Obtaining a favorable foreign judgement or arbitration award is only a half of a battle in any international dispute, as it is more important to have those rulings enforced. Recognition and enforcement of foreign judgements and/or arbitration awards has always been one of the key points in international transactions.
Due to the intensified trade and commercial relations Turkey has with Russia, Belarus and Ukraine, a number of disputes and litigation involving entrepreneurs from these jurisdictions may also increase. In some cases the parties to a contract may indicate international commercial arbitration (including ad hoc arbitration) as a competent dispute resolution institution, in some cases they may prefer national courts to resolve any possible disputes related to the contract. A clear distinction should be drawn between enforcement and recognition of the foreign judgements and arbitration awards – the latter being governed by the New York Convention 1958, whereas the former is subject to reciprocity enshrined in bilateral agreements between the states.
Enforcement of judgements in particular may become a real problem in case of absence of bilateral agreements between the jurisdictions. Hence, a due care must be taken to the existence and content of such interstate agreements or reciprocity between the jurisdictions prior to deciding on the dispute settlement mechanism in contracts involving Turkish and CIS entrepreneurs.
This article analyses differences between enforcement of foreign arbitration awards1 and foreign judgements; assesses legal framework for that and mainly focuses on peculiarities of recognition and enforcement of foreign judgements (rendered by the national courts of Ukraine, Belarus and Russia) in Turkey.
2. Foreign arbitration awards vs. Judgements of state courts
Recognition and enforcement of foreign judgements or arbitration awards in Turkey requires an approval decision of a competent Turkish court. Such procedure is governed by the International Private and Procedural Law of Turkey No 5718. The judge shall examine if all the preconditions necessary for recognition and enforcement are present, including the existence of bilateral agreements or international treaties, as well as absence of any obstacles preventing it from enforcing the judgement or the arbitral award (e.g. exclusive jurisdiction, public order, etc.)
2.1. Foreign arbitration awards
Recognition and enforcement of arbitration awards is regulated by the New York Convention "On Recognition and Enforcement of Foreign Arbitration Awards" dated 1958 (hereinafter – the "New York Convention") to which Turkey (just as Ukraine, Belarus and Russia) is a party.2
One should take into account that Turkey limited the applicability of the New York Convention by making two reservations thereto: (i) the New York Convention will be applicable in Turkey to foreign arbitration awards delivered in another signatory state on the basis of a complete reciprocity; and (ii) only for disputes arising from contractual or non-contractual relationships of a commercial nature under the Turkish national law.
Ukraine, Belarus and Russia also made a reciprocity reservation stating that with regard to arbitration awards made in the territory of non-contracting states, Ukraine, Belarus and Russia will apply the New York Convention only to the extent to which those states grant reciprocal treatment.3
Interestingly that bilateral agreements Turkey concluded with Belarus and Russia (the latter has not been ratified yet), along with provisions related to court judgements, contain separate provisions for enforcement and recognition of arbitration awards granted by arbitration institutions of the contracting parties. Hence, recognition and enforcement of awards granted, for instance, by International commercial arbitration court of Belarus in Turkey, as well as awards of a newly established Istanbul Arbitration Center4 in Belarus, is additionally supported by Article 21 of the bilateral agreement between Turkey and Belarus.
As a rule, foreign arbitration awards are to be recognized and enforced in Turkey (as well as in any signatory state), unless the defendant proves that the specific grounds exist preventing the award from being enforced, such as: invalid arbitration clause, the subject matter is not arbitrable or its enforcement is contrary to the public policy etc.5
Hence, enforcement and recognition of arbitration awards granted, for instance, by the arbitration institutions in either Ukraine, Belarus or Russia, is rather straightforward, although time consuming, and shall cause no big problems in Turkey, unless the award has some drawbacks envisaged by the New York Convention or falls outside the scope of the reservation to the New York Convention made by Turkey. In this regard the most controversial will be family law cases, as well as the compatibility with the public order.
2.2. Foreign judgements of state courts
Foreign judgements are delivered by the national courts of a state and are normally more difficult to recognize and enforce in another jurisdiction, unless there is a reciprocity. In that respect, there are two ways for recognition and enforcement of foreign court judgements in Turkey: (i) on the basis of bilateral/multilateral agreements of Turkey providing for recognition and enforcement of foreign judgements (explicit reciprocity); or (ii) on the basis of a presumed/de facto reciprocity.
2.2.1. A bilateral agreement with the country whose judgements are to be enforced in Turkey can be regarded as the first condition for its recognition and enforcement in Turkey. Turkey has concluded bilateral agreements facilitating recognition and enforcement of foreign court judgements with a number of states ( e.g. with Austria, Romania, Italy, Azerbaijan, Northern Cyprus, Tunis, Poland, China, Georgia, Albania, Kazakhstan, Macedonia, Egypt, Moldova, Croatia, Kuwait, Tajikistan, Belarus and Ukraine). These agreements have a number of issues in common, and while replying on these agreements in the process of recognizing and enforcing foreign judgements in Turkey the following has to be taken into consideration:
- a subject matter of the judgement shall not fall within the exclusive jurisdiction of the Turkish courts (e.g. exclusive jurisdiction of Turkish courts in the issues related to immovable property located in the territory of Turkey);
- foreign judgement shall not be enforced if it is explicitly incompatible with Turkish public order (which is mostly the case in personaand family cases); and
- a party against whom the enforcement is sought should have been duly served to appear or duly represented before the court according to the law of the country where the judgement was rendered in his absence.
