Considering the heavy workload of Turkish courts and the lengthy adjudication process, it is becoming increasingly inevitable for Turkish individuals and legal entities to resolve their disputes through alternative dispute resolution mechanisms. The two most preferred alternative disputes resolution mechanisms are mediation and arbitration, both backed up by specific laws governing the procedural rules of adjudication and post-adjudication related issues.
The number of disputes referred to alternative dispute resolution mechanisms has substantially increased in recent years. Increase in the number of arbitration proceedings after the enactment of the International Arbitration Law1 in 2001 was followed by an increase in the use of mediation upon enactment of the Law on Mediation for Civil Disputes2 (the "Mediation Law") in 2012. It is expected that the number of arbitration proceedings will increase even more, thanks to the enactment of the Law on the Istanbul Arbitration Center3 (the "LIAC") in late 2014.
1. LAW ON MEDIATION FOR CIVIL DISPUTES
The Mediation Law and its secondary legislation (i.e. the Regulation on Mediation for Civil Conflicts4) set forth the principles and procedures applicable in mediation. The Mediation Law also regulates the institutional structure to be established within the current judicial system. Under the Mediation Law, (i) a Mediation Board; (ii) a Department of Mediation; and (iii) a Mediators Registry (within the General Directorate of Civil Affairs of the Ministry of Justice) were established for the purposes of providing uniformity in quality, consistency and a public authority in the field of mediation.
Some of the most significant aspects of the Mediation Law are as follows:
- The Mediation Law applies to private law related disputes, including those having a foreign element.
- The mediator supervises the parties' settlement negotiations. The mediator cannot (a) render a decision or (b) exercise any kind of judicial powers. The dispute must be resolved by the parties; not by a third party.
- If the parties refer their dispute to mediation, the statute of limitations for filing a lawsuit will be suspended. Similarly, if the parties commence mediation procedures after filing a lawsuit, the lawsuit will be suspended for three months. This term can be extended to six months by the court, upon the parties' mutual request. Although the Mediation Law does not stipulate what will happen after the end of this three/six months period if the parties do not reach a settlement thorough mediation, it is safe to assert that the lawsuit would continue. The Mediation Law does not provide the possibility of further extension.
- The period of time that passes during the mediation process is not taken into account in calculation of statute of limitations.
According to information available on the website of the Department of Mediation, 233 disputes have been referred to mediation since November 2013. In terms of the subject matters of disputes, mediators in Turkey apparently came across 16 types of disputes. 79% of these disputes (185 disputes out of 233) were employment related disputes, 5.1% of them (12 disputes out of 233) related to compensation of pecuniary and non-pecuniary damages and 3.8% (9 disputes out of 233) related to the determination of the amount of alimony. While only 2.5% of the disputes (6 disputes) were related to monetary debts, %1.7 (4 disputes) were work accidents related.
Mediation procedures took place in 19 different cities. Among these cities, Izmir ranks first, with 102 disputes referred to mediation, while Bursa is second, with 70 disputes. Surprisingly, Istanbul ranks third, with only 25 disputes.
According to the statistics, 228 disputes out of 233 have been concluded with settlement, which seems to be a great success for a newly enacted law.
2. ISTANBUL ARBITRATION CENTER
The idea of establishing of an arbitration institution was introduced to the Turkish arbitration community in the Strategy and Action Plan for Istanbul International Financial Center (the "SAP"), prepared under the coordination of State Planning Organization and approved by the Resolution of High Planning Council on 29 September 2009. The purpose of the SAP was to make Istanbul an international financial center. For the realization of that purpose, the SAP mentioned the necessity of legal improvements, which included the establishment of an independent and autonomous institutional arbitration center, capable of competing internationally with respect to cost, speed and award finalization process and effective operation of a mediation system. Since then, Turkish scholars and practitioners had been excitingly waiting for the establishment of that independent and autonomous arbitration institution. The working group completed its report and submitted a draft law on the establishment of the Istanbul Arbitration Center (the "Center") to the Grand National Assembly of Turkey (the "Turkish Parliament") on 25 March 2013, three and a half years after its introduction in the SAP. The Turkish Parliament finally passed the LIAC, in its session of 20 November 2014. The LIAC was published in the Official Gazette on 29 November 2014 and entered into force on 1 January 2015.
The LIAC governs the rules and principles of the establishment, organization and operation of the Center, but does not set forth specific arbitration rules. Under Article 4, the Center will determine the rules of arbitration, as well as other alternative dispute resolution mechanisms, within six months following the formation of its board of directors. The Center will have one Local Arbitration Court and one International Arbitration Court, separating the proceedings in local disputes from those having an international element. The Center has not yet been established.
During the period between the draft LIAC's submission to the Turkish Parliament and its enactment, some of its provisions were heavily criticized. Before having passed the LIAC, the Turkish Parliament made some positive revisions on the draft law by taking some criticism into account. That said, it seems that the Turkish Parliament ignored a major part of the critics and made certain revisions attracting even more criticism.
- Under the enacted LIAC, members of the advisory board must have at least five years of experience in the field of alternative dispute resolution. The draft LIAC had stated that they must have "enough experience", which was much more uncertain.
- While the Center's revenues included donations under the draft LIAC, the enacted LIAC excludes them. Turkish practitioners welcomed this revision, as excluding donations would prevent the possibility of the Center favoring certain donors.
- Under the draft LIAC, the Center's first year expenses were to be covered by the budget of the Prime Ministry. The LIAC changed this term to two years.
The provision on the Center's expenses attracted more criticism from Turkish scholars and practitioners. They were already criticizing the draft version of this provision, arguing that this provision would cast shadow on the Center's independence. The Turkish Parliament extending this term to two year was much more disappointing for the Turkish arbitration community.
Another provision that attracted significant criticism from scholars and practitioners is Article 14/1. Under this article, members and employees of the Center's bodies (except the advisory board) cannot act as arbitrator or mediator in the Center during their term of duty, unless otherwise agreed by the parties. It was argued that, due to this provision, practitioners and scholars, who can make significant contribution to the Center, would not want to take any position in the Center. Hence, this provision may slow down the Center's development and competitiveness at international level. The Turkish Parliament ignored this criticism and did not make any revisions on this provision.
Enactment of the LIAC is a very significant development in arbitration in Turkey. Upon the Center's establishment, Turkey will have its very own international arbitration center, which hopefully will strengthen the progress in arbitration law and practice in Turkey.
1 Published in the Official Gazette dated 5 July 2001
2 Published in the Official Gazette dated 7 June 2012
3 Published in the Official Gazette dated 29 November 2014
4 Published in the Official Gazette dated 26 January 2013
© Kolcuoğlu Demirkan Koçaklı Attorneys at Law 2015
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