Turkey: International Arbitration Comparative Guide

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1 Legal framework

1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?

The arbitration rules and procedures in Turkey are regulated under Turkish Code of Civil Procedure numbered 6100 ("TCCP") and Turkish Code of International Arbitration numbered 4686 ("TCIA"). The legislator prefers to make a distinction between domestic and international arbitration and regulates the domestic arbitration under TCCP whereas regulates the international arbitration is regulated under a separate code named TCIA. However, the both legislations are in compliance with UNCITRAL Model Law.

There are some mandatory provisions regulated in TCIA and an arbitration agreement is only valid if it is in writing. (Please see requirements explained under answer 10.)

1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?

The Turkish legislator regulates domestic and international arbitration under different codes (Please see above under item 1) When relevant articles of TCCP and TCIA are analysed, "foreign element" is determinant whether a dispute has domestic or international characteristic. Pursuant to TCCP rules for arbitration, regulated between art.407-444, if the dispute does not contain foreign element as defined in TCIA and the seat of arbitration is designated as Turkey, the dispute considered as domestic and will be settled by the rules of TCCP whereas TCIA applies to a dispute which has a foreign element or where TCIA is chosen to be applied by the arbitrating parties or their sole arbitrator or arbitral tribunal.

As per art. 2 of TCIA, the following conditions are indicators for foreign element in a dispute and give a dispute international characteristic if;

  • The domicile, habitual residence or places of business of the parties to the arbitration agreement are in different countries;
  • The domicile, habitual residence or places of business of the parties to the arbitration agreement are in different countries than;
    • The place of arbitration designated in the arbitration agreement or determined pursuant to the arbitration agreement; OR
    • The place of performance of the substantial part of the obligations arising from the underlying contract or the place where the dispute has the closest connection;
  • At least one of the shareholders of the company party of the underlying contract constituting the basis of the arbitration agreement has brought foreign capital to Turkey pursuant to regulations for foreign capital encouragement or it is necessary to enter into credit and /or security contracts for the purpose of providing capital from abroad for the execution of this contract.
  • In case the underlying contract or the legal relationship constituting the basis of the arbitration agreement causes the movement of capital or goods from one country to another.

1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?

Both legislation regarding arbitration (TCCP and TCIA) are based on the UNCITRAL Model Law on International Commercial Arbitration.

1.4 Are all provisions of the legislation in your jurisdiction mandatory?

In general, TCIA aims party autonomy and give parties room to decide how to manage their arbitration procedure. Therefore, it is possible to say that all provisions of the TCIA is not mandatory.

1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?

There are no current plans to amend arbitration legislation in Turkey.

1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?

Turkey is a signatory to the New York Convention ("Convention") since 2 July 1992 and the Convention entered into force on 25 September 1992 in Turkey. Turkey made two reservations to the Convention: the reciprocity reservation and commercial reservation. Pursuant to these reservations, the Convention will be applied only for the awards granted in the territory of another contracting state and for the disputes regarded as commercial under Turkish law.

1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?

Turkey is also a signatory to Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States and European Convention on International Commercial Arbitration.

2 Arbitrability and restrictions on arbitration

2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?

As per art.1/4 of TCIA, "the Code shall not be applicable to the disputes relating to in rem rights of immoveable properties located in Turkey or the disputes that are not subject to the disposal of the parties" Therefore, the disputes which are not concerning the in rem rights of immovables or the disputes subject to the parties' disposal are arbitrable.

Since the commercial law issues are subject to the parties' disposal, it is possible to agree on arbitration for potential disputes. However, disputes arising from family law, criminal law, administrative law and bankruptcy cannot be settled by arbitration. The Turkish Supreme Code also limits the scope of the arbitration for employment and consumer claims.

2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?

Seat of arbitration may be chosen freely by the parties.

3 Arbitration agreement

3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?

Firstly, arbitration agreement has to be entered into regarding an arbitrable matter. (Please see answer 8) Secondly, as per art. 4/2, an arbitration agreement has to be in writing. The written form requirement shall be deemed fulfilled if;

  • the arbitration agreement bases on a written document signed by the parties or,
  • there is an exchange of letters, telex, telegrams or other means of telecommunication showing a record regarding the agreement or,
    • The existence of the arbitration agreement is alleged by the plaintiff in the petition but the respondent did not challenge this allegation by its reply petition.

