Arbitration procedures and practice in Turkey: Overview
A Q&A guide to arbitration law and practice in Turkey.
The country-specific Q&A guide provides a structured overview of the key practical issues concerning arbitration in this jurisdiction, including any mandatory provisions and default rules applicable under local law, confidentiality, local courts' willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.
To compare answers across multiple jurisdictions visit the Arbitration procedures and practice Country Q&A Tool.
This Q&A is part of the global guide to arbitration. For a full list of jurisdictional Q&As visit www.practicallaw.com/arbitration-guide.
Use of arbitration and recent trends
Use of commercial arbitration and current trends
Although the use of arbitration has increased significantly in Turkey in recent years, it is still underused when compared to litigation before state courts. Arbitration is used more frequently in large commercial disputes in areas such as construction, energy and infrastructure, and share purchase agreements, and especially for resolution of cross-border disputes.
However, with the establishment of the Istanbul Arbitration Centre (ISTAC) by Law 6570 on 1 January 2015, and the start of its operation on 26 October 2015 with the publication of the ISTAC Rules (which are very similar to the ICC Rules) an upward trend in the use of commercial arbitration is anticipated.
It is very common for disputes regarding international business transactions to be resolved before arbitral tribunals. Arbitral tribunals are often seen as a reliable forum and are especially favoured by foreign investors who engage in business in Turkey.
Arbitration is significantly faster and more efficient, especially when it comes to large and complex disputes. State judges and court appointed experts are often insufficient for disputes which require special expertise. There is a common perception that arbitration is a more expensive method for resolution of commercial disputes. This can be accurate for small-sized disputes. However, for large-scale commercial disputes, litigation costs before state courts often exceed arbitration fees.
Confidentiality is another advantage of arbitration, as Turkish court proceedings are public. Enforceability of arbitral awards outside Turkey under the New York Convention is also an important advantage (see Question 34).
The International Arbitration Code (No. 4686) applies to arbitrations with an international nature that are seated in Turkey or where its application is agreed to by the parties or arbitrators. Domestic arbitration is subject to the Civil Procedural Code (No. 6100), which only applies to arbitrations seated in Turkey with no international element.
Both laws are essentially based on the UNCITRAL Model Law. Where the provisions of the International Arbitration Code differ from the UNCITRAL Model Law, Swiss international arbitration law has mostly been taken as a model.
Mandatory legislative provisions
The provisions of the International Arbitration Code are based on the principle of party autonomy. The mandatory provisions for arbitration include:
The right to a fair trial and the equal treatment of the parties.
The number of arbitrators must be an uneven.
If interim relief is requested from state courts before initiating arbitration proceedings, arbitration proceedings must be initiated within 30 days, or interim relief will be removed automatically.
An action to vacate an arbitral award can be filed within 30 days.
The arbitration award must include the elements listed in the law.
Failing to comply with mandatory legislative provisions can lead to cancellation of the arbitral award.
Under Turkish law, limitation periods are governed by substantive rather than procedural law. Therefore, limitation periods are determined according to the law applicable to the merits of the case. If Turkish law is applicable, the general limitation period is ten years and is triggered when the claim becomes due.
The statute of limitation for tort claims is two years from when the claimant becomes aware of the tortious act, damage and the person committing it. This must be within the upper limitation of ten years from the date of the occurrence of the tortuous act. For unjust enrichment, the two-year limitation runs from when the claimant becomes aware that he is entitled to raise a claim, again within the upper limitation of ten years from the date of unjust enrichment. As with proceedings before the state courts, these limitation periods must also be taken into consideration in starting arbitration proceedings. Initiating arbitration proceedings suspends/interrupts the limitation period.
The main arbitration organisations are the:
Istanbul Arbitration Centre (ISTAC).
Turkish Union of Chambers and Commodity Exchanges Court of Arbitration.
Istanbul Chamber of Commerce Arbitration Institution.
The ICC International Court of Arbitration is often preferred, especially for cross-border transactions, even if the seat of arbitration is Turkey.
See box, Main arbitration organisations.
