There is both domestic legislation such as Code on Civil Procedure, International Arbitration Act, International Private and Procedural Act, Foreign Direct Investment Act and international agreements that Turkey is party to such as New York Convention for Enforcement of Arbitral Awards, European Convention on International Commercial Arbitration and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States.
There are also international agreements related to foreign investments that have provisions on settlement of international disputes such as the Energy Charter Treaty and Bilateral Investment Treaties that Turkey is party to.
- By the amendment on Article 125 of Turkish Constitution titled as "Judicial Review" and dated 13.08.1999 following provision has been enacted; "In concession conditions and contracts concerning public services and national or international arbitration may be suggested to settle the disputes arising from them. Only those disputes involving an element of foreignness may be submitted to international arbitration."
Moreover, Law on Principles to be Observed in the Case of the Application for Arbitration in the Disputes arising from the Concession Conditions and Contracts Concerning Public Services No.4051 indicates the principals and procedures to be observed by Parties regarding arbitration clauses stipulated in the concession conditions and contracts concerning public services.
- Provisions of the Code on Civil Procedure (Law No. 6100) dated 4 February 2011 ("CCP") shall be applicable to the disputes that have no foreign element and agreed Turkey as the place of arbitration.
- International Arbitration ACT (Law No. 4686) ("IAA") 1 was adopted on June 21, 2001 and it entered into force on July 5, 2001. is based on United Nations Commission on International Trade Law -UNCITRAL Model Law- and contains the primary provisions to be applied in disputes with a foreign element where Turkey is the agreed place of arbitration or where the parties, arbitrator or arbitral tribunal have agreed that the IAA will apply.
- The Foreign Direct Investment Act ("FDIA") entered into force on June 17, 20032. The objective of this Act is to regulate the principles to encourage foreign direct investments and to protect the rights of foreign investors. Article 3 regulates the dispute settlement and offers the possibility of international arbitration for foreign investments "For the settlement of disputes arising from investment agreements subject to private law and investment disputes arising from public service concessions agreements which are concluded with foreign investors, foreign investors can apply either to the authorized local courts, or to national or international arbitration or other means of dispute settlement, provided that the conditions in the related regulations are fulfilled and the parties agree thereon."
According to Turkish law, enforcement and recognition of arbitral awards deemed as foreign arbitral award are subject to a specific procedure.
There are two different regulations regarding enforcement and recognition of arbitral awards in Turkey bearing element of foreignness.
- First of these two regulations is domestic legislation which are the provisions of Articles 60, 61, 62 ve 63 of International Private and Procedural Act ("IPPA") with effective date of 12.12.2007 and No.57183.
According to Article 62 the Court shall refuse the request for enforcement of foreign arbitral award if:"...
a. There is no arbitration agreement or there is no arbitration clause in the main contract.
b. The arbitral award is against good morals or order public.
c. The dispute, which became the subject of arbitration, may not be resolved by arbitration under Turkish law.
ç. One of the parties has not been properly represented before the arbitrators and has afterwards not expressly ratified their actions.
d. The person against whom the enforcement of the arbitral award is sought has not been properly informed about the selection of the arbitrators or he has not been given an opportunity to present his arguments and defend himself.
e. The arbitration agreement or arbitration clause is not valid under the law to which the parties have agreed or if there is no such agreement, according to the law where the
arbitration award was rendered.
f. The selection of the arbitrators or the procedural rules applied by the arbitrators is contrary to the agreement of the parties or, if there is no such agreement, contrary to the law where the arbitration award was rendered.
g. The arbitral award is on a matter that is not included in the
arbitration agreement or clause, or, if it is party outside the
scope of the agreement it will not be enforced as to that part.
h. The arbitral award is not final or is not yet executable or binding under the law to which the award is subject or under the law where it was rendered, or a competent authority annuls it where it was rendered.
The burden of proof on matters stated in paragraphs ç, d, e, f, g and h is on the party against whom the enforcement is sought."
According to article 61(2) the court is to apply by analogy the provisions of articles 55 "The application for enforcement together with the date of hearing shall be served on the other party. The enforcement decision will be rendered after an inquiry has been made according to the rules of simplified procedure. The defendant can only raise objections that the conditions for enforcement under the provisions of this section do not exist or that the foreign court decision has already been partly or fully fulfilled or that an event, which hinders its fulfillment, has occurred.", article 56 "The court may decide on the enforcement of the foreign judgment wholly or partly or may refuse the demand of enforcement. This decision shall be written beneath the foreign court decision and will be signed and sealed by the judge" and article 57 "Foreign judgments for which enforcement is given will be executed as if they are Turkish court decisions. Appeals against a decision of enforcement or refusing enforcement are subject to the general provisions. Appeal will stay the execution"
The other source for recognition and enforcement procedure is international treaties.
