where one of the parties is from Turkey. 

With the establishment of the Istanbul Arbitration Center (ISTAC) in November 2015, Istanbul has increasingly been chosen as the seat of arbitration in disputes, whether between foreigners or domestic parties.

Although the majority of legal disputes in Turkey are still referred to litigation, within the last few years, domestic arbitration has gained prominence as an ideal dispute resolution forum, especially in cases where the dispute concerns complex and technical issues that require particular expertise. There are other reasons why domestic parties prefer arbitration to litigation, such as confidentiality, speed of the arbitration proceedings and the freedom of choice of arbitrators.

The COVID-19 pandemic certainly had an impact on the way international arbitration proceedings are conducted. Several arbitration institutions announced that all hearings should be conducted in a virtual environment to mitigate the effects of the pandemic. 

Particularly at the beginning of the pandemic, both arbitral tribunals and the parties had no choice other than to suspend arbitration proceedings or conduct these proceedings through virtual hearings. However, switching physical hearings to virtual hearings has demonstrated that if the technical infrastructure is strong and sufficient, then even cross-examinations of the facts and the expert witnesses can be carried out professionally and smoothly.

In Turkey, no particular sector has seen a drastic change in arbitration activity due to the COVID-19 pandemic. In general, arbitration is most commonly used in large-scale project disputes concerning construction, oil and gas, and energy. 

On the other hand, as construction projects were seriously affected by the COVID-19 pandemic, in the near future it is expected that there will be an increase in the number of construction disputes arising from the enforcement of force majeure clauses in the case of a pandemic such as COVID-19. 

The most popular international arbitration centre for Turkish parties is the International Chamber of Commerce International Court of Arbitration (ICC). The Swiss Arbitration Centre, London Court of International Arbitration, and the Arbitration Institute of the Stockholm Chamber of Commerce are also frequently used.

On the other hand, in the case of an investment dispute, most Turkish investors who have investments in other countries are inclined to initiate investment arbitration under the rules of the International Centre for Settlement of Investment Disputes (ICSID) by relying on the relevant bilateral investment treaty. 

The Turkish Energy Disputes Arbitration Center (EDAC) was established on 21 October 2020 to resolve disputes regarding energy and infrastructure law between companies in Central Asia, Europe, the Balkans, MENA and America. EDAC is distinguished as the first and only sectoral arbitration centre in Turkey focused on energy disputes and operating as an international arbitration centre.

No specific courts are designated to hear disputes related to international or domestic arbitrations in Turkey. However, some chambers of the Turkish Court of Cassation have specific experience in arbitration and therefore, when a lower court’s decision on an arbitration-related matter is appealed, such appeal is referred to these chambers of the Court of Cassation.

International Arbitration Law

International arbitration proceedings in Turkey are governed by International Arbitration Law No 4686 of 21 June 2001 (IAL), which came into force on 5 July 2001. Pursuant to Article 1 of the IAL, it is applicable to disputes containing at least one foreign element where the seat of arbitration is determined to be in Turkey, or to disputes in which the provisions of the IAL are applicable by virtue of the parties’ choice or the arbitral tribunal’s decision.

Being in line with all modern arbitration laws, the IAL is widely based on the UNCITRAL Model Law, making it very convenient for foreign practitioners who need to become acquainted with the rules governing their arbitration.

While the IAL is built upon the same underlying principles as the Model Law, it should be noted that the IAL contains certain provisions such as Article 2 stipulating a definition of “foreign element” which is wider than Article 1 (3) of the Model Law, and the IAL regulates some aspects that are not covered by the Model Law. For instance, Article 15 of the IAL provides additional grounds for setting aside, including an arbitral tribunal’s failure to render an award within the prescribed time limit, while the Model Law does not consider this matter as grounds for annulment.

Code of Civil Procedure

On the other hand, national arbitration proceedings are regulated under the Code of Civil Procedure dated 12 January 2011 and numbered 6100, (CCP). The procedure of domestic arbitration is stipulated between Articles 407 and 440 of the CCP which have many similarities to the provisions of the IAL drafted mainly in accordance with the Model Law. 

2018 Amendments

In 2018, Article 15 of the IAL was amended by Law No 7101 of 2018.  After this amendment, annulment proceedings were heard by the regional courts of justice instead of the civil courts of first instance.

