Turkey: The Rise Of Arbitration In Turkey

Current Dispute Resolution Landscape in Turkey

Commercial disputes are on the rise in Turkey due to recent economic instability arising from local and regional political fragility. The Turkish lira weakening against the US dollar and euro should have fuelled exports; however, regional instability has hindered exports by Turkish companies. Therefore, manufacturers relying on local sales and regional exports have suffered as they could not turn their products into cash. As a result, they could not make payments to suppliers during recent months, giving rise to lawsuits, collection proceedings and applications to delay or execute bankruptcies.

The recent political crisis between Turkey and Russia has added another problematic dimension to cross-border deals and transactions. Tourism and leisure sectors have been hit seriously. Contract cancellations or contract breaches have given rise to commercial or treaty claims already, given that Turkish companies in Russia are now receiving hostile treatment, several Russian state-supported projects have been suspended and Russia has imposed sanctions over certain goods exported from Turkey.

And the recent terrorist activities in and around Turkey have deteriorated the situation in a way that parties to commercial contracts either opt for force majeure clauses or objective impossibility when cancelling their contracts, cashing in the bank guarantee letters or seeking for restructurings contract terms.

Even though commercial court judges in big cities are quite experienced, the fact that they heavily rely on expert opinions and that they lack sectorial knowledge make parties sceptic in taking their issues to courts unless there is no alternative. Indeed, lack of specialized courts in Turkey is the Achilles' heel of Turkish commercial dispute resolution mechanism.

In fact specialised courts do exist in Turkey, such as IP courts. However, the degree of specialism and the immeasurable variety of commercial transactions seem to require more specialised courts than currently exist. The reflection of lack of specialized courts in Turkey is that commercial judges place increased significance on court appointed experts in commercial courts; the more complex the case, the more judges rely on experts.

Such an approach distances parties from Commercial courts to the extent they can unless there is no other alternative to court proceedings. Indeed, Turkish construction industry for example have reached to a level that they use every type of alternative dispute resolution methods from mediation to dispute boards while the arbitration is not and alternative but the principal method to them.

Use of Alternative Dispute Resolution in Turkey

In Turkey, for a variety of reasons, parties have not preferred domestic arbitration institutions. These reasons include costs, as well as a lack of awareness and general arbitral culture in Turkey. Several arbitration institutions exist, operated by chambers of commerce, with minor market share in Turkey. In the absence of reliable arbitral institutions, ad hoc arbitrations composing academic arbitrators have been more attractive to parties. However, the lack of arbitrators' industry expertise, secretariat and pace are heavily criticised. As in the case of commercial courts, local arbitral panels rely heavily on expert opinions, raising questions of efficiency.

Although panels at local arbitrations are more flexible in selecting experts, the way experts can impact cases has almost no difference to court proceedings. Besides, arbitrator fees are extremely high in local ad hoc proceedings, despite their slow pace and questionable expertise. Accordingly, parties are prompted to think twice before choosing arbitration instead of court processes.

With these concerns in mind, a new arbitral centre was recently established in Turkey, the Istanbul Arbitration Centre ("ISTAC"). The new forum is intended to provide the necessary expertise, impartiality and independence, as well as to promote a culture and use of arbitration in Turkey, along with other alternative dispute resolution methods. The Centre recently declared its fee structure, under which it seems arbitrations will be resolved for fees equalling no more than 10 percent of court fees.

ISTAC in a Nutshell

ISTAC unanimously approved the ISTAC Arbitration Rules ("Rules") on 26 October 2015.

The Rules are generally compliant and sit well alongside those issued by high profile arbitration centres around the world. The ISTAC appears to be heavily influenced by the ICC Arbitration Rules, along with lessons learnt by other international arbitration bodies. The Rules are notably similar to the ICC Rules of Arbitration, except for provisions regarding fast track arbitration.

The ICC has a long history in Turkey, so local parties and practitioners are already familiar with the ICC Rules. Statistically, Turkish parties have usually opted for ICC arbitration and disputes involving Turkish parties are usually taken to the ICC. Therefore, it is understandably why the ISTAC has introduced arbitration rules which are substantively similar to the ICC's rules.

During drafting, the ISTAC appears to have taken into account revisions which other arbitral bodies made to their respective rules over time. Accordingly, the Rules benefit from the results of many discussions and experience-based amendments which have occurred in wider international commercial arbitration.