An arbitration agreement must be in writing. An arbitration agreement is deemed to exist where:
The agreement to arbitrate is recorded with either:
a document signed by the parties;
a letter, fax, telegram or other means of telecommunication exchanged between the parties;
The existence of an agreement has been alleged in a filed court petition and the counterparty has not objected.
A document containing an arbitration agreement is referred to with the aim of making it an inseparable part of the main agreement.
If an arbitration agreement complies with the requirements of the law that the parties have chosen, or of Turkish law where no choice of law is made, it is deemed to be valid and enforceable.
Separate arbitration agreement
Under the doctrine of separability, the parties can choose either to include an arbitration clause in the main contract, or to sign a separate arbitration agreement.
It is also possible to conclude a valid arbitration agreement by reference to another document (agreement or convention and so on) containing an agreement to arbitrate (Article 4/3, International Arbitration Code).
Unilateral or optional clauses
An arbitration agreement is enforceable under Turkish law if the mutual consent of the parties to settle the dispute by arbitration and to be bound by the arbitral award is explicit and clear. Therefore, unilateral or optional clauses, where one party has the right to choose arbitration are not enforceable under Turkish law.
The International Arbitration Code and Civil Procedure Code are silent on the involvement of a party that is not a party to the arbitration agreement in arbitration proceedings.
Academic opinion is divided on the extent to which involvement of a non-party in arbitration proceedings is compatible with the nature of arbitration as a mechanism based on party autonomy, confidentiality and equality of arms. A non-party can only be involved in arbitration proceedings if all parties to the dispute, including the non-party, give their consent.
Although it cannot be deemed as "joining" in technical terms, a party that was not a party to the arbitration agreement can appear as a party to the arbitration proceeding in case of a succession relation (such as under an insurance agreement) between the non-party (successor) and original party to the arbitration agreement (predecessor).
It is not possible to compel a non-party to arbitrate, see Question 10.
Breach of an arbitration agreement
Court proceedings in breach of an arbitration agreement
If a party starts court proceedings in breach of a valid arbitration agreement, the defendant can raise an arbitration objection. An arbitration objection must be made in the response petition (Articles 116 and 117, Civil Procedure Code).
Arbitration in breach of a valid jurisdiction clause
If a party requests arbitration despite a valid agreement on the jurisdiction of state/foreign courts, the objection to the tribunal's jurisdiction must be raised by the counterparty in the first response petition at the latest. See Question 7.
There is no particular provision in Turkish law allowing the Turkish courts to grant anti-suit injunctions. A respondent faced with a proceeding overseas despite a valid arbitration agreement can only challenge the enforcement and recognition in Turkey of the foreign court's decision.
Under the International Civil and Procedural Law, which regulates enforcement and recognition, a foreign award cannot be enforced if the foreign court had no relation with the disputed matter and the parties involved in the dispute, provided that the respondent had opposed its jurisdiction during the trial (Article 54/1,B, International Civil and Procedural Law).
In addition, the Turkish courts may find that a decision rendered by a foreign court despite a valid arbitration agreement is contrary to the public order, and consider that the respondent's right to a fair trial was violated (Article 54/1, C, International Civil and Procedural Law).
Number and qualifications/characteristics
An arbitrator must disclose any facts or circumstances that might cast reasonable doubts on their impartiality and independence, both before accepting the duty and in the course of the arbitration proceedings. (Article 7/C, International Arbitration Code)
Article 12 of the ISTAC Rules also contains detailed provisions regarding the independence and impartiality of arbitrators.
The main default provisions are contained in Article 416 of the Civil Procedure Code and Article 7 of the International Arbitration Code.
Appointment of arbitrators
Article 7 of the International Arbitration Code sets out the default provisions to be applied in relation to arbitrators' number, appointment, removal, liability, end of duty and authority.
If the number of arbitrators is not decided by the parties, then the number of the arbitrators must be three.
If the parties fail to agree on appointment of a sole arbitrator, the civil court of first instance appoints the arbitrator at the request of a party.