In 2018, some amendments were also made to the CCP which regulates domestic arbitration legislation in Turkey. With these amendments, the competent courts to hear disputes regarding arbitration proceedings (ie, appointment of arbitrators or issuance of interim relief) were determined as the civil courts of first instance or the commercial courts of first instance, depending on the subject matter of the case. These would be located in the seat of arbitration chosen by the parties or, in the absence of such choice, in the domicile or habitual residence or place of business of the respondent. Through this amendment, instead of the courts of first instance, the regional courts of appeal became authorised to hear setting-aside proceedings.

2020 Amendments

In 2020, further amendments were made to the CCP. Firstly, with the amendment made in Article 436(3) of the CCP, it was prescribed that the arbitral award will be notified to the parties by the arbitration, the president of an arbitral tribunal or the relevant arbitration institution. In addition, the original copy of the award must be sent to the relevant court, to be kept by this court. Secondly, with an amendment made in Article 440(5) of the CCP, unless otherwise agreed by the parties, it was stipulated that no fee is to be paid to the arbitrators for rectification, interpretation and/or completion of the award.

Article 4 of the IAL defines arbitration agreement in the same way as the Model Law. Accordingly, the arbitration agreement is required to be in writing to be valid, while it is sufficient to include it in the underlying contract, or in a document signed by the parties, or in other means of communication capable of providing a record of the agreement. Moreover, a written arbitration agreement is deemed to be made between the parties if the respondent does not immediately raise an objection against the claim of the existence of an arbitration agreement, in its statement of defence at the latest. The reference to a document containing an arbitration clause is also considered as a written arbitration agreement between the parties. The same requirements as to the validity of the arbitration are also prescribed under Article 412(2) of the CCP.

In accordance with Article 4 of the IAL and Article 412(2) of the CCP, the invalidity of the main contract does not automatically make the arbitration agreement invalid and the parties may still rely on an arbitration agreement even if the main contract between the parties has become null and void. 

Finally, pursuant to Article 4 of the IAL, arbitration agreements are considered valid provided that these agreements are in compliance with the applicable law agreed to by and between the parties and if there is no such law, according to Turkish law.

Another condition that must be met for an arbitration agreement to be valid is the precise consent of the parties. The Turkish Court of Cassation strictly emphasises that an arbitration agreement becomes invalid in the absence of the precise and clear consent of the parties, without any doubt.

Pursuant to Article 1 of the IAL and Article 408 of the CCP, disputes arising from rights in rem on immovables in Turkey and disputes that are not within the parties’ disposal are not arbitrable. Therefore, while the parties to a commercial dispute may resort to international arbitration, disputes covered by criminal law or administrative law, for instance, cannot be referred to arbitration under the IAL. 

In line with the principle of party autonomy, the parties may agree on the system of law by which their arbitration agreement is governed. In the absence of such determination, the validity of an arbitration agreement is governed by Turkish Law. Thus, under the IAL, an arbitration agreement will be valid if it is valid under the system of law chosen by the parties, and in the absence of such, under Turkish Law.

Being a truly arbitration-friendly legislation, the IAL favours the validity of arbitration agreement, as do Turkish courts, more often than not. Indeed, arbitration agreements are enforced/recognised by Turkish courts, provided that an objection for the enforcement of the arbitration agreement is raised in due time by the respondent before the Turkish courts. Following such objection, Turkish courts must enforce the arbitration agreement pursuant to the relevant provisions of the IAL, without evaluating the merits of the case, unless the arbitration agreement is invalid, ineffective, unenforceable, or against public order.

As noted above, as per Article 4 of the IAL, the validity of an arbitration clause within a contract is governed by the system of law chosen by the parties, or in the absence of such choice, by Turkish Law. IAL (Article 4) and CCP (Article 412(4)) also provide that no objection can be raised against an arbitration clause contained in an underlying contract, solely based on the invalidity of that underlying contract. In this respect, the principle of separability is applicable pursuant to Turkish law, under which the validity of the underlying contract and the arbitration clause included therein are evaluated independently.

According to Article 7(B) of the IAL, only real persons may be appointed as arbitrators. There is no other rule limiting party autonomy on the selection of the arbitrators. 

In cases where the parties fail to select the chair, the sole arbitrator or panel of arbitrators, they should apply to the relevant court for appointment of this arbitrator. In accordance with 7(B) of the IAL, in appointing an arbitrator, the relevant court will give due regard to:

• any qualifications of the arbitrator that are contained in the agreement of the parties;
• securing the appointment of an independent and impartial arbitrator; and
• the nationality of the arbitrator.

