Decisions of the Turkish Court of Appeals have discussed whether
the choice of Turkish law in an agreement including an arbitration
clause to apply to disputes arising out of the agreement should be
construed to refer only to the substantive law, or whether it
should also cover Turkish procedural laws.
In one case1 the 15th Chamber of the Court
of Appeals considered an agreement in which the claimant undertook
to construct a Soma thermal power plant for the defendant. The
agreement stated that:
"The arbitral tribunal shall take into consideration in
its decisions the provisions of the agreement and Turkish laws in
The place of arbitration shall be Zurich and the language of
the arbitration shall be English unless otherwise agreed in the
course of arbitration."
In the relevant arbitration, the arbitral tribunal held that
only Turkish substantive laws shall be applied and that the
applicable procedural laws shall be the procedural laws of the
place of arbitration (ie, Swiss procedural law).
At first instance the Turkish court decided that since it was
not clear in the agreement which procedural rules were applicable,
the application of Swiss procedural laws could be accepted.
The 15th Chamber of the Court of Appeals held that
the statement 'Turkish laws in force' in the agreement
meant Turkish procedural laws as well as Turkish substantive laws.
According to the court, if the parties had intended to refer only
to Turkish substantive laws, they would have explicitly mentioned
which specific procedural rules would apply to disputes arising out
of the agreement, just as they had chosen English as the language
of the arbitration and Zurich as the place of arbitration.
Accordingly, the court held that the fact that they did not
explicitly select the applicable foreign procedural rules indicated
that they intended Turkish procedural laws to apply.
When the case was returned to the first instance court following
the appeal court decision, the first instance court upheld its
former decision and consequently the issue was brought before the
General Assembly of the Turkish Court of Appeals.
In its decision2 the General Assembly upheld the
decision of the appeal court to find that the statement
'Turkish laws in force' included both Turkish procedural
laws and Turkish substantive laws.
In the doctrine, this interpretation has been criticized on the
grounds that it exceeded the intention of the parties.
In a more recent decision,3 the 11th
Chamber of the Turkish Court of Appeals held that a reference to
'Turkish laws' did not include procedural laws, but rather
referred only to substantive laws. In that case Article 4 of the
option agreement provided that:
"This agreement shall be governed and construed in
accordance with the laws of the Republic of Turkey.
All disputes in connection with the agreement shall be
resolved by the arbitrators in accordance with the Rules of
Reconciliation and Arbitration of the International Chamber of
In the relevant arbitration, the arbitral tribunal applied
foreign procedural laws and the 11th Chamber confirmed
this decision by ruling that Turkish procedural laws were not
applicable since the parties did not explicitly state that Turkish
procedural laws shall apply. The court held that by
agreeing to submit the dispute to a foreign authority (ie, the
International Court of Arbitration of the International Chamber of
Commerce), the parties were deemed to have accepted the procedural
rules of such foreign authority.
The International Arbitration Act, which entered into force on
July 5 2001, acknowledges the ambiguities regarding the
interpretation of this issue and explicitly provides in Article 12
that in the event of the law of a particular jurisdiction being
chosen, unless explicitly stated otherwise such choice of law shall
not include the procedural rules of that jurisdiction.
Notwithstanding this change in the case law of the Turkish Court
of Appeals and the explicit provision in the International
Arbitration Act, even if a reference to Turkish laws in an
agreement does not include Turkish procedural laws, in cases where
Turkey has been chosen as the place of arbitration the foreign
procedural laws applicable to disputes arising out of such
agreement shall apply to the extent that such foreign procedural
rules comply with the mandatory rules of Turkish procedural
1 Decision of December 25 1997,
2 Decision of May 5 1999,
3 Decision of May 26 2000,
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