ISTAC's Points of Difference

Institutional arbitration has been widely criticized in terms of its effectiveness, pace, fees, and flexibility. Similarly, arbitration has globally faced serious questions about the impartiality, availability and expertise of arbitrators. These factors have damaged arbitration's overall attractiveness as a dispute resolution mechanism.

Against this background, the ISTAC offers:

  • A similar (but less bureaucratic) institutional supervision system for arbitrations.
  • An effective Secretariat.
  • Fast track arbitration procedures.
  • Appointment of emergency arbitrators.
  • Flexible and relatively low fee structure, compared to regional and international bodies.

The ISTAC's fee levels and structure have already received positive feedback. Application fees are calculated on a pro-rata basis, relative to a case's quantum. The ISTAC's fees are low compared to regional and international arbitration bodies. The ISTAC aims to provide high quality dispute resolution services faster and cheaper than Turkish commercial courts.

The competitive fee structure is potentially ISTAC's biggest marketing strength. However, when parties test an arbitration institution over time, it is service quality, impartiality and continuity which become more important factors than fees alone. 

Commentary on ISTAC

The short time limit imposed for granting an arbitral award is one of the ISTAC's key advantages for users. Concerns about timelines are understandable in a jurisdiction where commercial cases before courts might take anywhere between two and ten years to finalize.

The pace and inefficiency of arbitral institutions have been widely discussed. Introducing expedited arbitrations is a promising feature for the ISTAC and seems to reflect its intention to establish an efficient system, delivering relatively faster awards. It also indicates the ISTAC's mind-set about how it wants to position and differentiate itself in the region, amongst other arbitral institutions and the Turkish courts.

The ISTAC's approach to the expedited procedure is also encouraging. For disputes below a certain amount, the ISTAC does not wait for the parties to request an expedited process. Instead, the ISTAC begins trying those lower-value cases according to expedited rules automatically. Expedited rules are still exceptions for many arbitral institutions, requiring party initiation. Therefore, the ISTAC's practical approach in this respect deserves recognition.

Parties can request appointment of an Emergency Arbitrator and detailed procedures are established for emergency arbitrators. These factors again illustrate the ISTAC's intention to pragmatically address urgent issues in an efficient manner, without forcing parties to seek interim decisions before the courts.

The ISTAC's rules require the arbitral tribunal to prepare a procedural timetable, including aspects such as dates for hearings, submissions and other procedural events. The timetable is prepared on consultation with the parties. The approach seems to have been improvised from the ICC's rules. However, the ISTAC's lack of a "Case Management Conference" for parties to share their opinions on the arbitration proceeding and to agree upon procedural matters, should be seen as point for future development.

The ISTAC's Rules allows new claims to be introduced, even after the terms of reference are signed or approved by the Board. However, amendments to claims and defences are not regulated under the Rules. Few arbitral institutions offer these elements. Arguably, such flexibilities could prolong proceedings due to parties abusing the process. However, the six month time limit applied for the tribunal to render the arbitral award following the Secretariat notifying the terms of reference to the arbitral tribunal could address any concerns in that respect.

On the other hand, disputes with international elements may require immediate communication by distant parties and persons, offering such methods to users will be an advantage in that it prevents loss of time due to communication methods and travel. However, the Rules do not include any provision related to these methods. The ISTAC's Rules seem to improve adopting relevant rules of ICC in this respect. The provisions in Appendix IV of the ICC Arbitration Rules (titled "Case Management Techniques") allow meeting or hearing to be held via media, such as teleconference or videoconference. While hardly any international arbitration centres offer these options to the users, we believe the ISTAC will find this element to be a necessity.

From an institutional point of view, the fact that ISTAC has two Boards, National Arbitration Board and International Arbitration Board, may not be a mainstream method. However, it indicates two issues that the ISTAC wishes to address. The first point is that the ISTAC principally would like to attract local users and disputes. Turkish parties are frustrated by the ineffective court system. A good reliable alternative could be their first choice in case of disputes. The second point is that local disputes could be different in nature compared to international ones. Also, the dynamics and culture of local disputes are different in nature. Therefore, the National Arbitration Board of the ISTAC could be better positioned to address local issue that might arise and respond to the needs of Turkish parties. Such an approach will ultimately help improve the reliability and trustworthiness of the ISTAC, sooner rather than later.

