A. INTRODUCTION
Arbitration is one of the most widely preferred alternative dispute resolution methods internationally, enabling parties to resolve their disputes efficiently and flexibly. Arbitration is increasingly favored providing parties with flexibility, impartiality, and adaptability in the international trade environment. However, for an arbitral award to be enforceable in a country other than where it was rendered, it must first be recognized and enforced in the jurisdiction where enforcement is sought.
In Turkey, the recognition and enforcement of foreign arbitral awards are regulated under Law No. 5718 on Private International Law and Procedural Law ("PILPL") and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention" or "Convention"), to which Turkey is a party, as well as bilateral international agreements between Turkey and certain other countries also provide additional legal grounds on the matter.
In this article, the enforcement of foreign arbitral awards in Turkey under the scope of the PILPL and the New York Convention will be explained. After addressing the general principles of enforcement, explanations regarding practical issues will be discussed and illustrated with a contemporary example.
B. RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS UNDER THE PILPL
In Articles 60-63 of the second section of the PILPL, titled "Enforcement and Recognition of Decisions of Foreign Courts and Arbitral Awards", set forth the key principles regarding the recognition and enforcement of foreign arbitral awards are regulated. Pursuant to Article 60, titled "Enforcement of Court Decrees", foreign arbitral awards that are finalized, enforceable, or binding foreign arbitral awards may be enforced. Similarly, under Article 63, titled "The Recognition of the Decisions of Foreign Arbitrators", the recognition of foreign arbitral awards is also subject to the provisions governing enforcement. Under these regulations, the following general conditions must be met for an enforcement request to be filed:
- The Binding Nature of the Arbitral Award: The award must be binding, finalized, and enforceable for the parties.
- Existence of an Arbitration Agreement: A written, valid, and duly executed arbitration agreement must exist between the parties.
- Compliance with Public Order: The arbitral award must not violate Turkish public policy or morality.
- Arbitrability: The subject matter of the dispute must be capable of settlement through arbitration under Turkish law.
- Failure to Properly Represent the Parties: The parties must have been duly notified and represented in the arbitral proceedings and they must not have expressly objected to the proceedings.
The parties are free to determine the court where enforcement will be sought. In the absence of such an agreement, the competent court will be determined based on the domicile of the party against whom the award is rendered in Turkey, or, if no domicile exists, the place of residence, or, if neither exists, the location where the assets subject to enforcement are situated. The court of competent jurisdiction is the civil court of first instance.
C. THE ROLE AND IMPACT OF THE NEW YORK CONVENTION
The New York Convention is one of the most significant international legal instruments for ensuring the enforceability of international arbitral awards. The Convention was established to enhance the effectiveness of arbitration in resolving international commercial disputes and to ensure that disputes between parties are resolved more swiftly and efficiently. With over 170 contracting states, including Turkey, the New York Convention is regarded as one of the most widely accepted international legal instruments.
The key principles of the New York Convention are outlined below:
- Obligation of Recognition and Enforcement: Countries that are parties to the Convention are obligated to recognize and enforce arbitral awards issued in another contracting state. However, this obligation is limited by specific grounds for refusal.
- Limited Grounds for Refusal: Article 5 of the Convention provides limited grounds for refusing recognition and enforcement. In this context, recognition and enforcement may be refused under the following circumstances: (i) The absence of a valid arbitration agreement between the parties, (ii) The failure to properly notify one of the parties or depriving them of their right to present a defense, (iii) The arbitral tribunal exceeding its authority, (iv) The arbitral award being contrary to public order, (v) The arbitral award not being final or binding in nature
- Scope of Public Order: The concept of public order is interpreted narrowly in the contracting states of the Convention. This approach aims to facilitate the recognition and enforcement of arbitral awards.
- Flexibility for Domestic Law: The Convention allows contracting states to adopt more favorable provisions within their domestic legal systems. In other words, the Convention enables states to develop national regulations that facilitate the recognition and enforcement of arbitral awards.