In the case of the appointment of more than three arbitrators, the above principles will also be applicable.

The selection procedure of arbitrators in domestic arbitration proceedings is similar to the above IAL procedure, which is regulated under Article 416 of the CCP.

As per Article 7(B) of the IAL, the appointment of the arbitral tribunal will be made, upon a party request, by the civil court of first instance or the commercial court of first instance, depending on the subject of the dispute, in cases where the parties agreed on the procedure to select the arbitrators but:

• one of the parties fails to act as required under such procedure;
• the parties, or two arbitrators, are unable to reach an agreement expected of them under such procedure; or
• a third party, including an institution, that is empowered to appoint arbitrators fails to perform any function entrusted to it under such procedure.

There is no separate default procedure prescribed under the IAL and/or the CCP with respect to multiparty arbitrations and the above principles are also applicable to multiparty arbitrations.

Pursuant to Article 7(A) of the IAL and Article 416 of the CCP, a Turkish court can intervene in the selection of arbitrators under the following circumstances:

• if one of the parties does not comply with the agreement even though they have decided on the selection procedure of the arbitrators; 
• despite the parties’ agreement to this effect, if the parties and/or the co-arbitrators fail in selecting the presiding arbitrator; or 
• if the third person, institution or organisation authorised to choose the arbitrator does not elect the arbitral tribunal, the selection of the arbitrator or arbitral tribunal will be made by the civil court of first instance upon the request of one of the parties.

The parties may freely decide on the procedure for removal of the arbitrators. If there is no agreed procedure for refusal, the default procedure is that a party may challenge the arbitrator within 30 days of the selection of the arbitrator or the constitution of the arbitral tribunal, or from the date on which the requesting party became aware of the situation leading to such challenge, and that party must notify the other party of this request in writing.

The parties may challenge an arbitrator based on the few grounds mentioned in Article 7(C) of the IAL and Article 417 of the CCP. The party may challenge the arbitrator if the arbitrator does not have the agreed qualifications, if there are grounds for a challenge that is foreseen in the arbitration procedure agreed to by the parties, or if there are circumstances that give rise to justifiable doubts on the impartiality and independence of the arbitrator.

According to Article 7(C) of the IAL, when someone is asked to serve as an arbitrator, such person must disclose all the circumstances and conditions that may cause justifiable doubts as to their impartiality and independence, before accepting the appointment. Arbitrators are also responsible for immediately informing the parties of any circumstances that may subsequently arise and cause justifiable doubts as to their impartiality and independence. The same rule is also prescribed under Article 417 of the CCP for domestic arbitration.

ISTAC Rules provide a similar understanding in relation to the independence and impartiality of arbitrators. Under Article 12, it is stated that both prior to accepting the duty and in the course of the arbitration proceedings, the arbitrator will disclose in writing to the Secretariat any facts or circumstances which might have an influence on their impartiality and independence, as well as any facts or circumstances which may give rise to justifiable doubts as to their impartiality and independence. The arbitrator will sign and submit a statement of impartiality and independence to the Secretariat within seven days from accepting the duty. The arbitrator is also required to provide a statement acknowledging the allocation of sufficient time for this duty. 

Under the IAL, matters relating to in rem rights concerning immovables in Turkey and matters that are not within the parties’ disposal cannot be referred to arbitration. See 3.2 Arbitrability.

Pursuant to Article 7(H) of the IAL and Article 422 of the CCP, both in international arbitration and domestic arbitration, an arbitral tribunal has jurisdiction to consider and rule on objections concerning its own jurisdiction, including objections as to the existence or validity of the arbitration agreement. In this respect, the principle of competence-competence is applicable when an objection is raised in due time (no later than the submission of the statement of response, unless the tribunal holds that there is a justified reason for delay). It should, however, be noted that the arbitral tribunal’s unlawful decision favouring or denying its jurisdiction constitutes grounds for setting aside.

Court intervention occurs when the party dissatisfied with the decision of the arbitral tribunal on jurisdiction appeals to the Regional Court of Appeals for setting aside the arbitral award in question. Following such appeal, the court decides on the annulment of the award which is based on the arbitral tribunal’s unlawful assumption or denial of jurisdiction. As such, the courts review negative decisions of arbitral tribunals on jurisdiction, as well as positive ones. See also 3.3 National Courts’ Approach and 5.6 Breach of Arbitration Agreement for the courts’ intervention in enforcing arbitration agreements by evaluating the jurisdiction of the arbitral tribunal.

