Turkey: Current Practices On Determination Of Seat Of Arbitration In ICC Arbitration

Last Updated: 4 November 2014
Article by Ezgi Babur

The determination of the seat of arbitration is of great importance, due to its consequences on the arbitration procedure. In the International Chamber of Commerce ("ICC") practice, cities as Paris, London, Geneva and Zurich are among the most popular arbitration seats. It is preferable that the seat is in a jurisdiction with a well-developed arbitration legislation. Courts experienced in arbitration issues and a tradition of supporting and respecting arbitration agreements and arbitral awards are also among the factors considered in the determination of the seat of arbitration. The location of the seat of arbitration and ease of access and convenience are also considered by the parties and practitioners in the choice of the seat of arbitration.

In General

The place of arbitration is set forth under Article 18 of the ICC Rules. Pursuant to the first paragraph of this article, the place of the arbitration shall be fixed by the Court, unless agreed upon by the parties.

In practice, it is seen that the parties agree on the place of arbitration and do not leave this to the discretion of the ICC Court. As per the statistics of the ICC1, the place of arbitration was specified in arbitration clauses in more than 76% of the cases. In 12% of the cases, the parties subsequently agreed on a place of arbitration and the Court fixed the place of arbitration in the remaining 12% of the cases.

The place of arbitration has important consequences on the arbitration procedure. Considering this importance, it would be on the safe side to decide on the place of arbitration in light of the expert legal advice. To begin with, it determines the law governing the arbitration proceedings, in other words lex arbitri. Within this context; issues such as the arbitrability, the enforcement of arbitration agreements, and the involvement of courts in arbitration proceedings are the affected by lex arbitri. Furthermore, the place of the arbitration defines the "nationality" of an arbitral award2. The nationality of the award may be significant for the enforcement of the award, since New York Convention enables the signatories to make a reciprocity reservation3.

Preference of Arbitration Seat in ICC Arbitration

Concerning the data of the years 2007-20114, ICC arbitrations mostly took place in North and West Europe, with 67% of the cases. Particularly, the most popular arbitration seat is France, with 546 cases. France is followed by Switzerland with 482 cases and United Kingdom with 324 cases.

One of the reasons of popularity of France is based on the fact that ICC's headquarters are based in Paris. Additionally, the positive attitude of the courts towards arbitration and the fact that there is a court specialized for arbitration contributes to the preference of practitioners on this issue5.

Concerning United Kingdom, it should be stated that London is commonly used as arbitration seat, especially in maritime arbitrations. In practice, it is seen that London is determined traditionally as seat of arbitration on most of the bills of lading.

Another quite popular seat of arbitration is Switzerland, especially the cities Geneva and Zurich. The reasons behind this preference are the recognition of Switzerland as a neutral state in many aspects, the multilingual aspect and the positive attitude of Swiss courts towards arbitration. Specifically, concerning Turkish parties, the fact that the Swiss and Turkish Code of Obligations are significantly similar is also a very important factor6.

Apart from the arbitration seats located in Europe, seats such as Singapore, New York and Sao Paulo are among cities most frequently selected as places of arbitration.

In addition to the data above concerning the most popular seats of arbitration, it should be stated that there is a large variety of different cities and countries selected as places of arbitration. Pursuant to the ICC statistics of the cases that were initiated between the years 2007-2011, the number of different cities selected as places of arbitration ranges from 86 to 113. As per the number of different countries in which those cities are situated, this is between 42 and 63.

In Turkey, activities pertaining to the establishment of an institutional arbitration center in Istanbul are on-going7. The Draft Law on the Istanbul Arbitration Center is on the agenda of Turkish Grand National Assembly. Considering the geopolitical advantages of Istanbul, the establishment of such arbitration center would contribute to enhance the popularity of Istanbul as an internationally recognized arbitration center.

Location of Hearings and Meetings

The location of hearings is laid down in the second paragraph of Article 18 of the Rules. Accordingly, the arbitral tribunal may, after consultation with the parties, conduct hearings and meetings at any location it considers appropriate, unless otherwise agreed by the parties. As stated in the relevant article, the parties may specify the use of a particular hearing location, although it is not common in practice. In this case, pursuant to Article 18(2), the arbitral tribunal will be bound by this specification.

It should be emphasized that the hearings may be held in a location other than the place of arbitration. The arbitral tribunal may consider another location more convenient for meetings and hearings, taking into account the location of the parties' counsel, the arbitrators, the parties and the witnesses8. For instance, in case all the counsels of the parties are located in the same city, it may be preferable to hold the hearings in the said city. On the other hand, if there would be a witness hearing and the witnesses are all located in the same city, then the witness hearing may be held in this city.

Conclusion

A variety of factors are considered by the parties and counsels in the choice of arbitration seat. Considering the importance and the effects of this choice, it should be emphasized that this choice should be made diligently. Concerning ICC arbitration, there are a number of cities frequently selected as arbitration seat by the parties of an arbitration agreement. With the opening of the Istanbul Arbitration Center, we hope that Istanbul will be an internationally recognized arbitration seat, and take part among the popular arbitration seats in the international arbitration arena.

Footnotes

1. Jason Fry, Simon Greenberg, Francesca Mazza, The Secretariat's Guide to ICC Arbitration, ICC Publication 729 (Paris 2012), p. 201 ("Secretariat's Guide").

2. Secretariat's Guide, p. 199.

3. It should be noted that Turkey ratified the New York Convention with two reservations. Firstly, the Convention shall be applied to commercial disputes; secondly, it should only be applied to arbitral awards which are given in another state that has also ratified the Convention.

4. Secretariat's Guide, p. 199.

5. Ziya Akıncı, Why Center for Arbitration in İstanbul?, Journal of Yaşar University, p. 80. Source: http://journal.yasar.edu.tr/wp-content/uploads/2014/01/3-Ziya-AKINCI.pdf ("Akıncı").

6. Akıncı, p. 81.

7. For detailed information about İstanbul Arbitration Center, please see: Leyla Orak, İstanbul Arbitration Center, Erdem&Erdem Law Office Newsletter, July 2014. Source: http://www.erdem-erdem.av.tr/en/articles/istanbul-arbitration-center/.

8. Secretariat's Guide, p. 206.

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.

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