In addition to these conditions, if an agreement refers to a document including arbitration agreement and this document is considered as a part of the agreement; an arbitration agreement between the parties is deemed valid.

Thirdly, the will of the parties must be explicit and must leave no room for any doubt regarding the arbitration agreement and a certain relationship or dispute has to be referenced in the arbitration agreement. Therefore, an arbitration clause stated as "all disputes between the parties shall be settled by arbitration" shall be deemed invalid.

3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?

As per art. 4/1 of the TCIA, an arbitration agreement may be concluded either with a clause in the main agreement between the parties or with a separate arbitration agreement.

Pursuant to the separability of the arbitration agreement doctrine regulated under art. 4/4, it is not possible to challenge an arbitration agreement by claiming that the underlying agreement is invalid.

3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?

As per art. 9/1 of the TCIA, the arbitral tribunal shall determine the seat/place of arbitration by taking into consideration the characteristics of the dispute if there is no agreement between the parties. In respect of the language which will be used in arbitral proceeding, the arbitral tribunal shall determine the language as per art. 10/C of the TCIA in the absence of an agreement.

4 Objections to jurisdiction

4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?

As per art. 7/H/2 of the TCIA, the objection to the jurisdiction of the tribunal must be raised by the submission of the first reply petition at latest.

4.2 Can a tribunal rule on its own jurisdiction?

As per art. 7/H of the TCIA, the arbitral tribunal may rule on its own jurisdiction regarding the existence or validity of the arbitration agreement. This provision shows that TCIA explicitly recognizes the principle of "Kompetenz-Kompetenz".

4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?

As per art. 3/2 of the TCIA, court only intervenes for the conditions provided with the TCIA and there is not an explicit provision that the courts of the seat may rule regarding the jurisdiction of the tribunal.

However, if any of the parties commence a lawsuit before courts, the respondent may object the jurisdiction of the court as a preliminary objection asserting the arbitration agreement as per at. 5 of the TCIA. If the judge accepts the objection of the respondent., the lawsuit shall be dismissed. If any objection has not been raised, the court will have jurisdiction to hear the case between the parties.

Secondly, an arbitral award may be set aside by the competent regional courts of justice in case the arbitral tribunal unlawfully rule its own jurisdiction. Therefore, the competent regional courts of justice will have a say regarding the jurisdiction of tribunal at that stage.

5 The parties

5.1 Are there any restrictions on who can be a party to an arbitration agreement?

There is no restriction in TCIA regarding the parties of the arbitration agreement. However, Turkish Supreme Court decides that consumer claims may not be arbitrable since the weak position of the party. Therefore, it is possible to say that consumers cannot be a party of an arbitration agreement.

5.2 Are the parties under any duties in relation to the arbitration?

Although there is not an explicit provision in TCIA, the arbitration procedure deems confidential in practice and parties under the obligation of confidentiality.

5.3 Are there any provisions of law which deal with multi-party disputes?

There is no provision dealing with multi-party disputes in TCIA. However, it is possible to agree on arbitration with multi-parties by following the core principles of the TCIA. In this case, the requirements for the arbitration agreement must be met by parties(explicit will of the parties, form requirement-please see the answer 10) and all parties has to be equally treated during the arbitration proceedings.

6 Applicable law issues

6.1 How is the law of the arbitration agreement determined in your jurisdiction?

As per art. 4/3 of the TCIA, it is possible that parties may choose the law applied to the arbitration agreement. In the absence of such agreement, the arbitration agreement shall be subject to the Turkish law.

6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?

As per art. 12/C of TCIA, the tribunal shall settle the dispute in accordance with the provisions of the agreement and the law chosen by the parties. The commercial customs and practices of the applicable law are considered in the interpretation of the agreement between the parties if the law is unclear.

In the absence of the agreement regarding the substantive law applicable to the dispute, the law of the most connected country will be applicable to the dispute.

7 Consolidation and third parties

7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?

Consolidation of separate arbitrations is not regulated under TCIA. However, it is possible to say that if both parties give consent for the consolidation, the arbitral tribunal may decide to consolidate separate arbitrations. In addition, if parties choose the application of the rules of İstanbul Arbitration Center or ICC ; it is possible to consolidate separate arbitrations.

7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?

TCIA does not govern the joinder of the additional parties of the arbitration. However, if both parties give consent for the joinder of additional party, it is possible that the arbitral tribunal permits the joinder of additional parties. Moreover, if parties designate that the rules of ICC shall be applicable to the arbitration procedure, then it is possible to join an arbitration as per the requirements setup by ICC.

7.3 Does an arbitration agreement bind assignees or other third parties?

An arbitration agreement only binds the parties of the arbitration agreement. Therefore, non-signatories or third parties can not be bound by the arbitration agreement. In addition, interim measures or provisional seizures binding third parties also can not be rendered by the arbitral tribunal. However, in general it is recognized that a third party may be bind by arbitration in case the assignment of claim, transfer of the agreement and succession. In such case, third party's explicit will should also be analysed.

8 The tribunal

8.1 How is the tribunal appointed?

Since the TCIA considers party autonomy in arbitration proceedings, parties may choose whom their arbitrators will be and they are free to decide the number of the arbitrators on the condition that this number must be odd. Failing such agreement, three arbitrators shall be appointed.

Unless otherwise agreed by the parties, the appointment must be done according to some principles required by the relevant article:

  • Only real persons can be appointed as arbitrators.
  • If a sole arbitrator will be appointed and the parties cannot reach an agreement on the arbitrator, the arbitrator shall be appointed by the civil court of first instance upon the request of a party.
  • If three arbitrators will be appointed, each party shall appoint its own arbitrator and these two arbitrators appoint a third arbitrator. In case a party fails to appoint its arbitrator within 30 days upon the service of the appointment notice from the other party or arbitrators chosen by the parties fail to appoint the third arbitrator within thirty days of their appointment; the arbitrator shall be appointed by the civil court of first instance upon the request of a party.

While analysing the request of the party, the court of first instance considers the principles of independency and impartiality of arbitrator and chooses an arbitrator having different nationality than the parties in case of appointment of the sole arbitrator and also if three arbitrators will be appointed, the court chooses two of the arbitrators having different nationality than the parties.

8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?

Please see the answer 24 regarding the number of the arbitrators.

There is not a restriction regarding the qualifications of an arbitrator under TCIA. Therefore, arbitrators do not need to be lawyers or pursue a career related to law. There is also no restriction regarding the nationality of the arbitrators. Therefore, foreigners may be appointed as arbitrator in the arbitrations subject to TCIA. In addition, as mentioned above; unless otherwise agreed by the parties, only real persons shall be arbitrators.

8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?

There are three main bases that an arbitrator may be challenged as per art. 7 of TCIA. If:

  • the arbitrator does not have the qualifications agreed by the parties;
  • there is a reason to challenge as per the arbitration procedure agreed by the parties
  • there is a reasonable suspicion that the arbitrator is impartial.

The parties may agree the procedure in order to challenge of the arbitrator. Failing such agreement, the procedure regulated under art. 7 shall be applied.

As per TCIA art. 7, the challenge shall be filed within 30 days of starting from the appointment of the arbitrators or realizing the situation may give ground to challenge.

8.4 If a challenge is successful, how is the arbitrator replaced?

The rules of the appointment of the arbitrator can apply to replacement of arbitrator in the event of a challenge is successful as per art. 7/G of TCIA.

8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?

The main duty of the arbitrator is to conduct arbitration proceedings and while performing his/her duty, an arbitrator shall be impartial and equally treat the parties. This duty is regulated detailed under TCIA. As well as impartiality, even if these are not broadly regulated under TCIA, it should be accepted that the arbitrator has duty to render an award in a reasonable time and based on applicable law and also an arbitrator should also take into consider to render a decision which will be enforceable.

8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?

  1. procedure, including evidence?

    As per art. 11 of the TCIA, the arbitrator may decide to hold oral hearings.

    As per art. 12 of TCIA, the arbitrator may decide to

    • appoint an expert regarding the issues determined by the arbitrator
    • require parties to make necessary explanations to the expert and provide relevant information and documents
    • rule on inspection of goods or other property.
  • interim relief?

    As per art. 6 of TCIA, arbitral tribunal is competent to order interim measure during arbitration proceedings upon request of one of the parties.

  • parties which do not comply with its orders?

    There is not an explicit provision regulating a sanction in case any of the parties does not comply with its orders.

  • issuing partial final awards?

    Unless otherwise agreed, the arbitral tribunal may grant partial awards as per art. 14 of TCIA.

  • the remedies it can grant in a final award?

    There is not an explicit provision regulating or limiting the scope of the remedies in a final award.

  • interest?

    There is not an explicit provision regulating the interest. Parties may decide the interest applied to the subject matter of the dispute.

  • 8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?

    In that case, tribunal seated proceed depends on the which party (claimant or respondent) does not participate and whether there is a valid reason to not to participate.

    If the claimant fails to well-timed communicate his statement of claim, the arbitral tribunal will terminate the proceedings whilst If the respondent fails, the tribunal will continue the proceedings. However, the continuation does not mean that acceptance of the claimant's allegations.

    The statement of claim has to be proper to the Article 10(D). If it is not, the arbitral tribunal will state a period to reclaim. Within this period, if the statement cannot be reclaimed the proceedings will be terminated by the tribunal.

    If any party fails on attending hearing or producing evidence without a valid reason, the tribunal can maintain the proceedings and also can grant an award according to available evidences.

    8.8 Are arbitrators immune from liability?

    Unless otherwise agreed, the arbitrators are liable to compensate any damages arising from the failure to perform his/her duties without a valid reason as per art. 7/E of TCIA. In addition, since the relationship between the parties and the arbitrator is a contractual relationship; arbitrators are under the duties arising from the Code of Obligations also.

    9 The role of the court during an arbitration

    9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?

    If there is an arbitration agreement between the parties and a party maintains an action before the court about a matter that is the subject of this agreement, other party can make an objection as to arbitration as a preliminary objection in the reply petition. This objection's validity is liable to the provisions which is about to the preliminary objection of the TCCP.

    9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?

    As per TCIA, Courts have powers to appoint arbitrators in certain cases (please see answer 24) and hear appeals for the dismissal regarding the challenge request of arbitrator or hear challenges of the arbitrators in certain cases, order interim measure and execute the interim measure decision of the tribunal upon request, set aside an arbitral award, decide on the jurisdiction of the arbitral tribunal if court proceedings commence and extend the term of arbitration. These powers are applicable if the arbitration seated in Turkey.

    As per art. 1/3, in case an arbitration seated outside Turkey; art. 5 (decide on the jurisdiction of the arbitral tribunal if court proceedings commence) and 6(interim relief) shall remain applicable. The competent court will be in the respondent's domicile, habitual residence or places of business in Turkey or where none of these is in Turkey, the İstanbul Civil Court of Justice.

    9.3 Can the parties exclude the court's powers by agreement?

    There is not an explicit regulation to exclude the courts powers by agreement. Therefore, it is arguable to exclude the court's powers by agreement. Since the courts have limited grounds to intervene or give assistance to the arbitral proceedings, it is possible to accept that these powers of the courts may not be excluded. The only exception to this if parties renounce their rights to set aside. (Please see answer 42)

    10 Costs

    10.1 How will the tribunal approach the issue of costs?

    Costs of arbitration regulated under art. 16 of TCIA. Pursuant to this provision, parties are free to the decide which costs shall be borne by the which party. Unless otherwise agreed by the parties, the costs of arbitration shall be borne by the losing party. In case parties' claims are partially accepted in the arbitral award, the costs will be calculated considering the degree of the rightfulness of their claim.

    The Arbitral tribunal shall indicate the costs of the arbitration in the arbitral award and as per art. 16/d of the TCIA and the costs includes the fees of the arbitrators, travel and other expenses of the arbitrators, fees of the experts or other parties whose assistance is sought and who are, collectively, appointed by arbitral tribunal, the costs for the site inspection, travel expense or other expenses of the witnesses on the condition that the tribunal approves, attorney fee of the prevailing party determined by the arbital tribunal and calculated conspiring the minimum fee schedule, fees required for the applications to the courts and the expenses of notifications concerning the arbitral proceeding.

    If the parties cannot reach an agreement about the fees of the arbitrators, the fees of the arbitrators will be determined between the arbitral tribunal and the parties considering the amount in dispute, the nature of the dispute and the term of arbitral proceedings. The parties also can make a reference to the international rules or institutional arbitration rules to determine the fees. If the condition that there is no solution for determining those fees methods which mentioned above, the schedule of fees determined annually by the Ministry of Justice can also be referable.