The party dissatisfied with the decision of the arbitral tribunal favouring its jurisdiction may resort to the Regional Court of Appeals for setting aside only after the award on merits has been rendered. Against a decision of the tribunal denying its jurisdiction, on the other hand, the party may appeal for setting aside immediately, since the arbitral tribunal’s decision on lack of jurisdiction would constitute a final award. See 5.2 Challenges to Jurisdiction for objections raised before arbitral tribunals.

Setting Aside of Proceedings

The setting aside of proceedings is the sole judicial review available for a party dissatisfied with an arbitral award. An application to set aside an award may only be made on the grounds set forth in Article 15 of the IAL, which are related to the procedure of the case, rather than the merits or the facts of that case. As the grounds for setting aside purport to be exhaustive, the court before which setting-aside proceedings are brought is not entitled to examine any grounds that may be relied upon by the dissatisfied party, other than the grounds for setting aside which are explicitly prescribed under Article 15 of the IAL. The rationale of this provision lies in the requirement of the finality of arbitral awards. 

Finality of Awards

The finality of awards is not, however, achieved only through limited grounds for setting aside. According to a fundamental principle accepted by Turkish courts, the courts lack the authority to review awards on the facts and merits and to make a fresh decision. This principle was clearly articulated by the Court of Cassation in several decisions in which the Court dismissed the application to set aside and noted that, “The arbitral tribunal’s decision on the merits, whether such decision is appropriate, whether the arbitral tribunal has properly applied the applicable law, cannot be discussed and reviewed in the setting-aside proceedings” (Court of Cassation, 15th Civil Law Chamber, dated 20 June 2019, numbered 2019/2896, and Court of Cassation, 11th Civil Law Chamber, dated 22 June 2016 and numbered 2016/6886). However, it should be noted that Article 15 of the IAL includes one ground for setting aside which might involve a review of the merits of the award, albeit to a limited extent, and that is public policy (Court of Cassation, 13th Civil Law Chamber, dated 16 March 2017 and numbered 2017/3322).

The above principles are also prescribed under Article 439 of the CCP with respect to the setting-aside proceedings in domestic arbitrations. 

As per Article 5 of the IAL, if an action is brought before the court with respect to a dispute which should be subject to arbitration based on the parties’ agreement, the counterparty may object to submission of this dispute to the court and may ask the relevant court to dismiss the claims of the other party due to lack of jurisdiction.

The acceptance and/or denial of that objection by the relevant court is based on the validity of the arbitration agreement, which should be reviewed by the court in accordance with the provisions of the CCP regulating the initial objection. If such objection is accepted, then the court must dismiss the action on procedural grounds. If the parties agree to arbitrate during the court proceedings, the case file will be sent to the arbitral tribunal by the court. Article 413 of the CCP has a similar provision for domestic arbitration proceedings.

In line with the above arbitration legislation, it would be fair to say that Turkish courts generally favour the enforcement of arbitration agreements and accept the objection of the party asserting the arbitration agreement between the parties unless there is an invalid arbitration agreement or there is no arbitration agreement at all between the parties. 

Arbitration agreements are binding only on the contracting parties, in line with the principle of privity of contract. Thus, under Turkish law, an arbitral tribunal is in principle not entitled to assume jurisdiction over a third party that is not a party to an arbitration agreement and has not consented to arbitrate, save for some cases where a successor of a contracting party takes the place of the latter, or where there is a situation of assignment of a right, transfer of a contract or assumption of a debt present, on which the legal analysis should be made on a case-by-case basis.

An arbitral tribunal may award preliminary or interim relief at the request of one of the parties, unless otherwise agreed. It is noteworthy that interim measures granted by an arbitral tribunal are not binding on third parties. Also, the tribunal cannot grant interim injunctions or interim attachments that must be executed by the executive authorities or performed by other public authorities. The arbitral tribunals may issue interim relief in the form of interim injunctions or in the form of interim attachments.

The courts may only contribute to the arbitration procedures when it becomes necessary. As per Article 3 of the IAL, with respect to the matters concerning international arbitration, no court may intervene except where so provided in this Law.