For recognition and enforcement of foreign arbitral awards there are also international agreements that Turkey is part to, such as the New York Convention for Enforcement of Arbitral Awards ("New York Convention")4 dated 10.06.1958, The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States ("ICSID Convention"), Energy Charter Treaty ("ECT") and Bilateral Investment Treaties.
- New York Convention; According to the Article 1 of New York Convention, Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought. Turkey's participation in the New York Convention is subject to reservations. Turkey applies paragraph 3 of Article 1 of the New York Convention only with respect to the recognition and enforcement of an award rendered in a signatory state in accordance with the reciprocity principle and that it must apply the New York Convention only to the disputes arising from contractual or non-contractual legal relationships and the disputes which are deemed as commercial under its domestic law.
If the State where the recognition and enforcement of arbitral awards are sought has not ratified the Convention, then Act on IPPA shall apply to the recognition and enforcement of foreign arbitral awards.
The Convention has been ratified by Japanese Government on 1961, and Turkish Government on 1992 and is effective for the both Parties. Therefore, this memorandum covers mainly New York Convention provisions and provisions of IPPA will be addressed to the extent necessary.
Recognition and Enforcement Criterias According to New York Convention,
- By adoption of the territory criteria on Article 1 of the NYC, it is stated that arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought and not considered as domestic awards in the State where their recognition and enforcement are sought (award rendered against mandatory provisions of Turkish procedural law) shall be deemed as foreign arbitral awards.
- Pursuant to Article V-1(a), capacity of parties and validity of arbitration agreement is subject to the law to which the parties have subjected it and if there is not explicit choice of law, the law of the country where the arbitral award was made.
- Pursuant to Article II/2 arbitration it has been stated that the arbitration agreement shall be in writing signed by the parties or contained in an exchange of letters or telegrams.
- An opted arbitration institution shall be explicitly stated in the agreement.
- The party against whom the award is invoked shall be given proper notice of the appointment of the arbitrator or of the arbitration proceedings and shall not be unable to present his case otherwise.
- The courts of the State where the recognition and enforcement of arbitral awards are sought shall refuse the recognition or enforcement of the award contrary to the public policy of that country. In the event that arbitrator have not impartiality and independence or arbitration provides an advantage in the proceedings to one party over the other or the subject of the agreement is immoral, arbitral award shall be deemed as contrary to the public policy. New York Convention m. V/2-b, IPPA 62/I-b.
- The subject matter of the dispute shall be arbitrable and capable of settlement by arbitration under the law of that country.
- If the dispute is partially arbitrable, only the provisions of the arbitral award capable of settlement by arbitration shall be enforced.
- According to the article V/2-a of New York Convention regarding law applicable to the assessment of arbitrability; recognition and enforcement of an arbitral award may be refused if the competent authority in the country where recognition and enforcement is sought finds that the subject matter of the difference is not capable of settlement by arbitration under the law of that country.
According to Turkish Law, disputes related to real rights concerning immovables (Turkish Civil Law numbered 4721 art. 683, 779) and disputes that are not within the parties' disposal are not capable of settlement by arbitration. (IAA art. 1; CCP art. 408).
- Burden of proof regarding fulfillment of conditions for recognition and enforcement of an foreign arbitral award, lies on the party against whom the award is invoked for recognition and enforcement. However, the court may ex officio examine the fulfillment of conditions in some occasions.
- According to the article V-e of New York Convention, it is sufficient for enforcement of an arbitral award to be binding and final for the parties.
The parties are free to determine all matters including, choice of arbitrators, the number of arbitrators, seat of arbitration, governing law, procedural law for Ad Hoc arbitration or they may prefer Institutional Arbitration including its institutional and procedural rules.
There is no procedural or judicial difference between foreign arbitral awards rendered in Ad Hoc or Institutional Arbitration regarding recognition and enforcement of an arbitral award.