If the number of arbitrators is three, each party appoints one arbitrator and then the two arbitrators determine the third arbitrator, who acts as the chairman. If one of the parties fails to appoint the arbitrator within 30 days as of receipt of notification, or the appointed two arbitrators fail to appoint the third arbitrator, the civil court of first instance appoints a third arbitrator at the request of a party.
Removal of arbitrators
Article 7/(C) of the International Arbitration Code contains detailed provisions for challenging arbitrators. The main grounds for challenging arbitrators are:
Lack of the qualifications agreed between the parties.
Existence of circumstances and facts that gives raise to doubts as to arbitrators' impartiality and independence.
Existence of another ground of removal as agreed by the parties.
The parties are free to agree the procedure to challenge the arbitrators. If no procedure has been agreed, the party who wishes to challenge an arbitrator must submit its request within either:
30 days of the appointment of the arbitrator or the tribunal.
30 days as of the date when the party learns the facts and circumstances on which the challenge is based.
The party requesting the removal of the arbitrator can challenge a decision on that request before the civil court of first instance.
Commencement of arbitral proceedings
Article 10/(A) of the International Arbitration Code and Article 426 of the Civil Procedural Code provide default rules governing the commencement of arbitral proceedings. Arbitral proceedings are deemed to commence when either:
The claimant notifies the respondent of the appointment of an arbitrator, if both parties are to appoint the arbitrators according to the agreement.
The counter party receives the request for arbitration, if the names of the arbitrators are stated in the agreement.
An appointment is made by the court or authority entitled to appoint arbitrators.
If one of the parties has obtained interim relief from state courts before initiating arbitration proceedings, arbitration proceedings must be initiated within 30 days or interim relief is automatically removed.
Article 10/(D) sets out mandatory minimum content requirements for the Request for Arbitration and Answer to Response submissions.
Applicable rules and powers
Applicable procedural rules
Both the International Arbitration Code and Civil Procedural Code contain default procedural rules. However, the majority of these rules are not mandatory and the parties are free to determine procedural rules in their arbitration agreement or after the arbitration procedure begins. It is also possible for the parties to determine the rules to be applied by referring to national procedural rules or institutional rules. Under Article 8 of the International Arbitration Code, the mandatory provisions of the code continue to apply even if the parties agree on the application of other procedural rules.
See Question 3.
Evidence and disclosure
Under Article 12 of the International Arbitration Code, an arbitral tribunal can appoint an expert and conduct in-situ examinations. In addition, arbitral tribunals can order the parties to submit specific evidence to assessment by appointed experts. Otherwise, arbitral tribunals cannot compel a party or non-party to the arbitration to produce evidence or to appear at a hearing to give testimony.
Under Article 432 of the Civil Procedure Code, a party can request assistance from local courts for collection of evidence, with the approval of arbitral tribunal, if the counterparty or any other third party does not comply with the arbitration tribunal's orders.
Arbitral tribunals can also request assistance from local courts for collection of evidence, especially with regards to documents and information to be obtained from public authorities.
Scope of disclosure
There is no provision regarding the scope of disclosure for arbitration and domestic court litigation.
Parties can avoid disclosing evidence. If so, the arbitral tribunal can continue the proceedings and render an award according the present evidence. Disclosure is also not obligatory in domestic court litigation. The Civil Procedure Code does not provide for any sanction for parties that do not comply with a request for evidence by the domestic court/arbitration tribunal. However, Article 220 of Civil Procedure Code provides that the court/arbitration tribunal is entitled to accept and rely on the other party's statements in such a scenario.
The state courts have wider powers in respect to witness testimony and the collection of evidence from third parties than arbitration tribunals. A state court can impose a monetary fine on third parties who do not appear as a witness or submit requested evidence without a satisfactory reason.
Validity of parties' agreement as to rules of disclosure
The parties can set the rules on disclosure in their agreement.
In principle, arbitration is confidential. Parties, as well as other attendees such as counsel, witnesses and experts, are under an obligation of confidentiality.
