Turkey: International Arbitration Guide 2021

1. What legislation applies to arbitration in your country? Are there any mandatory laws?

In Turkey, the arbitrations are regulated by two main legislations: (i) the International Arbitration Law No. 4686 (the "IAL") and (ii) the Code of Civil Procedure No. 6100 (the "CCP"). Both laws are mainly based on the UNCITRAL Model Law and Swiss international arbitration law.

The IAL is applicable to disputes including a foreign element where the designated seat of arbitration is Turkey or when the parties or the arbitral tribunal choose IAL to be applied to the arbitration.

The CCP is applicable to the disputes which do not have a foreign element, as defined in the IAL, and where Turkey is the designated seat of arbitration.

2. Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

Turkey is a party to the New York Convention. As per Article 90 of the Constitution of the Republic of Turkey ("Turkish Constitution"), international treaties which have duly entered into force have the force of law in Turkey. There are two reservations to the general obligations of the Convention: (i) reciprocity and (ii) commercial reservation. Accordingly, the Convention is applicable to disputes arising from commercial relationships and to awards rendered in another contracting state.

In addition, the provisions of Turkish International Private and Procedural Law No. 5718 ("IPPL"), which relate to the recognition and enforcement of the foreign arbitral awards and which are mostly parallel to the New York Convention, are applicable where the New York Convention is silent or is inapplicable.

3. What other arbitration-related treaties and conventions is your country a party to?

Turkey is a party to the European Convention on International Arbitration and to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention").

In addition, Turkey has signed bilateral investment treaties ("BIT") with 98 countries, 76 of them are currently in force (https://www.trade.gov.tr/legislation/bilateral-investment-treaties).

4. Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?

Both IAL and CCP are mainly based on the UNCITRAL Model Law. Where the provisions of IAL differ from the UNCITRAL Model Law, the Swiss international arbitration law provisions are mostly used as reference. There are no significant differences between the two.

5. Are there any impending plans to reform the arbitration laws in your country?

No. To the best of our knowledge, there are currently no such plans to reform the arbitration laws in Turkey.

6. What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?

The main arbitral institutions in Turkey are: (i) Istanbul Arbitration Centre ("ISTAC"), (ii) Istanbul Chamber of Commerce Arbitration and Mediation Centre ("ITOTAM"), (iii) Turkish Union of Chambers and Commodity Exchanges Court of Arbitration ("TOBB Arbitration").

ISTAC was established in 2015 and its rules have not been amended since then. Yet, it should be noted that ISTAC introduced the Mediation-Arbitration rules ("Med-Arb Rules"), an alternative dispute resolution procedure which has the characteristics of both mediation and arbitration, on 15.11.2019 and it also introduced the Online Hearing Rules and Procedures as of 21.04.2020.

ITOTAM rules of arbitration have been recently amended and the amended version is in force as of 31.03.2021.

The TOBB Arbitration rules have not changed since 2016.

7. Is there a specialist arbitration court in your country?

There is no specialist arbitration court in Turkey.

8. What are the validity requirements for an arbitration agreement under the laws of your country?

As per the provisions of CCP and the IAL, an arbitration agreement shall be in writing. The relevant agreement can be embedded in a contract between the parties as a provision, or it can be a separate contract. An agreement is considered as made in writing if it is contained in a document signed (including by e-signature) by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the addressee's confirmation of receipt. The reference in a contract to a document containing an arbitration clause also constitutes an arbitration agreement provided that the reference is such as to make that clause part of the contract.

9. Are arbitration clauses considered separable from the main contract?

Yes. Article 4 of the IAL and Article 412 of the CCP provide for the separability presumption by codifying that no objection could be made against the arbitration agreement by arguing that the underlying contract is invalid or that the arbitration agreement is related to a dispute which has not yet arisen.

10. Do the courts of your country apply a validation principle under which an arbitration agreement should be considered valid and enforceable if it would be so considered under at least one of the national laws potentially applicable to it?

As per Article 62 of IPPL, when faced with the request to enforce a foreign arbitral award, the Turkish courts would have to analyze whether the arbitration agreement/clause is valid as per the governing law applied to it, and if no such law exists, as per the law of the seat of arbitration. One can argue that a similar analysis should be made in every instance where the validity of an arbitration agreement/clause is called into question.

11. Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

There is no particular issue to be noted for Turkey with regard to multi-party or multi-contract arbitration; except that they are common between domestic and foreign parties.

12. In what instances can third parties or non-signatories be bound by an arbitration agreement? Are there any recent court decisions on these issues?

There is no regulation under the Turkish law for the extension of an arbitration agreement to a third party. In light of the principle of the privity of contracts, an arbitration agreement can only be binding between its signatories and accordingly, a third party cannot be bound by an arbitration agreement without its consent.

This being the case, there are certain exceptions to this principle such as where the explicit or implicit consent of the non-signatory exists, or there is an assignment of claim to a third party, or if a representative or agency that is acting on behalf of the non-signatory, or if there is a ground for lifting the corporate veil, etc.

In a very recent decision of the 43^th Chamber of Istanbul Regional Court, dated 22.04.2021 with file no. 2020/291 and decision no. 2021/528, the plaintiff in the arbitral process had assigned their receivable to a third party at the enforcement stage. The defendant debtor objected to the request for enforcement of the award by claiming, inter alia, that the third-party seeking enforcement was not a signatory to the arbitration agreement and that therefore the arbitral award could not have been extended to such third-party. Yet, the first instance court dismissed the defendant's objections by stating that there was no need for the approval of the debtor for the assignment of receivable and since the receivable of the plaintiff had been duly assigned to the non-signatory third-party, there was no obstacle for the non-signatory third-party to seek enforcement of the arbitral award, even though it was not a party to the arbitration agreement.

13. Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

Yes. Under Turkish law, only the matters which are at the parties' free disposal can be arbitrated. The IAL and CCP govern that the disputes related to in rem rights in immovable properties and the disputes which are not subject to the free will of the parties cannot be arbitrated. In general, disputes related to the bankruptcy law, criminal law, administrative law, family law and tax law are not arbitrable.

14. Are there any recent court decisions in your country concerning the choice of law applicable to an arbitration agreement where no such law has been specified by the Parties?

No. To the best of our knowledge, there is no recent court decisions published in this regard.

15. How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?

In general, the parties are free to decide the applicable law to the substance of the dispute. In the absence of such agreement, IPPL includes provisions for each category of dispute (e.g. tort, consumer protection etc.).

16. Have the courts in your country applied the UNIDROIT or any other transnational principles as the substantive law? If so, in what circumstances have such principles been applied?

No. To the best of our knowledge, there is no published Turkish court decision where the UNIDROIT or any other transnational principles are used as the substantive law. The major exception to this is the United Nations Convention on Contracts for the International Sale of Goods, to which Turkey is a party.

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Originally published by The Legal 500: International Arbitration Country Comparative Guide – Turkey.

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.