Recognition and Enforcement Procedure
Competence and Jurisdiction
In accordance with the amendment to Article 5 of the Law on the Establishment, Competence and Jurisdiction of the Courts of First Instance and the First Courts of the District Courts (No. 5235), commercial courts of first instance have jurisdiction on recognition and enforcement of foreign arbitral awards and competent court shall be where the Parties have mutually agreed and in a written form. If the parties have not agreed upon the competent court, then the domicile of the person in Turkey against whom the award is rendered, or in the absence of domicile, the person's place of habitual residence, and in the absence thereof, the court at the location of the property that may be subject to execution shall be the competent court. (IPPA m. 60/2).
In the event that the claimant has not property in Turkey that may be subject to execution proceedings, Turkish courts shall not have competence regarding recognition and enforcement of an arbitral award. However, in the cases where competence is not legally set, the court may not consider competence ex officio. Then, the defendant shall object the competency of the court within response petition period.
According to the article IV of the New York Convention dated 1958, a party requesting enforcement of a foreign award shall attach the copies of the following documents;
i. The duly authenticated original award or a duly certified copy thereof.
ii. The original agreement which the award rendered accordingly or a duly certified copy thereof.
iii. The arbitral award or its duly translation in the language of the court before the recognition and enforcement is invoked.
According to the Article III of New York Convention dated 1958 regarding fees and charges, there shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards are imposed on the recognition or enforcement of domestic arbitral awards. Pursuant to the article 15 of the IAA, upon the finalization of the judgment concerning the denial of the application for setting aside, the civil court of first instance shall give a certificate concerning the enforceability of the award to the party who made a request for it. No court charges are applicable to the issuance of this certificate. At the stage of the award's enforcement, the Code on Charges shall however be applicable.
The request of recognition or enforcement of foreign arbitral awards before the court shall be deemed as a lawsuit. In the event that the claimant is Turkish citizen and has no place of habitual residence in Turkey, claimant shall be subject to deposit security pursuant to CCP and if the claimant is a foreign individual or legal person having no place of habitual residence in Turkey then shall be subject to deposit security pursuant to IPPA The court may exempt the claimant from Reciprocity shall be applied according to bilateral agreements or international agreements which both Turkey and government of the claimant is a party.
Pursuant to the Article 61 of IPPA with reference to the Article 55, shall be applicable to the enforcement and recognition of foreign arbitral awards, the petition for the request for enforcement shall be served upon the opposing party and shall contain the date of the hearing. The request is to be reviewed and resolved by the court in accordance with the provisions of simple trial procedure.
According to Articles 316-322 of CPP No.6100 response period to the lawsuit is 2 weeks. The court, upon request of the defendant, may grant additional time of 2 weeks. The court shall end the procedure of examination on the merits within 2 hearings except the preliminary examination hearing.
Scope of Examination
According to the New York Convention and IPPA, court shall not make a judgment on the merits for the enforcement and recognition of foreign arbitral awards. Court of Cassation's jurisprudences also indicate that courts have not competence regarding judgment on the merits. "Revision au fond" restriction has been applied and respected by the Turkish courts.
Article 61 of IPPA with reference to the Article 55/2 shall be applicable to the enforcement and recognition of foreign arbitral awards.
The opposing party may only raise objection by claiming that the enforcement conditions under the provisions of this chapter are not present or that the foreign court decree was partially or wholly executed or a reason hindering the enforcement has arisen. These objections are numerus clauses. However, defendant may also raise objection by claiming that the Party who requests enforcements has attached none of the documents or missing documents.
- The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention)5
According to the ICSID Convention ICSID provides facilities for the conciliation and arbitration of disputes between member countries and investors who qualify as nationals of other member countries.
When countries ratify the Convention the Partys' courts are obliged to enforce an ICSID award as a final judgment of its courts6.
Turkey has two reservations for the Convention7. For Turkey ICSID does not have jurisdiction on disputes arising from or related rights on immovables in Turkey where the Turkish courts have exclusive jurisdiction. And Turkey does not consider itself bound by Article 64 of the ICSID Convention. According to the Article 64 any dispute arising between Contracting States concerning the interpretation or application of this Convention, which is not settled by negotiation, shall be referred to the International Court of Justice by the application of any party to such dispute, unless the States concerned agree to another method of settlement.
