Summary: This article stipulates the conditions for the enforcement of foreign arbitration awards as regulated under Private International and Procedural Law No. 5718, which do not fall far from the regulations under New York Convention on the Recognition and Enforcement of Foreign Awards, to which Turkey is a party. Further details on Turkish system and practice concerning the enforcement of foreign arbitral awards are also explained herein.
Turkey became a signatory to the New York Convention on the Recognition and Enforcement of Foreign Awards on 1 October 1992 and to the European Convention on International Commercial Arbitration on 23 September 1991. Article 90 of the Turkish Constitution provides that international conventions duly put into effect carry the force of law without any further enactment. Accordingly, Turkish courts are obliged to implement the provisions of the New York Convention. In Turkey, the domestic law relating to the enforcement of foreign arbitration awards is the Private International and Procedural Law (the “PIPL”) numbered 5718, which came into force in 2007. The provisions of the PIPL stipulating the terms and conditions of the recognition and enforcement of foreign arbitration awards, are very similar in nature to those set out in the New York Convention. Even though the obligation of the Turkish Courts to implement the provisions of the New York Convention remains, the Turkish Courts also apply the terms and conditions stipulated by PIPL. With an aim to promote the enforcement of foreign arbitration awards in Turkey, there has recently been an amendment in respect of the court charges of this action, whereby the relevant charges were abolished.
II. PECULIARITIES OF THE TURKISH SYSTEM
There are certain conditions and procedures to be followed in order to enforce a foreign arbitration award in Turkey:
- Requirement for separate legal action: In order to enforce foreign arbitration awards in Turkey, a separate legal action for recognition and enforcement must be pursued against the defendant. It should be noted, however, that this procedure does not involve a re-examination of the merits of the relevant dispute. Recognition and enforcement request may be refused, at the request of the party against whom the award is invoked, by the local courts, if the other party furnishes to the relevant local court proof on any of the grounds for rejection set out under Article V of the New York Convention and/or Article 62 of the PIPL, which are as follows:
- an arbitration agreement has not been made or an arbitration clause has not been placed in the principal agreement,
- the arbitration award is in breach of public morality or public policy,
- in accordance with Turkish law, the dispute subject to the arbitration award is not possible to be resolved by arbitration (arbitrability),
- one of the parties has not been duly represented before the arbitrators and has not expressly accepted the procedures in due course,
- the party against whom the enforcement of the arbitration award has been requested was not duly notified of the appointment of arbitrators or was deprived of the opportunity to defend itself,
- the arbitration agreement or clause is null and void pursuant to its governing law or in the event that there is no such agreement in place, in accordance with the laws of the country in which the arbitration award was made,
- the appointment of arbitrators or procedure applied by the arbitrators is in breach of the agreement between the parties or in the event that there is no such agreement in place, in accordance with the laws of the country in which the arbitration award was made,
- the arbitration award is related to a matter not included in the arbitration agreement or arbitration clause or if it exceeds the scope of the arbitration clause, or
- the arbitration award is not finalised or has not become enforceable or binding in accordance with its governing law or laws of the country in which it was made or the procedure to which it is subject or the arbitration award has been cancelled by the authorities at the place in which it was made.
It is usual practice for a judge to refer the determination of the above points to court experts and obtain report(s) in this respect. If the court deems expert determination to be necessary, the recognition and enforcement of the award may be granted subject to the court’s discretion and the result of the expert determination report(s).
The length of the procedure would depend on the schedule of the court and whether the arbitral award meets all the specifications described above and certain points may affect the duration of the enforcement.
The decisions of the local courts regarding the enforcement of foreign arbitration awards are subject to appeal.
- Original and valid arbitration agreement or arbitration clause:The existence of a valid agreement or clause between the parties is regarded as a crucial factor in order for the relevant parties to reach a consensus upon arbitration. Under Turkish law, an arbitration agreement or clause should be in writing in order to be valid. Article II-2 of the New York Convention also permits a series of exchanges of letters or telegrams between the parties to constitute a written arbitration agreement.
