Commercial Arbitration

Last verified on Tuesday 28th March 2023

Commercial Arbitration: Türkiye

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1. Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?

Turkey

Turkey is a party to the New York Convention (NYC), which entered into force on 30 September 1992. Article 90 of the Constitution of the Republic of Turkey (Constitution) attributes the force of law to the international treaties that have duly entered into force. Accordingly, NYC is a force of law with precedence over the national arbitration-related legislation under the explicit primacy provisions therein.

Turkey made two reservations in accordance with article I(3) of NYC, and those reservations are still in effect:

  • reciprocity reservation: NYC applies to the recognition and enforcement of the arbitral awards made only in the territory of another contracting state.
  • commercial reservation: NYC applies only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under its national law.

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2. Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?

Turkey

Turkey is a party to the 1961 European Convention on International Commercial Arbitration, the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), the 1994 Energy Charter Treaty as well as over 130 bilateral investment treaties that contain provisions on recognition and enforcement of awards.  

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3. Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?

Turkey

International arbitration and domestic arbitration are regulated under two main pieces of legislation, which are based on the UNCITRAL Model Law.

The Turkish International Arbitration Law No 4686 (IAL), which applies:

  • to the disputes with a foreign element where Turkey is the designated seat of arbitration; or
  • where the parties, arbitrator or tribunal have agreed that IAL will apply.

The Turkish Code on Civil Procedure No. 6100 (CCP) (in particular, the 11th section, articles 407 to 444), which applies:

  • to the disputes with no foreign element within the meaning of IAL; and
  • where Turkey is the designated seat of arbitration.

Between international arbitration governed by IAL and domestic arbitration governed by CCP, the foreign element draws the line. A foreign element exists if:

  • parties have their domiciles, habitual residences or places of business in different countries; or
  • in a country different from:
  • the country where the seat of arbitration is located; or
  • the country where a substantial part of the obligations arising from the underlying contract is performed or the dispute has the closest connection with.
  • a shareholder of the company that is a party to the underlying contract has brought foreign capital into Turkey in accordance with the legislation regarding incentives for foreign capital or a loan or guarantee agreement is needed to be signed for the execution of the underlying contract; or
  • the underlying contract or legal relationship procured transfer of capital or of goods from one country to another (IAL, article 2).

Further, Turkish Private International and Procedural Law No. 5718 (PIL) contains provisions regulating the recognition and enforcement of awards. PIL applies where NYC is not applicable or silent.

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4. What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?

Turkey

The number of bodies offering arbitration services as well as the quality of those services has seen a significant increase in the past decade. Among others, the Istanbul Arbitration Centre (ISTAC), which was established in 2014, and the Istanbul Chamber of Commerce Arbitration and Mediation Centre, which was established in 1979, offer institutional arbitration services for both domestic and foreign parties at international standards.

Further, some commercial institutions such as the Union of Chambers and Commodity Exchanges of Turkey, the Chambers of Commerce of Ankara and İzmir, the Chamber of Shipping, offer arbitration services.

All those bodies act as appointing authorities.

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5. Can foreign arbitral providers operate in your jurisdiction?

Turkey

Foreign arbitral institutions may freely operate in Turkey.

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6. Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with, and supportive of, the law and practice of international arbitration?

Turkey

A specialist court handling arbitration-related matters does not exist. However, first instance courts and regional appellate courts located in megacities as well as the Court of Cassation (CoC) are familiar with arbitration and their approach has been increasingly getting more supportive to arbitration.

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Agreement to arbitrate

7. What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?

Turkey

The most essential requirement for a valid and enforceable arbitration agreement is a clear consent of the parties to resolve the disputes though arbitration in a final and binding manner. Any other elements such as seat of arbitration, language of proceedings, governing law, number of and procedure for appointment of arbitrators are not mandatory but recommended.  

A very common pathology resulting in invalidity of the arbitration clauses is reference to the jurisdiction of both national courts and the tribunal at the same time. In such cases, Turkish courts, including CoC, consider that the consent of the parties to resolve the dispute in a final and binding manner through arbitration is not clear and they hold their jurisdiction.

As to formal requirements, an arbitration agreement must be in writing. Written form is satisfied if:

  • arbitration agreement is recorded in a document mutually signed by the parties, or a communication instrument exchanged between the parties such as letters, telex, fax or into an electronic environment; or
  • defendant, in its statement of defence, did not object to the existence of the arbitration agreement alleged by the claimant in the statement of claim; or
  • parties refer to a document containing an arbitration clause to make such a document an integral part of the main agreement.

