Enforcing arbitral awards in Turkey26. Juli 2017
Doguhan Uygun is a Turkish qualified lawyer. He studied law in Ankara and Istanbul and is currently an LL.M. candidate in International Dispute Resolution at Humboldt University of Berlin. He has previously worked as an associate for one of the largest law firms in Turkey, gaining experience both in their dispute resolution practice as well as in mergers & acquisitions. By preparing the answers to the Q&A below, Doguhan was kind enough to provide us with a concise and useful overview on Enforcement of Arbitral Awards in Turkey.
The use of arbitration is on the rise in Turkey, especially in respect of international commercial disputes. Turkish state entities and Turkish companies have been involved in massive investment and business projects both in Turkey and elsewhere in the region during recent decades, which is why the role of arbitration has increased dramatically. This is confirmed by figures of the International Court of Arbitration of the International Chamber of Commerce (ICC), which has recently announced that a record number of new cases has been filed from Turkey in 2016.
The establishment of the Istanbul Arbitration Centre (ISTAC) will also have positive consequences in this regard by encouraging parties to arbitrate in Istanbul. This applies not only to Turkish parties but also to companies from the neighbouring regions such as the Middle East, Eastern Europe and Caucasus.
In the past years however, several difficulties have arisen in Turkey when it comes to the recognition and enforcement of foreign arbitral awards, which will be addressed in the further course of this Questionnaire. However, in light of recent developments and the notable efforts of Turkey to catch up with international arbitration standards, it is evident that the Turkish judiciary will continue to progress in becoming more arbitration friendly.
- Is your jurisdiction party to the 1958 New York Convention? If yes, what is the date of entry into force of the Convention and was there any reservation made under it
Yes, Turkey is a party to the New York Convention (“NY Convention”). It came into force on 2 July 1992. Turkey made two reservations permitted under the NY Convention:
- the reciprocity reservation; and
- the commercial nature of disputes.
In line with the first reservation, Turkey will only recognize and enforce arbitral awards that are made in other contracting states of the NY Convention. Secondly, the award must be related to a commercial dispute or must be of a commercial nature to be subjected to the NY Convention.
- What is the applicable law for recognition and enforcement of an arbitral award in your jurisdiction and which is the relevant Section?
The NY Convention is the primary legal source for recognition and enforcement of foreign arbitral awards in Turkey. If the NY Convention is not applicable, foreign arbitral awards can still be recognized and enforced in line with Article 60 to 63 of Turkey’s International Private and Procedural Law No. 5718 (“IPPL”). Additionally, certain provisions of IPPL that govern the recognition and enforcement of foreign court judgments can also be applicable for the enforcement of foreign arbitral awards when appropriate.
On the other hand, domestic arbitrations are governed by Section 11 of the Turkish Civil Procedural Law No. 6100 (“CPL”). Its arbitration-related provisions are also based on the 1985 UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).
The main source of legislation for international arbitration in Turkey is the International Arbitration Law No. 4686 (“IAL”) which is based on the Model Law. It applies to all arbitration proceedings that take place in Turkey where a foreign element exists, or where the provisions of the IAL are chosen by the parties or the arbitrators as the applicable law.
JURISDICTION, PROCEDURE BEFORE COURT
- Which is the competent court for an application for recognition and enforcement of arbitral awards?
Pursuant to Article 60 of the IPPL, an application for enforcement of a foreign arbitral award shall be made to the Civil Courts of First Instance (asliye hukuk mahkemesi).
The recognition and enforcement of a foreign arbitral award must be requested from the Civil Court of First Instance mutually agreed upon by the parties in writing. If there is no such jurisdiction clause concluded between the parties, the Civil Court of First Instance at the award-debtor’s place of residence shall be the competent court. In the absence of such place of residence, the court at the person’s place of habitual residence shall be competent. In the absence thereof, as the last alternative, the court where assets are located that may be subject to enforcement is competent.
- How does one initiate court proceedings for the enforcement of an award in your home jurisdiction?
The party seeking enforcement must commence proceedings before the Civil Court of First Instance by making an application.
- Are the proceedings in your jurisdiction adversarial or ex parte?
The proceedings regarding the enforcement of foreign awards are adversarial with participation of both parties. Domestic awards on the other hand are binding once they are issued and there is no need to initiate formal enforcement proceedings for such awards.
- What documentation is required to obtain recognition of an arbitral award? For instance, must the award be submitted in original or a certified copy? Must the original arbitration agreement be submitted?
According to Article 61 of the IPPL, the party seeking enforcement of a foreign arbitral award must submit the following documents:
- an original or certified copy of the arbitration agreement;
- an original or certified copy of the finalised award; and
certified Turkish translations of the above documents.