- Energy Charter Treaty
Turkey is also party to Energy Charter Treaty (ECT)8 ECT is a multilateral treaty sets the legal framework on investment, trade, transit, competition and environment on energy sector. ECT has important dispute settlement provisions. Article 29, 7, 6 and 19 are regarding dispute settlement for trade, transit, competition and environment issues. For settlement of investment disputes there both the investor-state arbitration and state-state arbitration. In case of an investment dispute international arbitration is possible. For example in the ECT it is possible to resolve disputes by the Stockholm Arbitration, UNCITRAL Arbitration Rules or ICSID. There are important investment disputes under this Treaty against Turkey9.
- Bilateral Investment Treaties
Furthermore, such provision in this subject manner has been adopted in international bilateral agreements between Turkey and several states.
Within this scope, Agreement Concerning the Reciprocal Promotion and Protection of Investment between Japan and Turkey ("Agreement") has been ratified by the Law No.3844 dated 01.10.1992 and implemented with the 24.11.1992 dated, 92/3723 numbered decision of Council of Ministers.
According to the Article 11 of the Agreement; "Any dispute between either Contracting Party and a national or company of the other Contracting Party with respect to investment within the territory of the former Contracting Party shall, as far as possible, be settled amicably through consultation between the parties to the dispute. This shall not be construed so as to prevent nationals and companies of either Contracting Party from seeking administrative or judicial settlement within the territory of the other Contracting Party. If any legal dispute that may arise out of investment made by a national or company of such other Contracting Party cannot be settled through such consultation, such former Contracting Party shall consent to submit the dispute to conciliation or arbitration at the request of such national or company in accordance with the provisions of the ICSID Convention done at Washington on March 18, 1965, so long as both Contracting Parties are parties to the said Convention.
1. Each party to the dispute submitted to conciliation or arbitration in accordance with the Convention shall bear the cost of such conciliation or arbitration proceedings in accordance with the provisions of Article 61 of the Convention.
2. In the event that a national or company of either Contracting Party has resorted to administrative or judicial settlement within the territory of the other Contracting Party concerning a legal dispute that may arise out of investment made by such national or company, such dispute shall not be submitted to arbitration referred to in the provisions of paragraph 1 of the present Article.
3. In case a legal dispute arises out of investment made by a company of either Contracting Party and such company is controlled by nationals or companies of the Other Contracting Party on the date on which such company makes a request to the former Contracting Party to submit the dispute to conciliation or arbitration, such company of the former Contracting Party shall be treated for the purposes of the provisions of the present Article as a company of such other Contracting Party."
ICSID Convention shall be applicable to the Disputes within the scope of abovementioned Article.
Within this scope, applying the arbitration process on the grounds of bilateral agreements shall be permissible only if there is not a specific arbitration clause in their agreement.
- ICC ARBITRAL AWARDS
Accordingly, with article 35 of ICC Rules, "Every award shall be binding on the parties. By submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made." Besides this article, national legislations can require a recognition and enforcement process for these awards. However, these requirement shall merely be a part of the national enforcement requirements and not be the supplementary procedures for arbitration process.
In Turkey is procedures regarding the recognition and enforcement of international arbitral awards in New York Convention shall be required for recognition and enforcement of ICC arbitration awards.
However, Court Of Cassation10 assume ICC arbitral awards as a national arbitral award if national procedural law is applied to the award and does not require a recognition and enforcement procedure for this awards.
1 Turkish International Arbitration Act, No. 4686, Official Gazette, 05.07.2001, No. 24453.
2 Act No. 4875, Official Gazette, 17.06.2003, No. 25141.
3 International Private and Procedure Act No. 5718, Official Gazette, 12.02.2007, No. 26728
4 10.06.1958 (entered into force in Turkey in 1991, ratified by the Law No. 3731, 08.05.1991).
5 ICSID was established under the auspices of the World Bank 18.03.1965 (ICSID Convention entered into force in Turkey 02.03.1989). For ICSID Convention see: Official Gazette, 06.12.1988, No. 20011
6 ICSID article 53-54. Article 53 "...the award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention..."
7 Article 1(b)-(c), Official Gazette 02.06.1988, No. 19830.
8 ECT, Official Gazette, 12.07.2000, No. 24107
9 Such as: ICSID cases Libananco Holdings Co. Limited v. Republic of Turkey (Case No. ARB/06/8), Europe Cement Investment and Trade S.A. v. Republic of Turkey (Case No. ARB (AF)/07/2), Cementownia "Nowa Huta" S.A. v. Republic of Turkey (Case No. ARB (AF) /06/2).
10 T.C. Court of Cassation Civil Chamber' decision dated 19.12.1985, numbered E.7355, K. 7099, T.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.