Further, a special proxy with explicit powers to conclude an arbitration agreement on behalf of the clients is required for representatives (article 504, the Turkish Code of Obligations; article 74, CCP). To clarify, such a requirement is not sought for representatives acting as a corporate body of legal persons.

Another formality may arise from the Law No. 805 on the Mandatory Use of Turkish for Financial Institutions (Law No. 805), which requires Turkish companies and institutions to use Turkish for any agreements entered into in Turkey. Further, foreign companies and institutions must use Turkish in their transactions with Turkish parties. Otherwise, the agreement cannot be relied on by the relevant companies and institutions. For a long time, those provisions have resulted in invalidity of arbitration agreements drafted in a foreign language. Although the Court of Cassation clarified in its recent decisions that where an element of foreignness exists under IAL, Law No. 805 does not apply, even between two Turkish companies (CoC, 15th Civil Chamber, decision dated 2 October 2020, file No. 2020/1714, decision No. 2020/2652). To be on the safe side, it is still recommended to draft arbitration agreements in Turkish where a Turkish party is involved.

Finally, arbitration agreements may partially or wholly cover both existing and future disputes arising from an existing legal relationship (IAL, article 4/1; CCP, article 412). However, a vague agreement covering any future disputes that may arise between the parties under any relationship would not be valid.

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8. Are any types of dispute non-arbitrable? If so, which?

Turkey

Disputes that are related to in rem rights arising from immovable properties located in Turkey and disputes that are not subject to free will of the parties are not arbitrable (IAL, article 1/4; CCP, article 408). Accordingly, family law, administrative law (except for disputes arising from concessions contracts), criminal law disputes, consumer disputes, bankruptcy disputes, employment disputes, ex parte proceedings (such as recourse for certificate of inheritance, change of name) are not arbitrable.

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9. Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?

Turkey

An arbitration agreement, in principle, only binds the parties thereto. However, in some exceptional circumstances, third parties are also deemed to be bound through extension of the arbitration agreement. Those are, inter alia, succession, arbitration clauses incorporated by reference, lifting of the corporate veil, third-party beneficiary contracts, transfer of bill of lading, assignment of claims, guarantee claims, etc.

There are no specific provisions relating to joinder or intervention of third parties under IAL and CCP. To the extent that the arbitration rules, laws applicable to the procedure as agreed by the parties or the arbitration agreement allows, third parties can participate in the arbitration process.

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10. Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?

Turkey

There is no specific provision regulating consolidation of separate arbitral proceedings. However, if the arbitration rules, laws applicable to the procedure as agreed by the parties or the arbitration agreement allows consolidation, the tribunal must respect such choice of the parties.

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11. Is the "group of companies doctrine" recognised in your jurisdiction?

Turkey

The mere existence of a group of companies does not automatically result in extension of arbitration clause to the other group companies.

However, piercing the corporate veil based on the good faith principle (article 2, the Turkish Civil Code No. 4721) and trust liability of the parent company (article 209, the Turkish Commercial Code No. 6102) may serve as a basis to extend the arbitration clause to the group companies in exceptional circumstances.

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12. Are arbitration clauses considered separable from the main contract?

Turkey

Separability is a well-established principle in Turkish law, according to which the arbitration clause remains intact even if the main contract is invalid or non-existent.

Parties cannot object to the arbitration agreement by raising invalidity of the underlying contract (IAL, article 4/4; CCP, article 412/4). Accordingly, a decision by the tribunal rendering the underlying contract null and void, does not result automatically in the invalidity of the arbitration clause (IAL, article 7/H; CCP, article 442).

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13. Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal's jurisdiction and competence?

Turkey

The principle of competence-competence is recognised. A tribunal can decide on its own jurisdiction, including any objections related to existence or validity of the arbitration agreement.

Tribunal shall deal with jurisdictional objections as preliminary issues and if it holds its jurisdiction, the arbitral proceedings will continue (IAL, article 7/H; CCP, article 442). The tribunal’s decision on jurisdiction may be challenged along with the final award through a setting aside application or objection to the recognition and enforcement of the award.