- If the required documentation is drafted in another language than the official language of your jurisdiction, is it necessary to submit a translation together with an application to obtain recognition of an arbitral award? If yes, in what form is the translation required to be?
The Turkish translation of documents in foreign language must be submitted to the court at the outset of the proceeding in line with the requirements that are set forth under Article 61 of the IPPL and Article IV (2) of the NY Convention. The translations must be certified by an official or sworn translator or by a diplomatic or consular agent.
- Do you need to be represented by a lawyer from the particular jurisdiction?
Parties are not required to be represented by a lawyer. Individual applicants may act themselves before the court, while legal persons may be represented by their legal representatives in line with their authorizations.
- Are there any differences in the procedure for the enforcement of domestic and foreign arbitral awards?
There is no requirement for recognition and enforcement of domestic awards. However, parties are entitled to file a setting aside application against the award. If the setting aside application is rejected, the court may issue a certificate which approves the enforceability of the arbitral award upon request of a party. On the other hand, if the time-limit provided for the application has expired or the parties have waived their right to file a setting aside application, the parties are also entitled to request the certificate of enforceability from the court. In such cases, the court will only examine whether the arbitral award complies with public policy and the subject matter of the dispute is capable of settlement by arbitration. Unless the court decides otherwise, the analysis only amounts to an a priori examination of the award and is carried through in a straightforward and swift manner.
Foreign arbitral awards on the other hand need to be enforced first before the Turkish courts in order to be enforceable.
- What are the costs of recognition and enforcement proceedings and how are they allocated? Are there any statutory limitations to legal fees?
The party seeking enforcement will be required to cover the court fees and the applications costs at the outset of the proceeding together with the filing of the request for recognition and enforcement of the foreign award.
Pursuant to Article 3 of the Code on Fees No. 492, the claims concerning arbitral awards are subject to proportional court fees amounting to 6.831% of the amount in dispute (instead of a fixed fee). Accordingly, the claimant must pay one fourth of such fee at the outset of the proceeding, which can be recovered from the other party at the end of the proceeding. The losing party will be obliged to pay the remaining three-fourths of court fees.
- How long do recognition and enforcement proceedings usually take?
The length of recognition and enforcement proceedings depends on the complexity and nature of the individual matter, but a rough estimate would be that it takes between 6 to 18 months. The appeal stage may also take 6 to 18 months depending on the workload of the respective chamber of the Court of Appeal.
SUBSTANTIAL REQUIREMENTS FOR THE ENFORCEMENT OF FOREIGN AWARDS
- What are the grounds on the basis of which a foreign award may be refused enforcement?
The refusal grounds for recognition and enforcement of a foreign award are listed under Article V of the NY Convention. If the NY Convention is not applicable to the case (i.e. the award is decided by a non-contracting state to the NY Convention), the foreign arbitral award can still be enforced as per the IPPL. The respective provision of the IPPL on this was adopted from the NY Convention and the grounds referred to therein are in harmony with the refusal grounds that are listed under Art. V NY Convention.
- How does your home jurisdiction interpret and construe the public policy violation defense for foreign arbitral awards?
Turkish courts largely construe public policy in line with fundamental rights, moral rules, economic policies, the political system and social principles that exist in the society.
It is worth to note in this regard that Turkish courts have been criticised in the past for their excessively wide interpretation of the public policy exception, in particular in relation to disputes in which Turkish public entities were involved.
This is particularly well-illustrated by the unquestionably wrong decision of the Turkish Court of Appeal of 1976 in the so-called Keban case. In this decision, the court decided to refuse the recognition and enforcement application of a French party based on an ICC award because it found that ICC’s scrutiny procedure violated the independence of the arbitrators and accordingly Turkish public policy. This decision was criticised extensively both by international and domestic legal scholars and practitioners. In the aftermath of the decision, this interpretation and approach towards ICC’s scrutiny process has been changed, so that ICC awards are now enforceable in Turkey.
- Do courts recognize and enforce partial or interim awards or only final awards?
Article 60 of the IPPL stipulates that an award must be final and binding to be enforced. Accordingly, as long as an interim award that is subject to an enforcement proceeding is final and binding on the parties in the sense that it finally disposes of a matter in dispute, it can be enforceable before Turkish courts. However, the IPPL does not allow for recognition and enforcement of interim orders in the form of interim awards (e.g. provisional attachment or provisional injunction), as they are not final and may be open to amendments.
On the other hand, the IPPL does not finally regulate the enforcement of partial awards. However, according to Article 14/A of IAL, arbitral tribunals are free to render partial awards, unless otherwise agreed by the parties. In addition to this, Article 6 of the Communique on the International Arbitration Fees Tariff regulates the applicable fees for partial awards. Based thereon, it can be deduced that the concept of partial award is accepted under Turkish law. Accordingly, there is no obstacle for the enforceability of partial arbitral awards before Turkish courts, provided that they are final and binding.