2.2.2. If there is no bilateral agreement between the countries, then de facto reciprocity shall apply, if any. The principle of reciprocity implies that any benefits or penalties that are granted by one state to the citizens or legal entities of another, should be available to natural and/or legal persons of such state. The de facto reciprocity requirement is very often criticized because as a rule it is rather difficult to prove its existence, especially in relation between states with different legal systems.
Nowadays the principle of reciprocity serves more like an instrument of a courtesy demonstrating the will of the states concerned to intensify development of trade, economic and investment cooperation between them. Hence, if political and economic relations between the two countries are developing well, the reciprocity should not in principle be questioned, but rather shall be presumed, unless proved (by the defendant) otherwise. A presumption of reciprocity is directly reflected in Article 390 of the Civil Procedural code of Ukraine6, for instance.
In situations where a bilateral agreement is absent or has not been ratified, like in a case with Turkey and Russia (see below in Section 3(c)), relying on a de facto reciprocity seems to be the only way out for the claimant.
3. Bilateral agreements Turkey has with Ukraine, Belarus and Russia facilitating recognition and enforcement of foreign court judgements
A bilateral Agreement between Ukraine and Turkey "On legal assistance and cooperation in civil matters"7 dated 23.11.2000 (hereinafter – the "U-T Agreement") became effective for both jurisdictions on 02.05.2004 for an indefinite period of time. According to Article 35 of the U-T Agreement, each state is obliged to recognize and enforce judgements rendered by the national courts of the other state in relation to (i) civil cases; and (ii) criminal cases in part on compensation of damages.
The U-T Agreement outlines certain conditions for recognition and enforcement of such judgements, such as:
- The judgement has to be final and subject to enforcement in the territory of such jurisdiction;
- A defendant's right to defence was observed and he was duly notified about the court proceedings. A respective document should be provided confirming that the defendant or his representative, who did not take part in the hearing, was timely and in a due form at least once informed about and invited to the court hearing;
- There is no any other final judgement or ongoing court hearing in relation to the same subject matter/parties in the jurisdiction of the state where enforcement is required; and
- Such judgement does not contravene main principles of law and public order of the state where enforcement is required.
Article 38 (2) of the U-T Agreement explicitly stipulates that the court of the state, which is requested to enforce the judgement of the other state, shall verify only whether the conditions listed above are met. For that purpose, such court may request a person that initiated the enforcement procedure to provide additional explanations, as well as to hear the defendant on the subject matter of the enforcement procedure, and ask the court, which delivered the judgement, to provide additional documents.
There is a bilateral agreement between Belarus and Turkey "On legal assistance in civil, commercial and criminal matters" dated 13.03.2012 (hereinafter – the "B-T Agreement"). Civil and commercial cases; criminal cases in part related to compensation of damages, and arbitration awards granted in relation to civil and commercial cases are subject to recognition and enforcement by each contracting state according to Article 19 of the B-T Agreement. The conditions for recognition and enforcement of such rulings are similar to the ones listed in the Agreement between Ukraine and Turkey as described above.
Interestingly, the scope of the rulings to be recognized and enforced under the B-T Agreement, along with the judgements, also includes arbitration awards (granted by the arbitration institutions of Turkey or Belarus, i.e. International commercial arbitration court at the Belarussian Chamber of Commerce and Industry, a newly established Istanbul Arbitration center etc.).
Additionally, there is a Protocol between the Supreme Commercial court of Belarus and Cassation Court of Turkey "On Cooperation"8 effective from 2.11.2010 for an indefinite period of time (hereinafter – the "Protocol"). It contains reciprocity as one of the main principles of cooperation, in addition to the principles of legality, efficiency and confidentiality9. The scope of the Protocol covers exchange of legal and other information upon the request for assistance of the contracting state, or upon the initiative of the contracting state, which presumes that such assistance would be of interest for the other contracting state.
The agreement between Russia and Turkey "On mutual legal assistance in civil, trade and criminal matters"10 (hereinafter – the "R-T Agreement") was signed in 1997, but it has not been ratified by either of the parties. The R-T Agreement provides for recognition and enforcement of judgements in relation to (i) civil cases; (ii) criminal cases in part related to compensation of damages, and (iii) arbitration awards. The conditions for recognition and enforcement of such rulings are similar to the ones listed in the agreements Turkey concluded with Ukraine and Belarus as described above.