D. THE SCOPE OF APPLICATION OF THE NEW YORK CONVENTION IN TURKEY
Turkey ratified the New York Convention in 1991, and its provisions have been in effect since 1992. Turkey has placed reservations limiting the application of the Convention to commercial disputes and requiring the recognition of arbitral awards only from contracting states. These limitations allow Turkey to adopt a more controlled approach to the recognition and enforcement of arbitral awards.
The New York Convention in Turkey is predominantly applied to commercial disputes, investment arbitration, and disputes arising from international agreements. The Convention serves as a significant legal basis, particularly during the recognition and enforcement of arbitral awards rendered by international arbitration institutions under Turkish law. For instance, the standards set forth by the New York Convention play a decisive role in the enforceability of awards issued by institutions such as the International Chamber of Commerce ("ICC") and the London Court of International Arbitration ("LCIA") in Turkey.
E. PRACTICAL ISSSUES AND A CONTEMPORARY EXAMPLE
Recognition and enforcement of foreign arbitral awards in Turkey may lead to various legal and practical problems. One of these issues is the broad interpretation of the public policy concept by Turkish courts, which occasionally leads to the refusal of recognition and enforcement of certain arbitral awards. While public policy is generally expected to be interpreted narrowly, its expansive interpretation in practice can complicate the recognition of arbitral awards. Furthermore, deficiencies in the submission of arbitral awards or procedural errors regarding the validity of the arbitration agreement may negatively impact the recognition and enforcement process. Additionally, inconsistent interpretations and applications by courts create uncertainty in the recognition and enforcement of arbitral awards, undermining the confidence of international investors in enforcing arbitration awards in Turkey.
A recent emerging issue involves anti-suit injunctions issued by Russian courts, which complicate the recognition and enforcement of arbitral awards in other jurisdictions. To illustrate this issue with a hypothetical example: an international arbitration was initiated between Company X and Company Y, resulting in an award against Company X. However, due to an anti-suit injunction issued by Russian courts, Company X refrained from participating in the arbitration proceedings, and enforcement of the award was blocked in Russia. Upon investigation, it was discovered that Company X possesses certain assets in Turkey, thereby providing Company Y with an opportunity to enforce the arbitral award in Turkey to recover its claim.
However, the Russian anti-suit injunction could give rise to a defense that Company X's participation in the arbitration proceedings was prohibited, thereby violating its right to a fair trial. In assessing such claims, Turkish courts must consider whether Company X was properly notified of the arbitration proceedings and whether its absence was voluntary. Additionally, the courts should examine whether the Russian anti-suit injunction aligns with Turkish public policy, particularly in the context of the right to a fair trial.
If Turkish courts find this defense valid and refuse the enforcement of the arbitral award on the grounds of public policy, Company Y will be unable to recover its claims in Turkey. However, if the courts determine that the arbitration proceedings were conducted fairly and in accordance with due process, and that the anti-suit injunction violates fundamental principles of international arbitration, the enforcement of the award will likely be granted.
The example above clearly demonstrates the legal challenges encountered in the recognition and enforcement of international arbitral awards in Turkey. It is crucial for Turkish courts to adopt a balanced approach when evaluating principles such as public policy and the right to a fair trial. This is essential for Turkey to position itself as an arbitration-friendly jurisdiction. Effective and impartial handling of such cases is of paramount importance to ensure Turkey's reputation as a reliable forum for the enforcement of arbitral awards.
F. CONCLUSION
The recognition and enforcement of foreign arbitral awards in Turkey plays a critical role in preserving the effectiveness and reliability of international arbitration. The legal framework established by the PILPL and the New York Convention, to which Turkey is a party, provides a solid foundation encouraging parties to choose arbitration as a method for dispute resolution. However, differences in the interpretation of the public order concept, procedural errors, and other practical issues occasionally complicate this process. By adopting a narrow interpretation of public policy and carefully safeguarding the right to a fair trial, Turkish courts can strike a balanced approach that will contribute to Turkey's positioning as a reliable jurisdiction in international arbitration. In this context, developing the processes for the recognition and enforcement of foreign arbitral awards in line with principles such as legal certainty and impartiality will be a significant gain for both international investors and the Turkish legal system. Indeed, a balanced interpretation of principles like public policy and the right to a fair trial by Turkish courts will further strengthen Turkey's standing as a trusted center for international arbitration.
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.