Arbitration proceedings are confidential and all attendees in the proceedings must maintain confidentiality under the arbitration rules of the:
Istanbul Arbitration Centre.
Istanbul Chamber of Commerce.
Union of Chambers of Commerce.
Industry, Maritime Trade and Commodity Exchanges of Turkey.
Courts and arbitration
Under Article 3 of the International Arbitration Code, the court can only intervene in arbitration proceedings in accordance with relevant articles of the code.
Local courts assist arbitration proceedings by appointing arbitrators if the parties cannot agree on the arbitrator to be appointed, or for any other reasons, under Article 7 of the International Arbitration Code. The same provision also allows parties to resort to state courts to obtain the disqualification of arbitrators.
If the parties fail to agree on extension of the arbitration period of one year given under Article 10 of the International Arbitration Code, one of the parties can request the local court to grant an extension before the time limit for arbitration proceedings expires.
Parties can request interim injunctions enforceable on the counterparty and third parties from local courts during or before the arbitration proceedings. Parties can also seek the assistance of state courts if the counterparty does not comply with interim relief ordered by the tribunal.
The arbitral tribunal and parties to the dispute can seek the assistance of local courts to collect evidence and witness statements. Local courts can compel third parties to collect evidence and witness statements (see Questions 20 and 21).
If the International Arbitration Code applies, the court of first instance where the defendant resides or has a place of business has jurisdiction over arbitration-related applications.
If the Civil Procedure Code applies, the regional appellate court of the place of arbitration has jurisdiction. If the place of arbitration is not determined, the regional appellate court where the defendant resides or has a place of business has jurisdiction.
Risk of court intervention
It is not common for a local court to intervene in arbitration proceedings, as Article 3 of the International Arbitration Code provides only a very limited number of grounds for a party to apply to the court.
There is no specific provision that enables parties to delay arbitral proceedings by making court applications. The interventions permitted by the Civil Procedure Code or the International Arbitration Code are intended to facilitate the course of the arbitration proceedings and do not in practice cause a risk of frustration.
It is possible for a party to delay arbitration proceedings by challenging the arbitrator and requesting a state court to disqualify an arbitrator on the grounds of lack of impartiality or failure to fulfil his duties. However, the state court would take this issue as an urgent matter and apply an expedited procedure (Article 316, Civil Procedure Code). The court's decision is then final and cannot be appealed (Article 7, International Arbitration Code). Therefore, even if parties apply to the court in bad faith, it would not cause an excessive delay.
Following insolvency, an insolvent company's power of disposition over its assets and rights is transferred to a bankruptcy trustee (composed of the insolvent company's rightful creditors) who pursues any pending arbitrations or claims in the state courts.
If one of the parties loses its capacity to pursue the proceeding, the arbitration tribunal must notify the interested parties to ascertain whether they intend to continue with the arbitration (Article 11, International Arbitration Code). In case of insolvency, if the trustee does not continue the arbitration proceeding within six months of notification, then the arbitration tribunal finalises the proceeding without rendering a decision on the merits of the dispute.
In arbitration proceedings, the arbitral tribunal can order preliminary injunctions or preliminary attachment, and require testimony at the request of a party, unless otherwise agreed. However, arbitral tribunals cannot grant interim remedies that bind third parties or that need to be executed by official authorities or execution offices.
The Istanbul Arbitration Centre (ISTAC) adopts the emergency arbitration procedure given in the ICC Rules. The applicant must submit its request for main arbitration within 15 days of the emergency arbitration.
An applicant can also request interim remedies from state courts. Parties can request all forms of interim relief to secure their rights before or during the arbitration proceedings, including binding third parties, and orders to be executed by official authorities or execution offices. However, if a request for interim relief is made before arbitration proceedings and the interim relief is granted by the court, then the party requesting that relief must request the commencement of arbitration within 30 days of the decision on the interim relief. Otherwise, the interim relief automatically becomes ineffective.
As the arbitral tribunal cannot render an interim remedy that binds third parties or that needs to be executed by official authorities or execution offices, even if the arbitral tribunal grants interim relief on an ex parte basis, it is not enforceable against third parties.
