Provisions of the Civil Procedure Code numbered 6100 ("CPC") regarding arbitration shall be applicable to disputes which do not involve any foreign element and for which the place of arbitration has been designated as Turkey. These provisions are significant for adapting the provisions governing national arbitration to the currently applied arbitration concept and to the International Arbitration Act numbered 4686 ("IAA"). With the adaptation of the CPC to be in line with the IAA, they became compatible with the UNCITRAL Model Law. Thus, the controversies between different arbitration rules have been overcome.
Due to the extensive scope of the provisions of the CPC governing arbitration, we will analyze them under separate chapters and other provisions shall be assessed in our articles to be published in the following newsletters.
Provisions of national and international arbitration rules under the Turkish law are primarily governed with two separate codes. Provisions governing national arbitration were included within the Civil Procedure Code numbered 1086 ("Former CPC") prior to the promulgation of the CPC. Nevertheless, there were material differences between the arbitration provisions of the Former CPC and the provisions applicable to international arbitration. Therefore, the unification and harmonization process of national and international arbitration rules were of material importance.
The provisions of the CPC governing arbitration have been regulated in line with the IAA. Therefore, both legislations have become compatible with the UNCITRAL Model Law.
Article 407 of the CPC regulates the scope of application of the provisions of the CPC governing arbitration. The provisions of the CPC governing arbitration shall be applicable to disputes which do not involve a foreign element, as defined under the IAA, and for which the place of arbitration is designated as Turkey. Furthermore, arbitration is only valid for disputes in which the underlying matter is subject to the free will of the parties. Pursuant to article 408 of the CPC, arbitration is not convenient for disputes arising from rights in rem over immovable goods or other transactions of which the parties cannot dispose on their own will. To this end; disputes related to divorce, inheritance, bankruptcy and labor act do not overlap with the scope of arbitration.
Article 410 of the CPC regulates that the competent court having jurisdiction over the works assigned for courts in an arbitration proceeding is the regional court of justice located at the place of arbitration. Pursuant to Temporary Article 3/3 of the CPC, the provisions of the Former CPC which do not contradict with the CPC will be applicable until the regional courts start to function. The IAA has designated such courts as the civil court of first instance. There is no justification for this difference in the provisions. Therefore, it is supported by the doctrine that it would have been more appropriate to appoint civil courts of first instance as the courts having jurisdiction, as it has been regulated under the IAA.
The Arbitration Agreement
Article 412 of the CPC regulates the definition and form of the arbitration agreement. The arbitration agreement is defined as an agreement, whereby the parties agree to refer to resolution by a unique arbitrator or an arbitral tribunal all or part of the disputes that have arisen or that may arise between them in respect to a contract or any other legal relationship. The arbitration agreement may be executed as a separate agreement or an arbitration clause. In practice, it is seen that the arbitration agreements are mostly embodied as an arbitration clause within an agreement governing the relations between the two parties.
In order for an arbitration agreement to be valid, it shall be in a written form. The written form requirement is not a condition of proof but a condition of validity. Pursuant to article 412/3 of the CPC, the inclusion of the arbitration agreement in a written executed document or in an exchange of a communications such as letters, telegrams, telex, fax or transferred into an electronic environment, or the lack of objections of a respondent in his petition to the petition of claim of a claimant claiming the existence of a written arbitration agreement is sufficient. An arbitration agreement will also be deemed validly executed in the event of a reference to a document containing an arbitration clause, so as to make it part of the main agreement. The claim about the existence of the arbitration agreement gives flexibility to the condition of written form.
The arbitration agreement must be executed for specific disputes. Indeed, it must be agreed to refer disputes arising from a specific legal relationship to arbitration. For instance, arbitration agreements which foresee referring all disputes which may arise between two parties to arbitration shall not be valid.
The principle of validity of the arbitration agreement being independent from the validity of the main agreement is accepted by the CPC as well. Pursuant to the "separability doctrine", the validity of the arbitration agreement is independent from the validity of the main agreement in which they are embedded. Therefore, even if the main agreement is deemed invalid for any reason, the arbitration agreement shall continue to be valid and binding. This principle is supported by Article 412/4 of the CPC. Pursuant to the relevant article, objections to the arbitration agreement stating that the main agreement is not valid or that the arbitration agreement is regarding a dispute which has not yet arisen are inadmissible.
