Sponsored briefing: An overview of recent court decisions in Turkey: Are Turkish courts becoming more pro-arbitration?

In this article, we take a look at some of the Turkish Court of Appeals decisions concerning international arbitration from 2019 onwards, with a view to identifying whether Turkey is shifting towards a more pro-arbitration approach.

Turkey is hardly known as a particularly pro-arbitration jurisdiction. Although there are a number of pitfalls in the legislation, this is not quite the reason – the International Arbitration Act numbered 4686 is, after all, based on the UNCITRAL Model Law. Turkey has been a party to the New York Convention since 1991, and as the lex specialis, the Convention prevails over the International Private and Civil Procedure Law numbered 5718 (IPPL). The IPPL, which applies to enforcement of awards falling outside the scope of the Convention, was amended to accommodate the needs of a more arbitration-friendly environment.

The Turkish Supreme Court of Appeals, however, is strict when it comes to the validity of arbitration agreements and has almost a zero-tolerance policy on pathological clauses. The same approach had naturally extended to review of arbitral awards on some occasions. However, important developments in case law occurred in recent years, including on matters regarding public policy, reviewing the merits of the case and violation of due process.

In 2019, the 15th Circuit of the Supreme Court of Appeals, overturned a decision by the Regional Court of Appeals, in which an arbitral award was set aside on the grounds that it was against public policy. The lower court decision was based on procedural issues such as the lack of an expert report, a terms of reference and a certified translation of the contract subject to the proceedings. The Supreme Court of Appeals questioned why contradiction to public policy may be a cause for annulment in the first place, and emphasised that just because an award is against certain provisions of law or the mandatory provisions, did not mean that it is against public policy. The matter should, instead, be contrary to fundamental rights, and basic values and principles of the society, to the extent that the society cannot accept it in good conscience. Issues surrounding collecting evidence did not, according to the decision, concern the public and were not against public policy. In another case, the Regional Court of Appeals dismissed the party that resisted enforcement on nearly every ground available, including on the grounds that enforcing the award would be against public policy as it ‘would place a burden the Turkish economy and the Turkish institutions’.

Courts have also adamantly refused to enter into the merits of the award in annulment or enforcement reviews. In 2019, the Supreme Court of Appeals found that the annulment review could not include a re-examination of whether the arbitral tribunal correctly found a protocol between the parties invalid. Similarly, the 19th Circuit upheld lower court decisions that refused to review not only the merits and facts but also the capacity to enter into the agreement and the service procedure, on the grounds that these would be governed by the English Arbitration Act in that particular case.

In 2020, the Regional Court of Appeals dismissed the arguments of a party that resisted enforcement by reason of (inter alia) being unable to present its case. The court decided, following a prima-facie review, that the facts of the case which were brought forward in the enforcement proceedings were evaluated by the arbitral tribunal. Another Regional Court of Appeals circuit similarly dismissed arguments of a party that resisted enforcement on the grounds that it was unable to present its case because it was not given proper notice of the proceedings. The court found that the said party did not present its case despite having been given the opportunity, and that it was not able to prove otherwise.

Turkey aspires to become an arbitration centre and it is gradually becoming well-positioned to do so. Reliability in enforcing arbitral awards and a firm stance against challenge of awards are key to promoting arbitration. There are – and there will be – decisions which may not be deemed arbitration friendly. But these will continue to be put to test in years to come, and after all, becoming ‘pro-arbitration’ does not happen overnight. However, the trend identified in this article is promising, and the aforementioned decisions are steps in the right direction.