Assisting Arbitral Tribunals

Generally, the intervention of the courts in arbitration proceedings takes place in the form of assisting the arbitral tribunals, especially when there is a necessity to obtain urgent and necessary interim relief (ie, an interim injunction or interim attachment) before or during the arbitration proceedings. Besides, should one of the parties fail to fulfil the interim injunction or precautionary attachment decision given by the arbitral tribunal, the other party may again ask for the assistance of the competent court to execute the interim injunction or a provisional attachment decision. 

It is important to note that if the interim relief is procured from a Turkish court before the initiation of the arbitration proceedings, the arbitration must be initiated within 30 days upon the issuance of the court’s interim relief decision. Otherwise, the precautionary injunction or the precautionary attachment will automatically cease to have effect.

Appointing Arbitrators

Apart from above, as mentioned in 4.3 Court Intervention, Turkish courts may also play a role in arbitration proceedings as an appointing authority in cases where the parties fail to select their arbitrators and/or the co-arbitrators appointed by the parties fail to select the presiding arbitrator. 

The IAL has no specific provisions regarding the use of emergency arbitrators. However, ISTAC has special provisions on emergency arbitration procedures in the first appendix of its rules (Emergency Arbitrator Rules Appendix 1). The decisions of emergency arbitrators are binding. ISTAC Emergency Arbitrator Rules Article 6(2) specifically states that the emergency arbitrator must decide on the admissibility of the application and their jurisdiction to grant interim measures.

According to Article 16(C) of the IAL, an arbitral tribunal may request that the claimant makes an advance payment for the cost of the proceedings. If said advance is not deposited within the prescribed time limit, the tribunal may suspend the arbitration proceedings. The proceedings will continue if the deposit is made within 30 days after the notification to the parties of the suspension of the proceedings. Similarly, as per Article 442 of the CCP, in domestic arbitration proceedings, arbitral tribunals may request that the parties make advance payments for the cost of the proceedings.

Excluding a few mandatory provisions set forth by the IAL for international arbitration proceedings and by the CCP for national arbitration proceedings, the procedure to be followed by the arbitral tribunal when conducting proceedings is at the parties’ discretion. The parties may agree on the law applicable to the procedure of arbitration or incorporate international or institutional rules of arbitration in their arbitration agreement by reference. In the absence of such choice, the IAL (in the case of international arbitration proceedings) and the CCP (in the case of national arbitration proceedings) will be the governing law of the arbitration proceedings. The same freedom applies to the seat and language of arbitration, and the number of arbitrators.

As long as the parties are granted the same rights and powers, and have a full opportunity to be heard, the IAL and the CCP have no particular procedural requirement from which the parties cannot deviate.

However, in some circumstances the relevant procedures prescribed under the IAL and the CCP must be strictly followed by the parties. These circumstances are:

• objections to the court to refer the dispute to arbitration due to the existence of a valid arbitration agreement;
• application for interim measures of protection and interim attachments; and
• appointment of and challenge of an arbitrator. 

The principal duty of arbitrators is to conduct the arbitration proceedings in line with the international or institutional arbitration rules that the parties have chosen, and in the absence of such choice, in accordance with the provisions of the IAL (for international arbitration proceedings) and the CCP (for national arbitration proceedings). 

Granting the parties equal rights and powers and providing them with a full opportunity to assert their claims and defence could be considered the most important duty of the arbitrators.

In line with the principle of independence and impartiality, arbitrators are obliged to disclose any circumstances which are likely to give rise to justifiable doubts as to their impartiality or independence. This obligation continues throughout the entire proceeding. 

Arbitrators conduct the selection of the seat and language of arbitration, and the law applicable to the merits of the case at hand, in line with the provisions of the IAL’s absent parties’ determination. Arbitrators are also granted power to issue procedural orders on interim measures at the request of a party, provided that this does not conflict with what has been agreed between the parties and that such procedural orders do not require action by the enforcement authorities. 

Article 12(C) of the IAL and Article 433(3) of the CCP allow arbitrators to render an award ex aequo et bono or as amiable compositeur in cases where the parties have reached an agreement in this regard.

Unless otherwise agreed by the parties, arbitrators are obliged to render the award within one year. In the case of the failure of an arbitrator to perform their duties without a justifiable reason, the delinquent arbitrator is obliged to compensate the damages of the parties. An arbitral tribunal’s power and duty to decide on its jurisdiction is explained in 5.2 Challenges to Jurisdiction.

While the privilege to represent parties before the Turkish courts is solely reserved for attorneys qualified in Turkey, no legal requirement applies to the representatives of the parties involved in arbitration proceedings under the IAL or the CCP. 

