Turkey: Public Order In Turkish Arbitration: Perspectives From The Court Of Cassation

Last Updated: 17 November 2017
Article by Abdulkadir Guzeloglu and Tarik Kurban

In Turkish legislation, there are two relevant provisions in separate legislation regarding the annulment of arbitral awards, namely, Article 139 of the Civil Procedure Code (the "CCP") and the Article 15 of the International Arbitration Law (the "IAL").

It must be stated that while the relevant provisions that are regulated in the CCP are applicable only to the disputes that does not contain any foreign element, the IAL is applied only to the disputes that contains foreign element and if the place of arbitration is determined as Turkey or the provisions of IAL have been preferred to be applied either by the parties or by the arbitrator(s).

Article 439 of the CCP states that only legal recourse that can be taken against an arbitral award is set aside procedures. In accordance with the Article 439 of the CCP, set aside actions must be heard primarily and urgently. With this provision, the legislator aims to protect the autonomy of the parties that enables them to choose the arbitration process which is rapid settlement of the dispute.                

Grounds for annulment of an arbitral award is listed by the Article 439 of the CCPI in an exhaustive fashion as follows:

a)       One of the parties of the arbitration agreement is incompetent to conclude the arbitration agreement or any other reasons of voidness,

b)      The methods of the determining of the arbitrator or the arbitral tribunal that is foreseen in the arbitral agreement has not been applied,

c)       The arbitral award has not been given within the foreseen time schedule,

d)      The arbitrator or the Arbitral Tribunal has wrongfully accepted or denied jurisdiction 

e)       The arbitrator or the Arbitral Tribunal has ruled beyond the claims submitted to it, or failed to decide one of the claims;

f)        The procedure of the arbitration process has not held properly according to the terms determined in the arbitration agreement or if the arbitration procedure is not determined in an agreement according to terms of this Code, providing that this irregularity materially affected the merits of the award,

g)       The principle of equality of the parties or the right of defense is not being respected,

h)       The subject of the arbitral award is not arbitrable pursuant to Turkish Laws,

i)        The award is conflict with the Turkish public order.

After that, it is seen that quite similar annulment reasons have been stated in the Article 15 of the IAL. As seen above, if an arbitration award conflicts with the Turkish public order, the court may annul the award upon the request of the one of the parties.

According to Article V-2-b of the New York Convention of 1958, which Turkey is a party, if the recognition or enforcement of the award would be contrary to the public policy of that country that hosts place of arbitration, the competent authority in the country where recognition and enforcement is sought may refuse the recognition and enforcement of such arbitral award.

Having said that, the concept of "Turkish public order" although possessing a paramount importance have not been described in the legislation. Instead, to ensure the flexibility and up-to-dateness, the Legislator  desires Courts to steer practice to make definition of the concept.

The General Assembly on the Unification on the Judgments has described the public policy in a decision1 as following;

"The entirety of the rules that protects the fundamental structure and interests of the society."

After the definition the framework of the public policy, the decision further stated that;                

"The cases which would constitute as a violation of the Turkish public order will often be considered in the event of an explicit violation of a compulsory legal rule. However, it is not possible to say that in the event of violation of every compulsory legal rule, the Turkish public order is violated.

In that case, the framework of the violation of the "public order" in domestic law can be drawn as the conflict to the basic values of Turkish law, to the sense of Turkish general principles and morals, to the basic sense of justice on which Turkish laws are based, to the general policy of the Turkish laws, to fundamental rights and freedoms in the Constitution, to common rules based on the international field and rules based on the principle of good faith of the private law, to the common principles of civil society and the principles of morality that is the expression of justice, to the civilization level of the society, to politic and economic regime, to human rights and freedoms."

Above, the General Assembly emphasize an fundamental and important element of the violation of the public order:

"Not every violation of the mandatory legal rules cannot be classified as violation of the public policy." 

Otherwise the courts could break a basic rule of arbitral principle: The prohibition against judicial review of the merits of arbitral decision ("révision au fond") means that when determining the enforceability of arbitral awards, the court cannot act as an appellate court and can review de novo. The court cannot review merits of the award  based on public policy argument.

The court needs to find and sustain a balance between excessive or intrusive review which unduly prolongs the arbitral process and cursory or inadequate review which overlook arbitral injustice.                

In another judgment2 that was given by the Assembly of Civil Chambers of Cassation, the Turkish public policy defined as follows;

"Public policy, is a whole of the institutions and rules that determines the basic structure and protects the interest of political, social, financial, moral and legal perspective of a society in a specific period of time."

With this definition, the Assembly remarks the "time" factor of the public policy and indicates the element of temporariness. Indeed, according to the doctrine and the goal that is pursued by the Legislator as stated above, the public policy should be defined and interpreted through the method of which takes the element of time into consideration. Thus, the provisions can adapt and evolve themselves into the current vision and perception of the society and the Law itself can be always vivaciously applied.

Footnotes

[1] The Board of The Unification of Case Laws of The Cassation decision no: E. 2010/1 K. 2012/1 T. 10.2.2012

[2] Assembly of Civil Chambers of Cassation decision no: E. 2011/13-568 K. 2012/47 T. 8.2.2012

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