SUBSTANTIAL REQUIREMENTS FOR THE ENFORCEMENT OF DOMESTIC AWARDS
- What are the grounds on which a domestic award may be refused enforcement?
There is no differentiation with respect to this between domestic and foreign awards. Please see #9 for more information.
- Do courts recognize and enforce partial or interim awards or only final awards?
There is no differentiation with regards to this between foreign and domestic awards. However, readers should take note that the legal instrument covering domestic arbitration proceedings is the CPL and not the IPPL, which covers the enforcement of foreign awards. The conclusions arrived at under #14 above however remain identical under both instruments. An award, domestic or foreign, must finally resolve a matter in dispute in order to be enforceable.
EFFECTS, REMEDIES & PROCEDURAL REQUESTS
- What is the effect of a decision recognizing the award in your jurisdiction? Is it immediately enforceable?
Once the Turkish court renders a decision recognizing a foreign award, such decision prevents re-evaluation of the subject matter of the award. Subsequently, the award can be enforced. However, this all takes place in one single proceeding, there is no need to initiate separate actions for recognition and enforcement proceedings.
- Are any remedies available against a decision recognizing an arbitral award in your jurisdiction and, if yes, what are they?
The decisions of the first instance courts in relation to the recognition and enforcement of foreign arbitral awards are subject to appeal proceedings. There are two levels of appeal. The Regional Second Instance Courts (İstinaf Mahkemeleri) are responsible for reviewing the decision of the courts of first instances. Awards or matters exceeding the minimum statutory threshold of TL 40,000 (approx. EUR 10,000) first have to be appealed before the Regional Second Instance Court (İstinaf Mahkemeleri) and can thereafter also be appealed before the Court of Appeal (Yargıtay).
- Is it possible to obtain the recognition and enforcement of an award that has been fully or partly set aside at the seat of the arbitration?
If the award is annulled at the seat of arbitration, Turkish courts will most likely refuse enforcement of the award on grounds of Article V (1) (e) NY Convention. On the other hand, if a setting aside proceeding has been commenced and is pending before the courts at the seat of arbitration, Turkish courts may suspend the proceeding until the decision on the challenge of the award becomes final.
- In case the award is set aside after the decision for enforcement of the award has been issued, what remedies, if any, are available against this decision?
In such a circumstance, the defendant may challenge the decision of the enforcing court as explained under #18. In this context, the decision of the enforcing court should be overturned.
However, in practice, if there is a pending challenge proceeding in the country where the award was made, Turkish courts tend to suspend proceedings until the decision on this becomes final. This is because the issue is considered of prejudicial nature under Turkish Law.
- Are interim measures against assets available in your jurisdiction available? And if yes, what kind of measures are they?
Yes, Turkish law permits two types of interim measures for securing rights and receivables:
- provisional attachment (ihtiyati haciz); and
- provisional injunction (ihtiyati tedbir).
The requests for these measures are reviewed and decided by the court in a speedy manner. The applicant must submit documentary or at least prima facie evidence to convince the court of the necessity of rendering such orders.
THE ENFORCEMENT ITSELF
- How do you enforce an award that has been declared enforceable by the court? Is there a specific procedure?
Once the enforcing court has rendered its recognition and enforcement decision, the party seeking enforcement must apply to the debt collection office (icra müdürlüğü) by requesting initiation of a debt collection proceeding with judgment (ilamlı icra takibi) against the debtor. This is a simple and straightforward procedure that can be done by filling a standard form with the enforcement decision of the court as an attachment.
- Are there any costs involved and what are the costs?
The application fee for this procedure is fixed and updated annually by the Tariff No. 1 of the Code on Fees No. 492. According to the Tariff No. 1 of 2016, the application fee for the year 2017 is TL 31,40 (approx. EUR 8).
There are also other costs involved with this procedure, such as expenses for service of documents and certification, authentication fees, which are insignificant however and generally less than TL 50 (EUR 12,70). It should be noted that these costs are recoverable from the award-debtor.
- Are there any other particularities which should be considered?
It is interesting to note once more that domestic awards are binding and enforceable in a straightforward manner in Turkey, so there is no need for formal recognition and enforcement proceedings. The only challenge option is to initiate a setting aside application.
On the other hand, taking into consideration the case law of recent years, it is apparent that the Turkish Court of Appeal has changed its negative, hands-on approach towards arbitration, which has been criticised for a long time following the remarkably erroneous Keban Decision in 1976. It has since then become more arbitration-friendly when reviewing arbitral awards.
Über den Autor
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