Courts’ review comes into play when a party initiates proceedings before a court despite the existence of an arbitration agreement. In such a case, the party relying on the arbitration agreement may lodge an arbitration plea before the national court, among its preliminary objections to be raised in the reply petition. The national court will conduct a limited review on the validity of the arbitration agreement (IAL, article 5; CCP, article 413). Unless the arbitration agreement is null, invalid or unenforceable, the court must accept the jurisdictional objection and dismiss the case on procedural grounds. If the objection is not raised in a timely manner, the respondent will be deemed accepted the jurisdiction of the Turkish courts.

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14. Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?

Turkey

An arbitration agreement must contain an explicit consent of the parties to resolve the dispute through arbitration in a final and binding manner. In that regard, avoiding pathological clauses containing reference to both national courts and arbitration would be likely to result in the invalidity of the arbitration agreement, set aside of the award or refusal of enforcement.

Further, to avoid any delay and complications in the proceedings, it is strongly advised that the parties should agree on the basic elements such as seat, language and governing law of arbitration. Otherwise, any application to the national courts for assistance may cause significant delays in the proceedings.

It is worth noting that one should be mindful of the long-running debate arising from Law No. 805 requiring mandatory use of Turkish in agreements among Turkish parties and transactions with Turkish parties while drafting arbitration agreements with Turkish parties.

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15. Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?

Turkey

Institutional international arbitration is more common than ad hoc arbitration. ISTAC is becoming very popular among Turkish parties. In particular, where a state entity is involved, recourse to ISTAC arbitration is highly encouraged by the government. In particular, the Turkish Public Procurement Authority included an optional ISTAC clause in the standard contracts annexed to the Regulations on the Implementation of Public Procurements, effective as of 19 January 2018.

In ad hoc international arbitrations, UNCITRAL Rules are commonly used.

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16. What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.

Turkey

Neither IAL nor CCP specifically regulates multi-party arbitrations, which usually give rise to issues related to the constitution of the tribunal in terms of equal participation in appointment of the arbitrators. Accordingly, the parties are strongly advised to adopt rules ensuring equal participation in multi-party arbitrations or explicitly agree on the procedure for constitution of the tribunal in the arbitration agreement. Otherwise, in the case of any disagreement among the parties acting on the same side, the competent court will appoint the arbitrator upon request of a party.  

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Commencing the arbitration

17. How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?

Turkey

An arbitration is deemed to have been initiated on the date on which:

  • a request made by the claimant to either the competent court or the appointing authority for appointment of arbitrators; or
  • (if the arbitrators are to be appointed by the parties) a notice by the claimant is sent to the counterparty to inform it of the appointment and requesting it to appoint the other arbitrator; or
  • (if the arbitrators are namely designated in the arbitration agreement) the request for arbitration is sent by the claimant is received by the respondent (IAL, article 10/A; CCP, article 426).

The statute of limitations is subject to the law applicable to the substance of the case. It varies depending on the nature of the claim under Turkish law. The general statute of limitations applicable to contractual claims is 10 years, unless otherwise provided by law.

An important procedural time limit is filing period in case that an interim relief is obtained from the court. In that case, arbitration shall be initiated within 30 days of the court’s decision. Otherwise, the interim relief will automatically lose its effect.

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Choice of law

18. How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

Turkey

Parties may freely agree on the substantive law in their contract or subsequent to the occurrence of the dispute. Commercial usages and customs under the chosen law are also taken into consideration in interpretation and completion of the contract.

If the parties have expressly authorised it to do so, the tribunal may decide ex aequo et bono or as amiable compositeur.

In the absence of any choice of law, the tribunal shall apply the law of the State having the closest relation with the dispute (IAL, article 12/C).

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Appointing the tribunal

19. Does the law of your jurisdiction place any limitations in respect of a party's choice of arbitrator?

Turkey

Any person who has capacity to exercise his or her civil rights can act as arbitrator.

In principle, the parties are free to choose the arbitrators, except for below restrictions:

  • The number of arbitrators shall be odd (IAL, article 7; CCP, article 416/1/ç).
  • Where there is more than one arbitrator in an arbitration subject to CCP, at least one of the arbitrators shall be qualified in law and have minimum five years of experience (CCP, article 416/1/d).
  • Under article 140 of Constitution, ‘judges and public prosecutors shall not assume any official or private occupation other than those prescribed by law’. Accordingly, judges and public prosecutors cannot act as arbitrator.

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20. Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?