However, it should be noted that only a Turkish lawyer admitted to the Bar in Turkey is capable of representing the parties before Turkish courts during arbitration proceedings when an intervention of the Turkish courts is required by law or by a party, including but not limited to applications for:

• appointment of an arbitrator;
• interim measures; and
• setting-aside proceedings.

Parties are free to agree on the applicable procedural rules for arbitration, including the rules concerning the collection and submission of evidence. The procedure on submission of evidence may be based on the law of any state or international organisation rules, such as the IBA Rules on the Taking of Evidence in International Arbitration, in accordance with the agreement between the parties and/or the decision of the arbitral tribunal in this regard.

Unlike litigation proceedings in Turkey, which are mainly based on an inquisitorial system, both international arbitration legislation (the IAL) and national arbitration legislation (the CCP) are close to adversarial systems which allow the parties to collect and submit their own evidence, including but not limited to witness testimonials and expert reports. On the other hand, the parties and the arbitral tribunals may decide on a document production phase as well.

On the other hand, in international arbitration proceedings, as per Article 12(A) of the IAL, the tribunal may also decide:

• to appoint experts;
• to order the parties to provide documents and information to the tribunal-appointed experts; and
• to conduct site inspections.

Article 431 of the CCP grants the same powers with respect to appointment of experts and site inspections to the arbitral tribunals in national arbitration proceedings.

There is a distinction between national arbitration and international arbitration. The rules of evidence applied in national arbitration, which are included in the CCP, do not apply to international arbitration, unless stated otherwise in the IAL.

As per Article 12(B) of the IAL, in international arbitration proceedings, the parties must provide their evidence within the term determined by the arbitrators. The arbitral tribunal may request the competent court’s assistance in taking evidence. Similarly, pursuant to Article 432 of the CCP, in domestic arbitration proceedings, the parties may apply to the authorised court to get assistance in obtaining the evidence to be provided based on the decision of the arbitral tribunal in this regard.

Article 6 of the IAL provides that the arbitral tribunal will not grant interim measures that bind third parties. Hence, in principle, the arbitral tribunals have no jurisdiction to issue interim relief that binds the third parties. However, under exceptional circumstances, tribunals may order the production of documents which are directly relevant to the merits of the case and in the possession of a third party, and the parties may apply to the authorised courts to obtain these documents from the third party. 

While the IAL does not impose any requirement as to the confidentiality of the proceedings, documents or information obtained through arbitration, the parties are free to lay down such requirement and determine to what extent it applies. The parties may do so by agreeing on this particular matter, for instance, during the first procedural meeting, or by adopting certain instruments or special procedural rules of their choice. 

Certain institutional rules governing the arbitration proceedings subject to the parties’ discretion may also impose this requirement, as ISTAC Rules do. There is also no restriction on the use of information attained through arbitration proceedings in subsequent proceedings. 

The content of an arbitral award must involve the following:

• the names, surnames, titles and addresses of the parties and their representatives, if applicable;
• the legal grounds and reasoning behind the award, as well as the quantum of damages;
• the place of arbitration and date of the award;
• the names, surnames and signatures of the deciding arbitrators and any dissenting opinion; and
• a statement that the award is subject to an action of annulment.

Unless the parties agree otherwise, the arbitral tribunal will decide on the merits within one year from the date of the selection of the arbitrator in sole arbitrator cases, and in cases with more than one arbitrator, from the date of preparation of the minutes of the first meeting of the arbitral tribunal.

There is no specific rule on the types of remedies that can or cannot be awarded by an arbitral tribunal. In general, arbitral tribunals are entitled to give an award in the form of compensation for material damages, interim relief such as interim injunctions and interim attachments, and determination of several issues such as violation of the contract by one party, etc. 

Unless the parties agree otherwise, the costs of the proceedings are borne by the losing party. If both parties’ claims are partially accepted, the costs of arbitral proceedings may be shared between the parties. It would be fair to say that arbitral tribunals in Turkey generally follow the principle of costs follow the event. 

As to the interest claims of the parties, arbitral tribunals are bound by the parties’ claims (which means that the tribunals cannot ex officio determine the amount of interest). On the other hand, it should be noted that compound interest is prohibited under Turkish law. Hence, if the parties request compound interest, the arbitral tribunal should dismiss such request, as the granting of compound interest to a party may be set aside due to the violation of public policy. 

