Foreign Arbitration And Precautionary Attachment

In cases where the parties have agreed on foreign arbitration, the Competency of the Turkish Courts to grant precautionary attachments before the commencement of or during the arbitration proceeding is of great importance in international arbitration.

The decisions granted by foreign courts or arbitral tribunals need to be recognized to become enforceable in Turkey by means of a decision to be ruled by the Turkish courts in a separate legal action called “enforcement”.

However, the enforcement of precautionary attachment decisions granted by foreign arbitral tribunals is not possible in Turkey due to their preventive nature and temporary character. Thus, this impossibility to enforce the precautionary attachment decisions granted by foreign arbitral tribunals against the receivables or the assets of the parties in Turkey may result in hiding of or transferring to another location or a third party of the assets by the opponent party.

According to paragraph 3 of Article (1) and to Article (6) of Turkish International Arbitration Law No. 4686 (the “IAL”), requesting a precautionary attachment decision from the Turkish courts, either before the commencement of or during an arbitration proceeding outside Turkey, does not constitute a contradiction with the arbitration agreement, as stated in the decisions of the Appeal Court and as accepted by the Turkish legal doctrine. In this respect, it is well understood that the Turkish law provides a temporary protection to the parties to a foreign arbitration proceeding with regards to their rights and receivables in Turkey until the completion of the arbitration proceeding.

In the light of the above, according to the Turkish law doctrine and established practices of the Appeal Court, commencement of an arbitration proceeding abroad does not abolish the jurisdiction of the Turkish courts to grant a precautionary attachment decision as a temporary legal protection measure. Within the framework of this understanding, it is possible to state that; in case an application is made to the Turkish courts for precautionary attachment in respect of assets or receivables in Turkey, either before the commencement of or during an arbitration proceeding; the Turkish courts should grant a precautionary attachment decision without any limitation applied to its jurisdiction, which may arise due to the designation of a foreign arbitration tribunal by the parties, provided that the courts are convinced on the presence of the conditions set out in the law to grant a precautionary attachment are in place.

As to the legal procedures to follow with regards to the completion of the precautionary attachment decision, in case the precautionary attachment is granted before the commencement of the arbitration proceeding, the arbitration on the merits should be commenced at the arbitration tribunal, which has been designated as the seat of arbitration, within 30 days as of the date of the precautionary attachment decision. Otherwise, according to Article 10/(A)-(2) of the IAL, the precautionary attachment decision becomes void automatically.

In brief, in case the place of arbitration designated to be out of Turkey, it may well be said that, the competency of the Turkish courts to grant a precautionary attachment decision, both before the commencement of or during an arbitration proceeding is accepted under the light of the Turkish law doctrine and the well-established decisions of the Turkish Appeal Court. In case a precautionary attachment is granted before the commencement of the foreign arbitration proceeding, the arbitration proceeding on the merits should be initiated at the competent arbitral tribunal within 30 days as of the issuance date of the precautionary attachment decision. Otherwise, the precautionary attachment decision automatically becomes void.

Very recently, while an arbitration proceeding was being held in England, our firm applied to the Turkish Court requesting a precautionary attachment decision against the debtor. The local Turkish court accepted our application and granted a precautionary attachment decision against the debtor within the framework of the reasons we have stated hereinabove. Thereafter, the debtor objected the precautionary attachment decision upon which the local court insisted on its decision. Then, the debtor appealed such decision of the local court whereas the Court of Cassation rejected the appeal reasons while approving the decision of the local court in favour of our client.

2018-10-25T23:41:07+00:00