Turkey

Foreign citizens can freely act as arbitrator in arbitrations seated in Turkey and attend the hearings in Turkey, subject to regular visa requirements, if applicable. 

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21. How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?

Turkey

Under the default appointment mechanism (IAL, article 7; CCP, article 416):

  • only real persons can be appointed as arbitrator;
  • if a sole arbitrator is to be appointed, the arbitrator will be appointed by the competent court upon request of a party;
  • if three arbitrators are to be appointed, each party shall appoint one arbitrator and the appointed arbitrators shall appoint the third arbitrator, who will be acting as presiding arbitrator. If a party fails to appoint the arbitrator within 30 days (under IAL) or one month (under CCP) of the receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days or one month of their appointment, the appointment will be made, upon request of a party, by the competent court;
  • if more than three arbitrators are to be appointed, both parties shall appoint an equal number of arbitrators; then, the appointed arbitrators shall select the presiding arbitrator. In case of any failure in the procedure, the appointment will be made, upon request of a party, by the competent court; and
  • if the parties did not agree on the number of arbitrators, three arbitrators will be appointed.

If the agreed mechanism fails, arbitrators will be appointed by the competent court upon request of a party.

The court may hear the parties before rendering its decision, which will be final. The court takes into consideration the below criteria in the appointment:

  • parties’ agreement;
  • independence and impartiality; and
  • neutrality of nationality of arbitrator, if that parties are of different nationalities.

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22. Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?

Turkey

No immunity from suit is granted to the arbitrators. However, arbitrators, in principle, are free in their decision-making activities.

If an arbitrator fails to perform his or her duties without any just cause, shall compensate the damage suffered by the parties, unless otherwise agreed by the parties (IAL, article 7/E; CCP, article 419). In any case, the parties cannot waive liability for gross negligence or wilful conduct in advance. 

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23. Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?

Turkey

Arbitrators may order the parties to pay an advance on arbitration costs, which includes arbitrators’ fees. In the case of any failure in payment by the parties, the tribunal may stay the proceedings. If the payment is not made within 30 days of the receipt by the parties of the notification regarding stay of proceedings, the proceedings will be terminated (IAL, article 16/C; CCP, article 442).

Arbitral institutions located in Turkey offers fundholding services in arbitrations subject to their rules. Apart from those, there is not a specific mechanism for fundholding, but regular bank and fiduciary services are available.

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Challenges to arbitrators

24. On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?

Turkey

Parties are free to determine the procedure applicable to challenge of arbitrators. In principle, an arbitrator may be challenged if:

  • he or she does not possess the qualifications agreed upon by the parties;
  • there exists a reason for challenge under the arbitration procedure agreed by the parties, or
  • there exist circumstances giving rise to justifiable doubts as to his or her impartiality or independence.

Challenges shall be made within 30 days of the appointment of the arbitrator or the date on which the relevant party became aware of the circumstances giving rise to challenge.

In principle, a challenge to one or more arbitrators is decided by the tribunal whose decision can be objected to before the national courts. However, where all arbitrators or such a number of arbitrators affecting the decision quorum are challenged, the challenge must be made to the national court, whose decision will be final.

Courts do not directly rely on IBA Guidelines on Conflicts of Interest in International Arbitration. CCP’s articles and CoC’s jurisprudence on a challenge against judges provide guidance to Turkish courts depending on the particularities of the case.  

The ISTAC Arbitration Rules (article 16) provide for similar grounds for challenges that shall be submitted to the Secretariat within 30 days of the date of the notification of appointment or on which the party making the request became aware of such circumstances and facts. ISTAC’s Board of Arbitration decides on the challenges. In such a decision, IBA Guidelines may be taken into account.

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Interim relief

25. What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

Turkey

In both international and domestic arbitrations, unless otherwise agreed, tribunals are empowered to grant an interim relief upon request by a party. If one of the parties does not comply with the tribunal’s order, the counterparty may request assistance of the national courts (IAL, article 6).

In international arbitration, parties may also request the national courts to order an interim relief before or during the arbitral proceedings. Such a request does not constitute a breach of the arbitration agreement.  

In domestic arbitration, the parties may have recourse to the national courts for interim relief only under the circumstances where the tribunal is not able to act in an effective and timely manner (CCP, article 414/3). The tribunal is empowered to remove or amend interim reliefs granted by a national court.

Types of interim measures that may be granted in international arbitration are not specifically regulated. The tribunal may order any measures available under the applicable law, that it deems necessary.

Anti-suit injunctions are not recognised under Turkish law.

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26. Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?

Turkey

Tribunals and courts may order parties to provide security as an interim measure. Equally, in the arbitration agreement, parties can determine the circumstances in which the tribunal will order security for costs.

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Procedure

27. Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

Turkey

Parties can freely determine the procedural rules governing the conduct of the arbitration. However, the tribunal and the parties are expected to respect fundamental procedural guarantees, such as fair trial, due process and equality.

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28. What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?

Turkey

If the respondent does not participate in an arbitration, the tribunal will continue the proceedings. However, respondents’ failure in filing its response cannot be deemed as an admission of the claimant's allegations.

Tribunal must give a sufficient notice to the parties prior to the hearing where the consequence of non-attendance is explained. If any party fails to appear at the hearing despite that notice, the tribunal may continue the proceedings and may make the award according to the available evidence (IAL, article 11/C; CCP, article 430).

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29. What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Arbitration generally be taken into account?

Turkey

There is neither a list of admissible evidence nor specific provision relating to the value of evidence in arbitration. The tribunal can freely evaluate the available evidence. Parties are also able to agree on procedures applicable to the collection of evidence.

In international arbitration, fact and expert witness statements are largely used. Tribunals also have authority to appoint experts, order the parties to provide required information and documents to the experts or conduct on-site examinations, or both. Unless otherwise agreed by the parties; the experts, upon submission of their written or oral reports, may be summoned by the court ex officio or upon request by one of the parties to testify at the hearing. The parties have right to examine the experts and also produce their private experts.

The IBA Rules on the Taking of Evidence in International Arbitration are largely recognised and taken into account by tribunals in international arbitrations. As for the Prague Rules, those are also referenced but not as common as the IBA Rules.

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30. Will the courts in your jurisdiction play any role in the obtaining of evidence?

Turkey

Arbitral tribunals do not have coercive powers over the parties or any third parties. The tribunal and/or the parties may ask for the assistance of a national court in obtaining evidence. In that case, the national court shall apply the relevant provisions of CCP. Accordingly, if a legal benefit exists, the court may order the third parties including public authorities to produce documents, conduct on-site visits and expert examination, summon and hear witnesses (IAL, article 12/B).

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31. What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?

Turkey

Document production is not specifically regulated under IAL. However, parties are free to agree on a document production procedure. In practice, parties usually make reference to the IBA Rules on the Taking of Evidence in International Arbitration for document production.

The tribunal is empowered to order the parties to produce documents. However, such an order does not have a coercive effect on the parties and third persons. If required, court assistance may be sought by the parties or the tribunal, or both. 

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32. Is it mandatory to have a final hearing on the merits?

Turkey

Having a final hearing on the merits is not mandatory. The tribunal may decide to hold a hearing for the purposes of production of evidence, requesting clarification from experts or having verbal representation from parties. Unless parties agree not to hold hearings, tribunal will hold a hearing upon request of one of the parties (IAL, article 11/A; CCP, article 429/1).    

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33. If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?

Turkey

The choice of seat of arbitration does not require the tribunal to conduct all procedural gatherings in the seat. Unless otherwise agreed, the tribunal may convene and carry out hearings and procedural meetings elsewhere, provided that prior information is given to the parties (IAL, article 9 of IAL; CCP, article 425). 

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Award

34. Can the tribunal decide by majority?

Turkey

Unless otherwise agreed by the parties, the tribunal shall decide by a majority of its members. If an authority is given by the parties or the members of the tribunal, presiding arbitrator may decide on certain procedural issues (IAL, article 13/A; CCP, article 433).

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35. Are there any particular types of remedies or relief that an arbitral tribunal may not grant?

Turkey

Except for decisions that are binding on third parties and/or relating to non-arbitrable matters, the tribunal may grant and fashion remedies or reliefs as it deems appropriate and available under the applicable law within the scope of the arbitration agreement.

There is no specific restriction to the powers of the tribunal. However, if Turkish laws applies to the substance of the dispute, arbitral tribunal’s powers to grant punitive or exemplary damages, which are not recognised under Turkish law except for some specifically regulated instances, will be limited.

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36. Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?

Turkey

Unless otherwise agreed by the parties, dissenting opinions are permitted under Turkish Law (IAL, article 14/A/4; CCP, article 436/1(f)). In practice, however, tribunals usually decide by unanimity.