Unlike major arbitral institutions, the ISTAC hesitates to claim a confident exclusivity in the appointment of arbitrators to the extent possible. In fact, the authority of arbitration institutions over the selection of arbitrators is undeniably significant in that the quality of arbitrators appointed for the cases determines the success of institution too. For this reason, prestigious arbitration institutions such as ICC or LCIA claim strict exclusivity and have the final word in the appointment of arbitrators. ISTAC may have wanted to give as much freedom as possible to the parties for the appointment arbitrators to eliminate concerns about ambiguity over the arbitrators who will try their cases. Such flexibility may perhaps be at the expense of its institutionalism, efficiency and reputation, particularly in the long run.

Turkey as Seat a for Arbitration Proceedings

Turkey should be seen as an appropriate arbitral seat for all foreign and domestic parties. Particularly, Istanbul has huge potential, given that it is a centre which ties not only continents, but also cultures and history. Turkey is unique in a geographic sense because Istanbul can be reached by 50 percent of the world's population within four hours.

Although the International Chamber of Commerce in Paris or the London Court of International Arbitration Centre are regularly selected as institutions, due to visa problems for non-European parties, it is increasingly common to have trials in Turkey.

International or regional trade and business in sectors such as construction, transport and energy, often involving Turkish parties, puts Turkey in a position to be good seat for international arbitrations. Consequently, Istanbul has a higher chance to be an international arbitration seat rather than being an arbitration centre in the region, at least in the short term. Having said that, if Istanbul becomes a preferred seat for international arbitration, the Istanbul Arbitration Centre will follow this lead and gain momentum compared to other international arbitration institutions.

Strategies for Arbitrations with Turkish Parties

While it firmly depends on the sector in which parties operate, all alternative dispute resolution mechanisms should be considered wisely. For instance, construction companies in Turkey rely heavily on mediation or negotiation before taking their issues to arbitration. Because they work for sovereigns, it is understandable that they do not opt for arbitration easily without exhausting other methods available.

Turkish construction industry is a trendsetter in terms of dispute management and avoidance, achieved through dispute avoidance and dispute review boards. Involving experts in contracts long before disputes arise contributes massively to developing a manageable and sustainable relationship.

However, if disputes are inevitable, the way in which parties kept their records will be quite decisive, irrespective of whether they engage in institutional or ad hoc arbitration. If the rules of Turkish Civil Procedural Law are followed during arbitrations in Turkey, written evidence submitted by the parties will play a crucial role.

Equally, parties should carefully select their arbitrators in Turkey or for arbitrations having Turkish element. Academics without any commercial tenure, or without a practitioner's experience or knowledge about commercial arbitration, can slow down the process, as well as make unpredictable procedural or substantive decisions. It is equally important to appoint arbitrators who are acquainted with Turkish parties, industries in question.

In addition to the above, parties should be aware of the fact that experts are as important as the arbitrators which is why same, if not more, degree of market, culture, industry knowledge should be sought whilst appointing the experts.

Autonomy of Arbitral Process in Turkey

Pursuant to Article 424 of Turkish Civil Procedural Code numbered 6100, parties are entitled to determine procedural rules for arbitrators to apply in the course of arbitration proceedings, provided the rules do not contradict mandatory aspects of the Code.

However, arbitral awards can be cancelled by state courts. Therefore, the autonomous character of parties seeking recourse to arbitration can be interfered with on the basis that the arbitrated decision is against public order. There is no question that complete autonomy is necessary for arbitration proceedings to reflect parties' true intentions.

Arbitration Friendly Courts in Turkey

In accordance with the New York Convention, to recognise a foreign arbitral award in Turkey, the arbitral decision must not contradict the Turkish public order. However, Turkish judges are particularly interested in this public order exception as a method to review the merits of arbitral decisions. Turkish judges continue to find reasons to set aside arbitral awards.

Nevertheless, commercial courts in big cities such as Istanbul and Ankara have a more reasonable approach. It is a relief that courts in other cities have started to be influenced by this approach. Another challenge is that no special chamber of the Turkish Supreme Court exists to review set-aside applications. Therefore, there is no uniform approach on which parties can rely when enforcing their awards.

Orçun's work includes all aspects of disputes, corporate, and employment law matters. He regularly supports both local and foreign clients during cross-border disputes and debts, often involving high values or complex liability issues. Orçun advises clients on a broad range of issues including contractual claims, shareholder and partnership issues, joint ventures, construction, real estate, agency, professional negligence and employment matters, as well as administrative issues, tax disputes, customs, international trade and business crimes.

First published in the IBA Arbitration Committee newsletter, August 2016.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Erdem & Erdem Law
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Erdem & Erdem Law
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions