I – Introduction
International trade has been spreading due to increasing transportation and communication developments around the world. It becomes not only a geographic phenomenon but also it became the main activity of many small and middle size enterprises. Currently, due to this reason, international arbitration has been developed the scope of the international commercial law as a fundamental dispute resolution mechanism and gradually its practice has been expanded.
Generally, both foreign companies who make investments in Turkey or Turkish companies who make investments in abroad employ arbitration mechanism as a major provision into their contracts. Therefore, in recent years enforcement of arbitral awards is practiced more frequently as a result of Turkey’s increasing trade volume in international trade.
In this bulletin we want to provide an overview of the main topics relating to the enforcement of international arbitration awards in Turkey.
II – The legal basis of enforcement of arbitral awards
There is two main legislations on enforcement of arbitral awards (TENFIZ) in Turkey. They are namely:
1.The Law on Private International Law and Litigation (legislation no 5718; hereinafter is referred to as PIL ) which was enacted / dated /to come into effect/ on 27 November 2007.
2.The Law on International Arbitration( legislation no 4686; hereinafter is referred to as LIA )which became effective on 5 July 2001.
In respect of enforcement of foreign arbitral awards in Turkey, provisions of the PIL are applicable only if an award was made by a non-contracting state of the New York Convention. However, the New York Convention was signed by 142 countries and it has a larger scope. Consequently, the provision of PIL are very limited. In addition, cardinal rules of enforcement were expressed in Art 60-63 of PIL and there are no significant differences between Art. 60-63 and the provisions of the New York Convention.
Other important provision is the LIA. The New York Convention (Convention of the Recognition and Enforcement of Foreign Awards) is effective since 30 September 1992 in Turkey and the LIA shows the applicability of the New York Convention in domestic law /at national level. This private law rules was based on UNCITRAL Model Law and it regulates the arbitration process and enforcement of arbitral awards.
Other important regulations on the enforcement of international arbitral awards are Turkey is contracting state to Washington Convention or ICSID ( Convention on the Settlement of Investment Disputes between States and Nationals of Other States ) and 1961 Geneva Convention (European Convention on International Arbitration). The Washington Convention implemented in Turkish law in 1989. /Or these convention were implemented in Turkish law at 1989 and 1992 respectively. However these regulations hardly have been practised.
II – The enforcement period according to the PIL and the New York Convention
The New York Convention was signed in 1991 and entered into force on 30 September 1992. However, the general structure of the New York Convention as well as increasing applications/cases to set aside of awards showed that there was a need for a detailed rules and regulation in this area. As a result, the LIA which was based on UNCITRAL Model Law came into force in 2001.
The LIA provisions are applicable where a case holds foreign elements and the place of arbitration is Turkey or the parties’ choice of law is Turkish Law /the LIA. An arbitration award is final and binding also it is not subject to appeal. Nevertheless, it may be se aside by the Court only if the statuary requirements /reasons are existed. If there is no recourse to the Court against an arbitral award in certain time, the award can be executed upon recognition of arbitral awards by the Court of First Instance. (Asliye Hukuk Mahkemesi)
Under international conventions and (the New York Convention, Geneva Convention and )the PIL art 60-63 it is necessary to bring an action to the Court for recognition and enforcement of awards by the party/parties. This lawsuit called as ‘TENFIZ DAVASI’. The territorial jurisdiction of court of First Instance may determined by the parties in their contract , or if it is not the defendant habitual residence or place of defendants assets.
At the time of application, the applicant shall provide these documents (The NY Convention Art 4 and PIL Art 61 )
“a)The original or a certified copy of the arbitration agreement or the relevant clause.
b) The original or a certified copy of the formal enforceable final arbitral of such a decision having binding force as an arbitration awards
c) Translated and a certified copy of documents mentioned in paragraphs ( a) and (b ).
In the case of the existence of the grounds waiver under Article 62 of the PIL , the recognition and enforcement action may be rejected by the Court.
Art 15 of the LIA is a main tool for setting aside against arbitral awards when the recognition and enforcement of arbitral awards application is made under the NY Convention. This article has parallel stipulations as in the NY Convention and Art 36 of the UNCITRAL Model Law. According to the Art 15, an arbitration awards may be set aside in the following situations at the request of one of the party or by the Court:
A .If the party making application for setting aside furnishes the proved that:
1. A party to the arbitration agreement was under some incapacity or the said agreement is not valid under the law to which the parties have subjected it or failing any indication thereon under Turkish law;
2.The apointment of arbitrator or composition of the Arbitral Tribunal was not in accordance with the agreement of the parties or procedure provided in the LIA;
3.The award has not been rendered within the time limit of arbitration;
4.The arbitrator or Arbitral Tribunal has wrongly and contrary to law declared itself to have or not to have juridiction;
5.The arbitrator or Arbitral Tribunal has decided on a matter beyond the scope of the arbitration agreement or has not decided on all of the matters claimed or exceeded its jurisdiction;
6.The arbitral proceedings has not been carried out in accordance with the “agreement of the parties” as to procedure or failing such agreement , in accordance with the provision of Law (LIA) and this situation has effected the substance of the award;
7.The principle of equal treatment of the parties or their right to be heard has not been observed.
B. If the Court finds that:
1.The subject-matter of the dispute is not capable of settlement by arbitration under Turkish law
2.The award is incompatible with public policy
According to Art 15 of LIA, time limit for application for setting aside at Court of First Instance may be initiaded within 30 days and it has urgent priority in the Court proceedings. The time starts from completion or correction of awards.
Although the legistator intent is to avoid any delay of enforcement of arbitral awards , application to set aside against an arbitral awards and to appeal will prevent/suspend /halt its execution. (Art 15 LIA)
III –Topics of Enforcement of Arbitral Awards
Until now the recognition and enforcement of international arbitral awards according with the LIA is a new practise area in Turkey and case law/jurisprudance has been still improving. Therefore, it can be seen some dissimilarity between the courts decisions. The major problem is whether the court should apply fixed or proportioned duty for the application. The courts should determine fixed duty because the court does not examine merits of the case. However, heavy cost will incur if the court determines proportined duty where in high amounts of disputes are involved in enforcement procedure.
Besides that, implementation of UNCITRAL Model Law in Turkish Law is a fundamental development as far as Turkey’s growing volume in international trade. It can be said that Turkey has sufficient/efficient/competent/ legal standarts for recognition and enforcement of international arbitral awards because the international commercial arbitration is an integral part of the international trade.
However, in order to further improvements in arbitration the efficient /effective Exchange of information is indespensible. Therefore, the need for establishing a Center/Body/İnstitution on International Commercial Arbitration was accepted by academics and practitioners. In this respects, a working group set up by the Istanbul Chamber of Commerce in 2005 in order to establish the mentioned Institution in İstanbul. Moreover, This working group drafted the Rule of international Arbitration Center of the Istanbul Chamber of Commerce. This Project is continued by the Turkish Union of Chambers and Commodity Exchanges.(Turkiye Odalar ve Borsalar Birligi TOBB).
IV – Conclusion
Turkey is qualified in recent years by decrees of the expected legislation as a suitable country for the recognition and enforcement of arbitral awards. With the establishment of an international arbitration institution gives hope to further progress /improvements on arbitration in Turkey.