Pursuant to Article 413/1 of the CPC, in the event of initiating a lawsuit before courts regardless of the existence of a valid arbitration agreement, the respondent shall put forward the fact that the dispute shall be resolved through arbitration as an initial objection. Pursuant to Article 116/1/b of the CPC the objection regarding a dispute which shall be resolved through arbitration is among the initial objections. In this context, the objection on arbitration shall not be heard if it has been put forward after the submission of the reply brief or after the lapse of the period for submitting the reply brief. Following an initial objection on arbitration, the court shall accept the objection and deny the lawsuit for procedural issues, unless the arbitration agreement is invalid, ineffective or impossible to execute. In the event the initial objection on arbitration is not put forward in the allocated time, the dispute shall be resolved before the courts and the parties may not object to the dispute being referred to the court. The fact that the objection on arbitration is an initial objection and that it would not be taken into consideration in a later stage may be criticized.
Pursuant to Article 422/1 of the CPC, the arbitrators may rule on their own competences, including ruling on objections to the existence and validity of the agreement. The ability of the arbitrators to rule on their own competences is referred to with the notion "competence-competence" by the scholars. Pursuant to Article 422/2 of the CPC, the objections to the competence of the arbitrators shall be put forward at the latest with the reply brief. The parties appointing the arbitrators or participating in the appointment of the arbitrators does not deprive them of the right to object to the competence of the arbitrators. Nevertheless, the objection related to the arbitrators exceeding their competences must immediately be put forward.
Provisional Legal Conservatory Measures in Arbitration
Article 414 of the CPC governs the ordering of interim measures and recording of evidence decisions. Pursuant to Article 414/1 of the CPC, unless agreed otherwise, arbitrators may decide to order an interim measure or the recording of evidence during the course of the arbitration proceedings upon request of a party. The interim measure decision may be declared conditional by the arbitrators upon the provision of adequate collateral. Nonetheless, it is supported by the doctrine that provisional seizure decision is not an interim measure which may be ordered by the arbitration tribunal given its nature, and it may only be requested from the courts.
Article 414/3 of the CPC regulates the events where application to the courts is possible for an interim measure or recording of evidence decision. Pursuant to this article, in the event the arbitrators or another person to be appointed by the parties may not act in a timely and efficiently manner, one of the parties may apply to the courts for obtaining an interim measure or recording of evidence decision. If these circumstances are not present, the application to the courts may only be done based on an authorization to be granted by the arbitrators or a written agreement of the parties regarding this matter. This provision may also be criticized, since the anticipated procedure may consume a lot of time in practice and may not serve its purpose, especially in case the delay is inconvenient.
Procedure of Appointment of the Arbitrators
Article 415 of the CPC regulates the number of arbitrators. The parties may freely agree on the number of the arbitrators, provided that the number of arbitrators must be an odd number. Pursuant to the second paragraph of the relevant article, in the event the parties do not indicate a precise the number for arbitrators, three arbitrators shall be appointed.
The procedure for appointing the arbitrators is governed by Article 416 of the CPC. Accordingly, only real persons may be appointed as arbitrators. In the event that a sole arbitrator shall be nominated, but the parties cannot agree on the choice of arbitrator, the arbitrator shall be appointed by court. If three arbitrators shall be appointed, each party shall appoint one arbitrator and these arbitrators shall appoint the third arbitrator. The third arbitrator shall act as the chairman. In the event one of the parties do not appoint their arbitrator within one month after the receipt of the request of the other party for such appointment to be made, or in the event the two party-appointed arbitrators do not nominate the third arbitrator within one month following their appointment, the court shall appoint the arbitrator upon request of one of the parties. As it may be seen, if the arbitrators are not appointed by the parties, the provisions adapt a solution to resolve any deadlocks through appointment of such arbitrators by court.
Article 416/1/d introduces a provision regarding the qualifications of the arbitrators. Accordingly, in the event there is more than one arbitrator, at least one of the arbitrators must be a lawyer with five years or more experience in its field of expertise. Thereby, it is ensured that the arbitrators are chosen among qualified persons.
Pursuant to Article 416/2 of the CPC, any disputes with respect to the appointment of arbitrators shall be resolved by the courts. This decision may not be appealed. Article 421 of the CPC on the other hand regulates that in the event the term of one of the arbitrators expires, the new arbitrator shall be appointed by following the same procedure. The time consumed for the appointment of the sole or multiple arbitrators shall not be taken into consideration in calculation of the duration of arbitration.
Provisions of the CPC governing arbitration have been prepared by taking into consideration the UNCITRAL Model Law and the IAA. Therefore, the provisions of the IAA and the CPC have been aligned. This is a positive development with regard to the harmonization and unification of the national and international arbitration rules.
Given the material similarities between the IAA and the CPC, it would be appropriate to regulate the national and international arbitration by summoning the provisions in one code. Thereby, any confusion with respect to the scope of application of the relevant laws may be overcome.
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.