An arbitral tribunal can require the claimant to provide an advance payment for costs (Article 16/C, International Arbitration Code).
An arbitral tribunal can also require security as a precondition to ordering a preliminary injunction or preliminary attachment (Article 6, International Arbitration Code).
The remedies available to arbitrator(s) are limited to those compatible with Turkish public policy. Punitive damages are not permissible under Turkish law and the remedies available to the arbitrator(s) are limited to the remedies allowed, which are;
Establishment, modification or termination of a legal relationship.
Publication of the judgment in newspapers.
Rights of appeal/challenge
An action for cancellation (setting aside) of an arbitral award can be filed before local courts within 30 days from notification of the award or any revision of/interpretation on/addition to the award by the arbitral tribunal.
Grounds and procedure
Article 15 of the International Arbitration Code and Article 439 of the Civil Procedure Code provide identical grounds for cancellation of an award as follows:
Lack of legal standing of a party.
Invalidity of the arbitration clause.
Procedural errors in the appointment of arbitrators.
Failure to grant the arbitral award within the legal period.
Incompetence by the arbitrator or arbitral tribunal, or an incompetent decision contrary to law.
Failure to grant the arbitral award for part or all of the claim.
Procedural errors in the conduct of the arbitration proceedings.
Unfair treatment of the parties.
The subject-matter of the dispute not being appropriate for arbitration under Turkish law.
The award being contrary to public order.
Both the International Arbitration Code and Civil Procedure Code identically provide that such actions are considered urgent matters that are to be resolved by an expedited procedure in comparison with regular state court actions. Under this expedited procedure, the parties can submit all their arguments and evidence with their petitions and cannot submit rebuttal/rejoinder petitions. The court will then render its award without holding a hearing, if possible. If not, the court cannot schedule more than two hearings, except for sessions arranged for witness statements and expert examinations.
The decision of the state court can be appealed, although only on the grounds listed above.
Waiving rights of appeal
A party can waive its right to file an action to cancel an arbitral award in the arbitration agreement or during the procedure (Article 15, International Arbitration Code).
Under Article 16 of the International Arbitration Code, parties can agree on the:
Amount of and/or nature of the dispute.
Duration of the arbitration.
Fees can also be determined according to international precedents or institutional arbitration rules. If parties cannot agree on the fees, they are determined in accordance with the yearly tariff prepared by the Ministry of Justice.
There is no third party funding provision in Turkish law and third-party funding is possible. There are no active professional funders.
Parties can agree on conditional fees based on success before local courts. Under Article 164 of Advocacy Law No. 1136, there is no explicit prohibition on contingent fees. However, if a lawsuit is won, the attorney fees cannot exceed 25% of the amount of the subject of the dispute.
Unless otherwise agreed, court expenses are paid by the unsuccessful party as per Article 442 al.4 of the Civil Procedure Code and Article 16D of the International Arbitration Code. If both parties are partially successful, the arbitration expenses are shared between both parties as determined by their degree of success. However, attorney fees that are part of litigation expenses to be borne by the unsuccessful party are limited by the yearly tariff determined by the Union of Turkish Bar Association.
The calculation of costs is within the sole discretion of the arbitrators or the arbitrators' board. Arbitration costs include:
Travel and other expenses of arbitrators.
Fees to be paid to experts and other persons from whom arbitrators request assistance.
Travel and other costs of witnesses to the extent approved by the arbitral tribunal.
Attorney fees determined by the arbitral tribunal and calculated according to Minimum Attorney Fee Tariff for the successful party's attorney.
Court fees for applications made before local courts under the International Arbitration Code.
In calculating costs, the courts take into account the parties' success and other circumstances of the case such as the volume of translations and documentation, and the conduct of the parties.
Enforcement of an award
Turkey is party to the New York Convention. Other notable treaties to which Turkey is party include:
European Convention on International Commercial Arbitration 1961 (Geneva Convention).
The International Centre for Settlement of Investment Disputes Convention.
