Arbitration in Türkiye

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In the modern era of global commerce and international relations, the mechanisms for resolving disputes have evolved significantly. Among these mechanisms, arbitration has emerged as a preferred method for many businesses and individuals seeking a fair, efficient, and confidential means of resolving conflicts. This preference is particularly evident in Türkiye, where the arbitration landscape has seen considerable development over recent years.

Arbitration offers a viable alternative to traditional court litigation, providing parties with the flexibility to choose their arbitrators, tailor proceedings to their specific needs, and ensure a level of confidentiality that is often lacking in public court cases. The Turkish legal system supports arbitration through a robust framework that aligns with international standards, making Türkiye an attractive venue for both domestic and international arbitration.

This blog post aims to provide a glimpse into arbitration in Türkiye with sections on the introduction, the legal framework, and the requirements for valid arbitration agreements.

As arbitration continues to gain prominence, it is essential for businesses, legal practitioners, and individuals to fully understand its benefits and implications.

1. Introduction

Arbitration is a method of dispute resolution where the parties involved agree to submit their conflict to one or more neutral third parties, known as arbitrators, rather than pursuing litigation in a court of law. The arbitrators review the evidence and arguments presented by both sides and then render a binding decision, known as an arbitral award.

Arbitration has many advantages, including efficiency and speed, expertise of arbitrators, confidentiality, flexibility and autonomy, neutrality and impartiality, and enforceability of awards.

In Türkiye, significant regulations have been initiated and enforced over the last twenty years. The Turkish International Arbitration Law (TIAC) and the Turkish Civil Procedure Code (CPC) form the most important legal framework in this area. Furthermore, institutions such as the Istanbul Arbitration Centre (ISTAC) play an important role in resolving disputes at both domestic and international levels.

2. Legal Framework

The Turkish Civil Procedure Code (CPC) is the main procedural law for civil cases, and its provisions on arbitration are found in Section Eleven, Articles 407 - 444. Arbitration agreements that do not have a foreign element will be resolved according to CPC rules. However, the parties may agree that the Turkish International Arbitration Law (TIAC) can be applied to their disputes.

The Turkish International Arbitration Law (TIAC), enacted in 2001, is a significant part of Türkiye’s arbitration legislation. It is modeled after the UNCITRAL Model Law on International Commercial Arbitration, a common approach in many countries that favor arbitration. The foreign element is defined in Article 2 as follows:

“Foreign element

Article 2 – The existence of any of the following circumstances demonstrates that the dispute has a foreign element and, under such circumstances, arbitration is considered as international:

1. Where the parties to the arbitration agreement have their domiciles or habitual residences or places of business in different states;

2. Where one of the following is situated outside the State in which the parties have their domiciles or habitual residences or places of business;

a) The place of arbitration, which is determined in, or pursuant to, the arbitration agreement,

b) A place where a substantial part of the obligations arising from the underlying contract is performed or a place where the dispute has the closest connection.

3. Where at least one shareholder of the company, which is a party to the underlying contract that constitutes the basis for the arbitration agreement, has brought foreign capital in accordance with the laws concerning the encouragement of foreign capital, or where a loan and/or guarantee agreement needs to be signed for the execution of the underlying contract.

4. Where, in accordance with the underlying contract or with the underlying legal relationship, the movement of capital or of goods shall be made from one country to another.

The provisions of Law No. 4501 of 21.1.2000 are reserved.”

In terms of the legal framework, international agreements also play an important role. The New York Convention, the European Convention On International Commercial Arbitration, and the ICSID Convention are among the important ones.

3. Requirements of a Valid Arbitration Agreement in Türkiye

Probably the most important rule for compelling a party to arbitrate is having a valid arbitration agreement or arbitration provision. This has been emphasized in many judgments handed down by the Court of Cassation. According to the Court, a valid arbitration agreement or provision must be clear and unequivocal, showing the parties’ consent. For instance, in Turkish: “Bu sözleşmeyle ilgili uyuşmazlıklar tahkim yoluyla çözülecektir,” which translates to “Any conflict concerning this agreement will be resolved by arbitration.”

The agreement must be in written form or refer to a written instrument. Additionally, the agreement between the parties must cover arbitrable matters. The parties must also clearly define the scope of the agreement. These three requirements are the most important.

Other requirements include widely used agreement considerations such as the legal capacity of the parties, language, and venue. Many of these subjects can be explained by referring to institutional arbitration rules or by being clearly explained in the agreement.

 T. Serkan Budak

 Attorney at Law

+90 553 023 07 27

info@budak-ip.com