Arbitration Law in Turkey
Arbitration Law in Turkey is primarily governed by the Turkish International Arbitration Law (TIAL), which was adopted in 2001. The law is modeled closely after the UNCITRAL Model Law on International Commercial Arbitration. Turkey has made significant efforts to modernize its arbitration laws and has made arbitration an attractive option for both domestic and international dispute resolution.
Turkey is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), which adds to its credibility as a venue for international arbitration.
Key Features of Arbitration Law in Turkey:
1. Legal Framework
- Turkish International Arbitration Law (TIAL): The Turkish arbitration law was enacted in 2001 and applies to both domestic and international arbitrations. The law provides a clear and modern framework for arbitration, in line with international practices.
- Civil Procedure Code (CPC): The Civil Procedure Code, in particular Articles 407-419, covers aspects of domestic arbitration that are not fully addressed by the TIAL.
- Turkey and the New York Convention: Turkey is a party to the New York Convention and enforces foreign arbitral awards, subject to limited exceptions.
2. Arbitration Agreement
- Written Form: Under Turkish law, an arbitration agreement must be in writing. The written form requirement is interpreted broadly, so the agreement can exist in a contract or be concluded in a separate document.
- Scope of Arbitration: The arbitration agreement should clearly define the scope of disputes to be arbitrated. In the absence of such a provision, the court may determine the arbitrability of a dispute.
- Enforceability: If a dispute falls under an arbitration agreement, Turkish courts are required to stay judicial proceedings and refer the matter to arbitration.
3. Arbitral Tribunal
- Number of Arbitrators: Parties are free to agree on the number of arbitrators, which is typically one or three. In the absence of such an agreement, the court may appoint arbitrators.
- Appointment of Arbitrators: Arbitrators are appointed by the parties, or in case of disagreement, a third party (such as a court or an institution) may appoint them. If the arbitration is institutional, the chosen institution will typically appoint the arbitrators.
- Impartiality and Independence: Arbitrators must be impartial and independent. If there is a conflict of interest or any challenge to the arbitrator’s impartiality, the parties can seek the removal of the arbitrator.
- Qualifications: While the law does not mandate specific qualifications for arbitrators, they should ideally have relevant expertise in the subject matter of the dispute and be capable of understanding and applying the relevant laws.
4. Arbitration Procedure
- Party Autonomy: One of the hallmarks of Turkish arbitration law is party autonomy. Parties are free to determine the rules, language, venue, and procedures for arbitration. If the parties have not agreed on specific rules, the arbitral tribunal has the authority to decide on procedural matters.
- Institutional and Ad Hoc Arbitration: Turkey allows both institutional and ad hoc arbitration. Well-known institutions like the Istanbul Arbitration Center (ISTAC) and Turkish Commercial Arbitration Center (TCAC) provide a range of services for managing arbitrations. In ad hoc arbitrations, the parties may opt for the UNCITRAL Arbitration Rules or other rules.
- Interim Measures: Arbitrators in Turkey have the authority to order interim measures to protect the rights of the parties during the arbitration proceedings. If necessary, these interim measures can be enforced by Turkish courts.
- Confidentiality: Arbitration proceedings in Turkey are generally confidential, unless the parties agree otherwise or the disclosure is necessary for the enforcement of the award.
5. Arbitral Awards
- Binding and Final: Arbitral awards in Turkey are generally final and binding on the parties. However, they can be challenged on limited grounds, such as jurisdictional issues or procedural irregularities.
- Award in Writing: The award must be in writing and signed by the arbitrators. The award must include reasons for the decision unless the parties agree otherwise.
- Time Limit for Award: According to the TIAL, the arbitral tribunal must issue the award within six months from the conclusion of the proceedings, unless the parties agree to extend the deadline.
- Monetary and Non-Monetary Remedies: Arbitrators can award a range of remedies, including monetary compensation, specific performance, and injunctions.
6. Enforcement of Arbitral Awards
- Domestic Awards: Domestic arbitral awards in Turkey can be enforced through the Turkish courts. If a party does not comply with the award, the other party can seek enforcement through the Commercial Court.
- Foreign Awards: As a signatory to the New York Convention, Turkey recognizes and enforces foreign arbitral awards, subject to limited grounds for refusal:
- The award is contrary to public policy in Turkey.
- The party against whom the award is being enforced was not given adequate notice of the arbitration proceedings.
- The dispute is not arbitrable under Turkish law.
7. Judicial Review and Setting Aside of Awards
- Limited Judicial Review: Turkish courts have limited authority to review or set aside arbitral awards. The grounds for challenging an award are limited to:
- Excess of jurisdiction: If the arbitral tribunal exceeded its authority.
- Procedural Irregularities: If there were serious procedural flaws that affected the fairness of the arbitration.
- Violation of public policy: If the award is contrary to Turkey’s public policy or fundamental principles of law.
- Setting Aside Process: A party wishing to set aside an arbitral award must file a petition with the Regional Court of Appeals within 30 days from the notification of the award.
8. Role of Courts in Arbitration
- Supportive Role: Turkish courts play a supportive role in arbitration. They assist with the enforcement of arbitration agreements, appointing arbitrators, and providing interim relief.
- Stay of Court Proceedings: When there is an arbitration agreement, Turkish courts will stay any judicial proceedings relating to the subject matter of the dispute and refer the matter to arbitration.
- Assistance with Interim Measures: Turkish courts can assist with enforcing interim measures ordered by the arbitral tribunal, such as injunctions or the preservation of assets.
9. Arbitration Institutions in Turkey
- Istanbul Arbitration Center (ISTAC): The Istanbul Arbitration Center is one of the leading arbitration institutions in Turkey. It administers both domestic and international arbitrations and provides a comprehensive set of rules for conducting arbitrations.
- Turkish Commercial Arbitration Center (TCAC): Another prominent institution, the TCAC offers a range of arbitration services, particularly in commercial and trade-related disputes.
- International Institutions: For international disputes, Turkish parties may also choose institutions like the International Chamber of Commerce (ICC), LCIA, or UNCITRAL.
10. Recent Developments and Future Outlook
- Reforms and Modernization: Turkey’s arbitration laws have been continually updated to align with international practices. There has been an emphasis on creating a more arbitration-friendly environment, both for domestic and international disputes.
- Focus on International Arbitration: Turkey aims to position itself as an important hub for international arbitration, with Istanbul being seen as a key location for dispute resolution between Europe, Asia, and the Middle East.
- Potential Reforms: In line with global trends, further reforms may focus on simplifying the arbitration process, enhancing efficiency, and providing more support for arbitrators and parties involved in international arbitration.
Conclusion
Turkey’s Arbitration Law offers a well-established and modern framework for both domestic and international arbitration. The country’s commitment to the UNCITRAL Model Law and the New York Convention ensures that Turkey is well integrated into the international arbitration landscape. With a focus on party autonomy, confidentiality, and judicial support, Turkey is an attractive venue for arbitration, especially for disputes involving cross-border commercial transactions. The country’s robust legal infrastructure, along with growing arbitration institutions like ISTAC, continues to enhance its reputation as a major center for arbitration in the region.
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