The parties are not entitled to appeal against an arbitral award based on the merits of the dispute. The parties may only apply to the authorised court to set aside the award based on procedural grounds only. The grounds for setting aside set forth in Article 15 of the IAL bear a resemblance to the grounds provided in Article 34 of the UNCITRAL Model Law, although there are some differences, as emphasised in 2.1 Governing Law. 

Article 15 of the IAL adds certain grounds for setting aside, including the arbitral tribunal’s failure to issue the award within the prescribed time limit, and if the principle of equality of the parties has been disregarded by the arbitral tribunal. As per Article 15 of the IAL, an award rendered under the IAL may be set aside only if:

• a party to the arbitration agreement was under some incapacity, or the said agreement is not valid under the law applicable to it by virtue of the parties’ choice or, failing such choice, under Turkish law;
• the composition of the arbitral tribunal was not in accordance with the parties' agreement, or with the IAL;
• the arbitral award was not rendered within the term of arbitration;
• the arbitral tribunal unlawfully assumed or denied jurisdiction;
• the arbitral tribunal rendered an award dealing with a dispute not contemplated by, or not falling within the scope of the arbitration agreement, or decided infra petita, or acted ultra vires; 
• the arbitration proceedings were not conducted in compliance with the rules set forth by the agreement of the parties, or, failing such agreement, by the IAL, and such non-compliance affected the substance of the award;
• the principle of equality of the parties was disregarded;
• the subject matter of the dispute may not be settled by arbitration under Turkish law; or
• the award is in conflict with public policy.

It should be noted that while the party making the application based on the first seven grounds needs to provide proof of such breach, the grounds of non-arbitrability and violation of public order will be examined ex officio by the court. 

The same grounds also apply to domestic arbitration. In other words, the grounds prescribed by Article 439 of the CCP for the actions of setting aside of domestic arbitral awards are the same as the ones set forth in Article 15 of the IAL. 

The application for setting aside an award rendered under the IAL must be filed within 30 days of issuance of the award. The execution of the arbitral award in question will be automatically suspended upon this application. The judgment on the application for setting aside may be appealed before the Court of Cassation in accordance with the provisions of the CCP. The appeal, on the other hand, does not result in suspension of the execution of the judgment on setting aside.

With regard to domestic arbitration, the application for setting aside does not result in suspension of the execution of the award, in the absence of the court’s decision on suspension at a party’s request and the provision of security. The judgment of the Regional Court of Appeals on the application for setting aside may be appealed before the Court of Cassation. Such appeal also does not result in suspension of execution of the judgment.

In accordance with Article 15 of the IAL, the parties may, in part or in full, renounce their right to file an action for the setting aside of an arbitral award rendered in an international arbitration proceeding conducted within the scope of the IAL. 

As mentioned in 11.1 Grounds for Appeal, the only grounds for annulment are set forth by Article 15 of the IAL and Article 439 of the CCP. In view of the foregoing, the award can only be reviewed by the competent courts in terms of procedural matters, without evaluating the merits of the case.

The Republic of Turkey is a party to the New York Convention, which was ratified on 2 July 1992, with two reservations. Firstly, the New York Convention will apply on the basis of reciprocity. Secondly, it will apply only to disputes that are commercial in nature, whether contractual or not.

Turkey is also a signatory to the ICSID Convention, which came into effect in 1989, to solve international investment disputes, and the Geneva Convention on International Commercial Arbitration, which was ratified in 1992.

The rules on the recognition and enforcement of awards are regulated under International Private and Procedural Law No 5718 (the “IPPL”) and the New York Convention. The enforcement and recognition of a foreign arbitral award will be subject to the New York Convention if the seat of arbitration is a signatory party to the Convention. Otherwise, recognition and enforcement will be subject to the IPPL.

Article V of the New York Convention sets out the grounds for refusal of recognition and enforcement. Article V(1)(e) sets out the situation where the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. 

