Determining Foreign Law as the Governing Law:
International Private and Procedure Law No. 5718 ("IPPL") allows parties to a contract bearing a foreign element freely choose the governing law to be applied to disputes arising out of such contract, unless the given dispute is required to be solved according to Turkish Law as per the IPPL. For example, lawsuits regarding utilization of real properties located in Turkey or establishment of real rights on the same are subject to Turkish law or if a lawsuit is initiated regarding infringement of intellectual property rights for which protection is sought in Turkey, such lawsuits must again be solved according to Turkish laws. Moreover, lawsuits that are initiated based on claims of unfair competition and violation of competition rules, are required to be solved according to Turkish law, if Turkish markets are directly affected by the infringing acts. Whereas, disputes over contractual relationships are - as a rule - subject to the governing law that the parties freely chose.
In case the parties to a contract have determined a foreign law as the contract's governing law, which is permitted under the IPPL, courts in Turkey are required to solve the disputes arising from the said contract according to the foreign law that the parties have chosen.
As to arbitration in Turkey, parties to a contract bearing a foreign element may freely choose to have their dispute settled by a foreign arbitration institution, unless an issue of public order is in question or Turkish law requires such dispute to be solved under the exclusive jurisdiction of Turkish Courts. Under Turkish law, certain types of disputes are subject to the exclusive jurisdiction of Turkish Courts, such as which relate to the establishment of real rights on real properties in Turkey.
Enforcement of Foreign Arbitral Awards in Turkey:
In order for an foreign arbitral award to gain effectiveness in Turkey, such award must be recognized or ratified by a Turkish Court.
The primary legal source for the enforcement of foreign arbitral awards in the Turkey is the 1958 – New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards which was ratified by Turkey on July 2, 1992 and entered into force on September 30, 1992 ("New York Convention"). New York Convention, as an international treaty, is regarded as a domestic law (within the hierarchy of norms), as per Article 90 of the Constitution of Turkey and therefore is binding and enforceable in Turkey as a domestic law.
New York Convention can be applied in Turkey for recognition and enforcement of awards made only in the territory of another contracting State of the New York Convention. Therefore, if the arbitral award in question is obtained in any of the contracting States, New York Convention will principally be applied (without prejudice to other multilateral or bilateral agreements). In addition, the scope of enforcement that can be sought in Turkey according to the New York Convention is limited to arbitral awards that have been rendered with commercial nature only.
IPPL is another domestic legal source regarding the enforcement of foreign arbitral awards in Turkey. The provisions of the IPPL are mainly parallel to the New York Convention. However, IPPL may only be applied if the party to the arbitration agreement is not a contracting state of the New York Convention, or is not a party to any of the multilateral or bilateral international agreements ratified by Turkey.
Regarding the procedure for enforcing a foreign arbitral award in Turkey (either under IPPL or the New York Convention); a petition must be filed before the competent court in Turkey, by those who are party to the arbitration agreement, together with the following documents: (i) the arbitration agreement, (ii) a duly certified copy of arbitral award, and (iii) the certified translations of these documents. However, depending on the case, the court may request additional documents.
The court can only determine whether the arbitral award meets the conditions for enforcement as stipulated under the IPPL or the New York Convention. Therefore, the court cannot examine the merits of the dispute settled with the award, unless the foreign arbitral award violates the public order of Turkey or the rules regarding conflict of laws in Turkey.
The decision of the court concerning the enforcement of the foreign arbitral award may be appealed before the Supreme Court in accordance with the general provisions of Turkish laws. If appealed, the enforcement of the award is suspended until the finalization of the appeal process.
Once the decision on the recognition for enforcement is finalized, the foreign arbitral award is treated as a final court decision under Turkish law. Therefore, the requesting party may pursue the execution of the award in accordance with Turkish laws and procedures.
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.