All international treaties to which Turkey is a party are considered as domestic law and lex specialis overriding other laws which only govern general matters (lex generalis).
Turkey has two reservations to the New York Convention, which provide that the Convention applies only to:
Recognition and enforcement of awards made in the territory of another contracting state.
Disputes arising out of legal relationships that are considered commercial under Turkish law.
Therefore, the New York Convention is not applied to recognition and enforcement of foreign arbitral awards that do not satisfy these criteria.
The International Civil and Procedural Law contains provisions for enforcement of foreign arbitral awards. Recognition and arbitral awards that do not fall within the scope of New York Convention are subject to the relevant provisions of the International Civil and Procedural Law. These are very similar to the relevant provisions of the New York Convention.
A foreign arbitral award is enforceable if it satisfies the conditions stipulated under Article V of the New York Convention or the very similar conditions under Article 62 of the International Civil and Procedural Law. UK and US awards are enforceable in Turkey under the New York Convention
Unlike the New York Convention, the International Civil and Procedural Law requires an arbitral award to be rendered in a state which either:
Is party to an agreement providing for reciprocity in enforcement and recognition of arbitral awards rendered in Turkey.
Recognises and enforces awards rendered in Turkey as a part of its legal practice or national laws.
Among all the conditions of enforceability, Turkish courts give particular importance to public policy. The term "public policy" is not explicitly defined by Turkish law and therefore the standards for refusing recognition or enforcement on public policy grounds mostly depend on legal practice. The most common examples of a violation of public policy are:
Violations of the right to be heard.
Awards being without merits.
Awards being against good morals.
Awards violating foreign trade, customs or tax regulations.
Non-arbitrability of the dispute.
However, the concept of public policy is changing over time, embracing a trend towards an enforcement-friendly approach.
The court where the defendant temporarily or permanently resides has jurisdiction over enforcement proceedings. In the absence of such a place, the claimant can file enforcement proceeding before the courts of Istanbul, Izmir or Ankara.
Length of enforcement proceedings
There is no expedited procedure. However, the examination should be brief since the court does not examine the merits of the case and only conducts a procedural examination. Enforcement proceedings for foreign awards can take one year before the first instance court. The appeal stage can take an additional year.
Enforcement proceedings are not necessary for domestic awards, as they are directly enforceable unless there is an action for cancellation (setting aside).
There are no proposals for changes to the applicable framework. However, the re-organisation of the structure of the Court of Appeals to establish a separate circuit specialised on international arbitration law is being considered. This would avoid any incompatibility among state courts' evaluations of conditions for the recognition and enforcement of arbitral awards (such as in relation to public order).
Main arbitration organisations
International Chambers of Commerce (ICC)
Main activities. Arbitration and ADR.
International Centre for Settlement of Investment Disputes (ICSID)
Main activities. Arbitration and fact-finding proceedings.
Istanbul Arbitration Centre (ISTAC)
Main activities. Arbitration and ADR.
Istanbul Chamber of Commerce
Main activities. Arbitration and ADR.
Union of Chambers and Commodity Exchanges of Turkey
Main activities. Arbitration and ADR.
General Directorate of Legislation Development and Publication
Description. The official website maintained by the General Directorate of Legislation Development and Publication, Prime Ministry of the Republic of Turkey. It contains up-to-date information on all kinds of applicable legislation together with the abrogated laws. All information provided on this website is in Turkish. There is no official or formal English language translations of the relevant legislation.
Pelin Baysal, Partner Corporate and Commercial Law Department
Gun + Partners
Professional qualifications. Turkey, Solicitor; LL.M Ruprecht-Karls University; L.B Ankara University Faculty of Law.
Areas of practice. Commercial and corporate law matters with a special focus on dispute resolution and arbitration, in addition to insurance and mergers acquisitions.
Recent transactions. Advising on large-scale arbitration matters and represented international and local clients on high-value commercial disputes arising out of construction agreements and share-purchase agreements.
Languages. Turkish, English, German
Professional associations/memberships. Istanbul Bar; Secretary of IBA Insurance Committee as the only Turkish member.
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