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37. What, if any, are the legal and formal requirements for a valid and enforceable award?

Turkey

Awards must be in writing and include the following (IAL, article 14/A; CCP, article 436):

  • names, surnames, titles and addresses of the parties, their representatives and lawyers;
  • grounds and legal reasoning along with the amount of compensation, if applicable;
  • place of arbitration and date of the award;
  • name, signature and a dissenting opinion, if any, of the members of the tribunal; and
  • an indication that an action for setting aside the award was available.

Further to the above, CCP requires an award to state:

  • period for setting aside application; and
  • rights and obligations imposed on each party as well as costs of arbitration.

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38. What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?

Turkey

Each party may, by also notifying the counterparty, request the tribunal to:

  • correct any material errors such as calculation and typographical errors; and
  • interpret a part or entirety of the award.

Such a request can be made within 30 days of the notification of the award to the parties in arbitrations subject to IAL, while CCP shortens the period to 15 days. Within the same time frame, the tribunal may also ex officio correct material errors in the award.

In 30 days (one month in domestic arbitration) starting from notification of the arbitral award (or any clarification, revision or completion decision following the award), parties may file a setting aside application.

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Costs and interest

39. Are parties able to recover fees paid and costs incurred? Does the "loser pays" rule generally apply in your jurisdiction?

Turkey

The tribunal shall decide on the arbitration costs in the award. Arbitration costs include:

  • arbitrators’ fees and expenses;
  • tribunal-appointed experts’ and other assisting persons’ fees and on-site inspection costs,
  • witnesses' travel and other expenses to the extent approved by the tribunal;
  • successful party's attorney fees, which are calculated by taking into account the Minimum Tariff Fee Tariff annually published by the Union of Turkish Bar Associations;
  • court fees for the applications under IAL and CCP; and
  • notification expenses.

If the parties agreed on the payment and allocation of costs, the tribunal must respect this agreement.

In the absence of any agreement, the loser pays rule shall apply. In the case of partial success of both parties, the costs shall be distributed among the parties by taking into account the degree of success of each party’s claims (IAL, article 16/D; CCP, article 442).

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40. Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?

Turkey

Interest can be included on the claim and costs. The rate will be determined in accordance with the applicable law to the substance of the dispute. If Turkish law applies, commercial parties can freely determine the interest rate. However, compound interest is forbidden under Turkish law unless there is a running account between commercial parties or a loan agreement.    

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Challenging awards

41. Are there any grounds on which an award may be appealed before the courts of your jurisdiction?

Turkey

No appeal procedure is available. Review of merits of an award by national courts is prohibited.

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42. Are there any other bases on which an award may be challenged, and if so what?

Turkey

A party that is not satisfied with the award may:

  • file a setting aside application before the competent court within 30 days; and/or
  • challenge recognition and enforcement application made by the winning party. 

Setting aside application does not allow the court to conduct revision au fond. Arbitral awards may be set aside if the below are proven by the requesting party:

  • lack of authority of persons executing an arbitration agreement or invalidity of arbitration agreement as per the law governing the arbitration or Turkish law if the parties did not choose any governing law;
  • breach of procedure envisaged by parties or IAL in the constitution of a tribunal;
  • failure to render the award in due time;
  • lack of jurisdiction;
  • infra petita or ultra petita awards;
  • procedural deficiencies affecting the merits; and
  • violation of equality principle.

Further, if the court considers ex officio that the dispute was not arbitrable and/or the award was against Turkish public order, it may set aside the award.

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43. Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

Turkey

Parties may partially or fully waive their right to file a setting-aside action once such a right has arisen (ie, upon notification of the award to the parties). However, parties whose domicile or habitual residences are abroad, may partially or fully waive their right to file a setting aside action through an explicit statement to be inserted into the arbitration agreement or a written agreement to be entered into after signing of the arbitration agreement (IAL, article 15).

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Enforcement in your jurisdiction

44. Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

Turkey

Grounds for refusal of enforcement are very similar in both NYC (article V) and PIL (article 62). However, under article V(1) of the NYC, setting aside of the award in the seat of arbitration is discretionary ground for refusal of enforcement; in other words, the court may enforce the award even this ground for refusal exists; while under article 62 of PIL, the court must refuse the enforcement if the award was set aside in the seat. Accordingly, where NYC is applicable, Turkish courts, theoretically, may enforce an award set aside in the seat. However, in practice, the courts tend to refuse enforcement in such cases.