- Capacity: In line with article V of the New York Convention, the PIPL article 62/1-a stipulates that the enforceability of an arbitral award is subject to the existence of a valid arbitration agreement or a valid arbitration clause within the agreement between the parties. The validity 3 of an arbitration agreement or arbitration clause depends upon the capacity of the parties who entered into such agreement or arbitration clause.Pursuant to Article 54 of the Turkish Code of Obligations, in case the arbitration agreement or the agreement containing an arbitration clause is signed by a representative of the company or by virtue of a power of attorney, the document granting the authorization must include a clear wording stating that the representative is authorized to enter into arbitration agreements in the name of its principal.
- Finalized award/ binding award:Turkish law recognizes the principle of a defendant’s right to exhaust all means of defence before any process of law having been enforced against the defendant. Under the PIPL, an enforceable arbitration award must be final. On the other hand, the New York Convention requires that an arbitration award be binding. The Turkish courts leave this issue to be decided in accordance with the rules of the arbitration forum or the chosen law of the parties.
- Public policy:Turkish public policy is considered as a determining factor for successful enforcement of a foreign arbitration award. One of the common issues precluding successful enforcement of a foreign arbitration award is lack of completion of service proceedings against the defendant party. In Turkey, a defendant can successfully deny receipt of notice of enforcement proceedings and as such, would give rise to a complete defence if successfully invoked. The burden of proof regarding service under Turkish law rests with the plaintiff.
- Subject matter:The subject matter of the dispute heard in the arbitration hearing must not be subject to the exclusive jurisdiction of Turkey, e.g. dispute over a heritable Turkish property or usage of a Turkish registered trademark.
III. ENFORCEMENT PROCEDURE
- Competent Court
Local civil courts shall have jurisdiction in relation to the enforcement of foreign arbitration awards. Article 60(2) of the PIPL stipulates that enforcement of foreign arbitration awards may be requested by a petition from the civil court of the location agreed upon in writing by the parties. In the event that there is no such agreement between the parties, the court at the location where the party against whom the award was made is resident in Turkey or if such party is not resident in Turkey, the court at the place where the goods against which the enforcement will be made are located shall be considered to have jurisdiction.
In summary, in the event that the party against whom an arbitration award has been made is resident in Turkey, the court authorised at the place of residence of such party shall have jurisdiction. Otherwise, in the event that the mentioned party has assets in Turkey, the court at the place in which such assets are located shall have jurisdiction.
2. Application Procedure
The party requesting enforcement of a foreign arbitration award shall make an application to the court by submitting a petition, containing the details stipulated by law.
Article 61 of the PIPL stipulates that the following documents should be annexed to the petition:
- the original or duly certified copy of the arbitration agreement or arbitration clause,
- the original or duly certified copy of the duly finalised or enforceable or binding arbitration award,
- translated and duly certified copies of the documents set out in (a) and (b) above.
In the event that there are no bilateral agreements between Turkey and the country where the arbitration award is made and/or the relevant country is also not a party to the Hague Convention on Civil Procedure, if the plaintiff is a foreign party (non-Turkish), it will be required to pay a certain security amount in order to initiate legal action (cautio judicatum solvi). This security covers the amount to secure the legal charges, opponent party’s lawyer’s fees and other court proceeding charges. There are no ratios or fix amounts for this security and the amount of security is in the discretion of the court.
Recently, an Omnibus Bill named Law on Amendment in Certain Laws for Improvement of Investment Venue, numbered 6728, was enacted and published on the Official Gazette dated 9 August 2016. The mentioned Omnibus Bill brought a significant amendment in respect of the court charges payable in actions for enforcement of foreign arbitration awards. Accordingly; effective as of 9 August 2016, pro-rata court charges will no longer be payable in these actions.
The information given in this note are aimed only at providing information, and does not serve as a legal opinion under any circumstances.