    10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?

    There are no restrictions on what the parties can agree in terms of costs in an arbitration.

    11 Funding

    11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?

    There is no article in TCIA regulating third party funding.

    12 Award

    12.1 What procedural and substantive requirements must be met by an award?

    As per art. 14 of the TCIA, the award shall contain:

    • Full names, titles and addresses of the parties and their representatives and lawyers if any;
    • Legal reasons the award is based; the amount of compensation if it is requested so
    • Place of arbitration and the date of the award
    • The name, signature and dissenting option of the arbitral if any
    • A statement that parties may set aside the award.

    In addition to these characteristics of the award; an award should;

    • Be rendered in accordance with the procedure agreed by the parties or stipulated by TCIA,
    • Be rendered in due time in accordance with the procedure agreed by the parties or stipulated by TCIA,
    • Be rendered as per the scope of arbitration agreement and be rendered regarding the whole request,
    • Be rendered considering equality of the parties,
    • Not be rendered in conflict with the public policy.

    12.2 Must the award be produced within a certain timeframe?

    As per art. 10/B of the TCIA, unless otherwise agreed, an award must be granted within one year. In the event of a sole arbitrator, this one-year period starts on the date of his appointment whereas in the event of an arbitral tribunal, this period starts on the date of the first tribunal's meeting.

    13 Enforcement of awards

    13.1 Are awards enforced in your jurisdiction? Under what procedure?

    As per art. 15/B, on the condition that the arbitral award is finalized, the competent court shall give a document concerning the enforceability of the award upon request of a party

    Since the Turkey is a signatory to New York Convention, it is also possible that an foreign award may be recognized and enforced if it is in scope of the New York Convention. Otherwise, the provisions of Turkish Private International Private and Procedure law regarding the recognition and enforcement of a foreign award shall be applicable.

    14 Grounds for challenging an award

    14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?

    As per art. 15, the only way against an arbitral award is the action to set aside.

    An award may be set aside if:

    • a party has lack of capacity or the arbitration agreement is invalid as per the law agreed by the parties or Turkish law in the absence of the agreement,
    • the procedure of appointment of arbitral tribunal agreed by the parties or stipulated by the TCIA does not followed,
    • the award is not rendered in due time,
    • the arbitrator or arbitral tribunal unlawfully rule its own jurisdiction or rule unlawfully regarding lack of jurisdiction,
    • The award rendered is out of the scope of the arbitration agreement or not covers the all issues or arbitral tribunal exceeds its authorization,
    • The award is not rendered in accordance with the procedure agreed by the parties or stipulated by TCIA and this situation affects the substance of the award,
    • The equal treatment principle is not considered by the arbitral tribunal,
    • the subject matter of the dispute is not arbitable as per Turkish law,
    • The award is against public policy.

    14.2 Are there are any time limits and/or other requirements to bring a challenge?

    As per art. 15 of TCIA, the request for annulment of an award shall be made within thirty days. The period of thirty days for bringing a challenge begins to run from the date of notification of a decision on correction or an award or interpretation or an additional award. This request suspends the fulfilment of the arbitral award per se.

    14.3 Are parties permitted to exclude any rights of challenge or appeal?

    As per art. 15 of TCIA, the parties may renounce partially or wholly their right to set aside the award. However, only the parties whose domicile or habitual residence is located outside the Turkey may renounce their rights to set aside in writing in the arbitration agreement with an express clause or after the arbitration agreement has been signed.

    15 Confidentiality

    15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?

    TCIA is silent regarding the confidentially of the arbitration. However, in Turkey it is recognized that the arbitration shall carry out confidential. All Parties involved in arbitration no matter in which kind (witnesses, experts, counsels etc.), are under the duty of confidentiality. Since there is a gap in law, It is advisable to add confidentiality clause in the agreement between the parties.

    15.2 Are there any exceptions to confidentiality?

    If parties may agree on not to comply with the confidentiality obligation. In addition, it is also noted that in the cases where courts intervene the arbitration procedure or give assistance, the hearings will be held publicly available due to publicity of trial.

    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.

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    These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

    You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

    No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

    If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

    Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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