Under both NYC and PIL, the court cannot ex officio review whether the award was set aside in the seat and the burden of proof is on the party against whom the award is invoked.

Further, existence of a pending setting aside procedure is not a ground for refusal. In that case, Turkish courts may deem the setting aside procedure as a preliminary issue to be resolved before deciding on enforcement.

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45. What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?

Turkey

Turkish courts have always given specific importance to public order. If a foreign award violates the main principles of the public policy and general ethics of the Turkish legal system, the courts have been traditionally eager to review the merits of the dispute. However, in recent decisions, it is observed that the courts have become more enforcement-friendly and tend to interpret public order narrowly (see CoC, 15th Civil Chamber, decision dated 26 September 2020, file No. 2019/2474, decision No. 2019/3640; CoC, 15th Civil Chamber, decision dated 2 October 2020, file No. 2020/1714, decision No. 2020/2652).

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46. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

Turkey

The Turkish law makes a distinction between immunity from jurisdiction and immunity from execution. Pursuant to article 49 of PIL, a state or a state entity cannot benefit from immunity from jurisdiction in legal disputes arising out of private law relations between states and private legal persons.

As to the immunity from execution, under article 82/1 of the Turkish Enforcement and Bankruptcy Law No. 2004, the state assets are non-seizable. This provision only relates to the Republic of Turkey’s assets. There is no provision regulating foreign states’ assets immunity from execution. In this regard, jurisprudence considers the nature and intended purpose of the assets. It has been accepted by CoC that a foreign state’s assets in Turkey that are not used for diplomatic or consular affairs and not dedicated to public services can be seized (see CoC, 12th Civil Chamber, decision dated 24 May 2004, file No. 2004/6469, decision No. 2004/13007) This is also in compliance with the Vienna Convention on Diplomatic Relations (article 22).

Accordingly, foreign states’, foreign state-owned enterprises’ and corporations’ assets in Turkey that are not used for diplomatic or consular affairs can be made the subject of enforcement proceedings.

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Further considerations

47. To what extent are arbitral proceedings in your jurisdiction confidential?

Turkey

Neither IAL nor CCP provides for the confidentiality of proceedings. The parties can agree to keep the proceedings confidential in the arbitration agreement or by choosing institutional rules where the proceedings are kept confidential. For example, article 14 of the ISTAC Arbitration Rules provides for the confidentiality of the proceedings and empowers the tribunal to give orders for the purposes of keeping the arbitration confidential and to take measures to protect trade secrets and other confidential information.

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48. What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?

Turkey

Evidence and submissions are not confidential and can be relied on in other proceedings, unless confidentiality is ordered by the tribunal or agreed by the parties.

In Turkey, court proceedings and documents are, in principle, open to public. Thus, awards and any supportive documents submitted to the courts within the scope of any actions filed for setting aside, recognition and enforcement, or annotation for execution are also public. However, upon request, the courts may issue an order for confidentiality provided that public morality and security, or an interest of the related parties requires confidentiality (CCP, article 28). However, such circumstances are rarely applicable to arbitration-related matters.

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49. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

Turkey

In domestic arbitration, only attorneys registered with a national bar can act as counsel. Turkish counsel bound by the Turkish Advocacy Law No. 1136 and the Professional Rules of the Turkish Bar Association. However, in international arbitration, foreign attorneys are allowed act as counsel (IAL, article 8).

Arbitrators must be independent and impartial. They are obliged to disclose any circumstances that are prejudicial to their independence and impartiality throughout the proceedings.

Further, under Turkish law, the relationship between the arbitrators and the parties are qualified as an attorney agreement. Accordingly, like an attorney, an arbitrator has to act diligently. Otherwise, he or she may be held liable for his or her acts causing damages to the parties.

Other than those, there are no arbitration-specific ethical codes regulating ethical obligations.       

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50. Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?

Turkey

Turkish arbitration system generally complies with international practice. Unusual practices are not common. It is worth noting that as a civil law country, written submissions and evidence are more powerful than oral presentations and testimonies.  

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51. Is third-party funding permitted in your jurisdiction? If so, are there any rules governing its use?

Turkey

Third-party funding is currently neither prohibited nor regulated. In parallel, Turkish courts have not yet had occasion to express their position on the nature, validity and enforceability of third-party funding agreements.

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