The IPPL is applicable for the enforcement of other arbitral awards rendered in a country which is not party to the New York Convention. Article 62 of the IPPL sets out the grounds on which recognition and enforcement will be refused. The award will not be recognised or enforced if: 

• there is no arbitration agreement; 
• the award is against public morals or public policy; 
• the dispute is non-arbitrable under Turkish law; 
• one of the parties was not duly represented during the proceedings and that party has not subsequently given explicit consent to the conducted proceedings; 
• the party against whom enforcement is sought was not duly informed of the appointment of arbitrators or was deprived of the right to due process; 
• the arbitration agreement or clause is null and void under the applicable law agreed by the parties, or in the absence of such, under lex loci arbitri; 
• the appointment of arbitrators or the procedures applied by the arbitrators are in violation of the parties’ agreement, or in the absence of such, in violation of lex loci arbitri; 
• the arbitral award relates to a matter not included in the arbitration agreement, or the award exceeds the scope of the arbitration (in such case, only the parts that exceed the scope will not be enforced); or
• the award has not become final, enforceable or binding under the applicable law, the law of the seat of arbitration or the applicable procedure, or it was annulled by the competent body of the place where it was rendered.

As explained above, the reasons for refusal of recognition and enforcement of an award are set out in the IPPL and in the New York Convention. The IPPL adopted the reasons for refusal in the New York Convention. Therefore, it is not possible for the courts to assert a sovereign immunity defence as it is not listed as one of the reasons for refusal.

If an award has been set aside in the seat of arbitration, it may not be enforced until there is a final and binding decision. 

In cases where the enforcement and recognition of an arbitral award, which is subject to the setting-aside process in the seat of arbitration, is requested by a party, the Turkish courts consider this application within the scope of Article VI of the New York Convention. 

In addition, in Turkey, enforcement and recognition of an arbitral award for which the annulment process is still ongoing in the seat of arbitration can be requested, and an interim attachment may even be sought from the relevant court. However, in line with Article VI of the New York Convention, Turkish courts generally consider the ongoing annulment case in the seat of arbitration as a preliminary issue and do not give their final decisions on recognition and enforcement without waiting for the outcome of the setting-aside proceedings. 

For instance, in a previous case, while the seat of the arbitration was the Netherlands and one party initiated proceedings for setting aside the arbitral award, the other party applied for the enforcement of the same award in Turkish courts. In its decision numbered E 2017/1094 K 2017/3777 and dated 2 November 2017, the 15th Civil Chamber of the Court of Cassation held that "the application was made to the court with the request for enforcement of the foreign arbitral award and it has not yet been annulled, but a lawsuit has been filed for annulment and therefore the court must wait for the outcome of the annulment proceedings before ruling on the enforcement of the arbitral award".

Finally, it should be noted that sovereign immunity does not prevent the relevant parties from filing a suit for recognition or enforcement of an arbitral award against the state or state institutions, but the execution of the decision may be non-seizable. 

Turkish courts render arbitration-friendly decisions. Objections concerning refusal of recognition and enforcement of arbitral awards are being carefully reviewed by the courts. 

Public Policy

The concept of public policy has been widely defined in past cases. It is broadly understood as the fundamental rules of international law, the common understanding of morality in developed societies, the basic understanding of justice and legal policy on which Turkish laws are based, and the fundamental rights and freedoms prescribed under the constitution and under bilateral treaties.

There is no specific provision in the IAL or the CCP regarding class action or group arbitration, or restricting any aspect of such claims.

Ethical standards applicable to attorneys in Turkey are regulated by Attorneyship Law No 1136, under which attorneys in Turkey are obliged to conduct their duties with care, rightfulness and honour, in a way that befits the sanctity of the profession of attorneyship. The Union of Turkish Bar Associations also provides the core principles of the legal profession, which attorneys in Turkey are required to abide by under the Attorneyship Law. 

There is no provision in the IAL or in the CCP regulating, providing or restricting third-party funding. In line with this, the obligation to disclose third-party funding is not applicable to arbitration proceedings governed by the IAL and the CCP, in the absence of an agreement by the parties to use a set of arbitral rules that contain such requirement.

The consolidation of separate arbitrations is not regulated, either under the IAL or the CCP. It is therefore dependent upon the parties’ agreement and the arbitral tribunal's decision. In this regard, it is for the parties to refer to the institutional rules of their choice that regulate and allow for such procedure, or not, as such procedure is neither provided nor prohibited by the IAL or the CCP.

In line with the principle of privity of contract, arbitration agreements are, in theory, only binding on the contracting parties, as are awards. The IAL and the CCP do not contain any provision providing for any circumstance in which a third party is deemed to be bound by an arbitration agreement or award. Having said this, the parties have, however, the right to adopt institutional arbitration rules that allow the extension of arbitration to third parties. See 5.7 Jurisdiction Over Third Parties for further information.