Just as in case with Belarus, the R-T Agreement covers also arbitration awards. The term 'arbitration' awards should not be confused with the judgements of the arbitration court of Russia. It is important to note that a term "arbitration court" (in Russian - arbitrazhnyj sud) used in the legislation of Russia refers to the commercial court of Russia, a state court, which is a part of the national judicial system of Russia; whereas "arbitration," as understood by the international community, is an alternative means of dispute resolution (e.g. London Court of International Arbitration, ICC International Court of Arbitration in Paris, or the Arbitration Institute of the Stockholm Chamber of Commerce, Istanbul Arbitration Center). Only International commercial arbitration court (MKAS) at the Russian Chamber of Commerce and Industry can be regarded as an arbitration institution within the meaning the New York Convention. Therefore, recognition and enforcement of the judgements of the Russian arbitration court in Turkey is not possible of the basis of the New York Convention (because only arbitration awards as opposed to the state court judgements are covered by the New York Convention).
Considering that the bilateral agreement between Russia and Turkey has not been ratified yet, judgements of Russian arbitration court may be recognized and enforced on the grounds of reciprocity between Russia and Turkey. Although reciprocity principle is not explicitly mentioned in the legal documents related to enforcement and recognition of foreign judgements and arbitration awards in Russia (except for insolvency cases11), it may be assumed that reciprocity between Russia and Turkey exists as Russia is Turkey's second (after Germany) in value foreign trade partner and cooperation between the jurisdictions continues to grow. Denying reciprocity between Russia and Turkey could undermine the relations between the countries.
4. Concluding remarks
Recognition and enforcement of foreign rulings (either foreign judgements or arbitration awards) constitutes an important part and a problem of every international dispute settlement process. In order to secure yourself and avoid any potential problems at the enforcement stage, business parties should pay a due care to the peculiarities of the recognition and enforcement procedures in the respective jurisdictions from the very beginning of the contract negotiation and conclusion:
- If you decide to choose international commercial arbitration as a means of dispute settlement mechanism, make sure that both parties are registered/domiciled in the jurisdictions that are parties to the New York Convention. Enforcement and recognition of arbitration awards granted, for instance, by the arbitration institutions in either Ukraine, Belarus or Russia, is rather straightforward, although time consuming, and shall cause no big problems in Turkey, unless the award has some drawbacks envisaged by the New York Convention and/or falls outside the scope of the reservation made by Turkey. In this regard the most controversial will be the compatibility with the public order provision and enforcement of family law cases.
- If you prefer a national court of the state of either of the party to deal with any potential disputes, it is highly advisable to check existence and operation (legal force) of bilateral agreements facilitating recognition and enforcement of foreign judgements in those countries. If there is a relevant applicable bilateral agreement for the reciprocal recognition and enforcement of foreign judgements (e.g. with Ukraine or Belarus), the Turkish court shall normally grant its decision on recognition and enforcement of a foreign judgement. If there is no such agreement or no agreement in force due to absence of ratification (e.g. with Russia), recognition and enforcement shall still in principle be possible based on presumed reciprocity.
- You can always try and rely on de facto reciprocity between the countries, which works well in theory, although may be less effective in practice. To a greater extend reciprocity depends on economic and political relations between the jurisdictions. If relations between the two countries are developing well, the reciprocity should not in principle be questioned, but rather shall be presumed unless proved (by the defendant) otherwise.
1. Please note that arbitration awards in relation to international investment disputes are outside the scope of the present article.
2. Turkey ratified the New York Convention on 2 July 1992 and it entered into force on 30 September 1992.
2. See: United Nationas Treaty Collection – Available at https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXII-1&chapter=22〈=en#EndDec; New York Convention Guide 1958. – Available at http://www.newyorkconvention1958.org/index.php?lvl=more_results&look_ALL=1&user_query=*&autolevel1=1&jurisdiction=167
4. With the establishment of the Istanbul Arbitration Center (the Law became effective on 1 January 2015), there is a likelihood that Istanbul may become one of the regional leaders in international arbitration for major international disputes. A big advantage of the Istanbul Arbitration Center is a faster way of resolving a dispute, as compared with the national courts that are overloaded. Although, the main concern is that it will be financed by the Prime Ministry for two years, hence it may affect its independence.
5. For the exhaustive list of the grounds please see Article V of the New York Convention.
6. Civil Procedural Code of Ukraine, 2004. – Available at: http://zakon2.rada.gov.ua/laws/show/1618-15/print1419347572747661
7. Text of the Agreement between Ukraine and Turkey in Ukrainian is available at http://zakon4.rada.gov.ua/laws/show/792_600?test=4/UMfPEGznhhu8I.Zi0OB0tUHI42Is80msh8Ie6
8. Available at http://www.pravo.by/main.aspx?guid=3871&p0=H3 1200437&p1=1
9. Article 1 of the Protocol
10. Available at http://www.mid.ru/BDOMP/spd_md.nsf/0/982DBF28937E41D243257E4C0024B61B
11. According to para 4 of Article 1 of the Federal Law dated 26 October 2002 "On insolvency", judgements of foreign courts on insolvency cases shall be recognised in Russia in accordance with international agreements of Russia. In case of absence of such agreements, the judgements on insolvency cases shall be recognised on the basis of reciprocity, unless otherwise is envisaged by the Federal Law.
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.