Akıncı Arbitration Newsletter - July 2023

US Supreme Court Ruled that Creditors of Foreign Arbitral Awards May Bring Claims Based on RICO

The US Supreme Court issued an important decision concerning foreigners who want to collect their receivables by enforcing the relevant arbitral award in the US. In its decision dated 22 June 2023, the Supreme Court concluded that non-US citizens may also bring claims based on the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

In the case at hand, the claimant, a Russian national, won an LCIA arbitration against the respondent, a Russian national. The claimant enforced the arbitral award in California district court and the respondent's assets in California were frozen. In the meantime, the respondent won another arbitration case and tried to hide the receivable awarded in its favour in off-shore entities in order to avoid being affected by the measures in the US.

Thereupon, the claimant filed a lawsuit in the California district court based on the RICO provisions, and the case was dismissed. The court of first instance held that RICO could only be applied to domestic injury to assets in the United States and that the requirement of domestic injury was not fulfilled since the claimant was a Russian citizen.

Upon the appeal of the decision, the Court of Appeal ruled that even if the creditor is not a US citizen, the domestic loss requirement will be fulfilled in a situation where the receivable cannot be collected in the US. The Supreme Court also found this approach appropriate and upheld the decision.

The Court of Cassation Ruled that Filing a New Lawsuit at the Local Court in Violation of the Arbitration Clause, after the Objection to Arbitration Was Raised in the Previous Proceedings Is Contrary to the Rule of Honesty

The claimant filed a lawsuit against the respondent in the local court, despite the arbitration clause in the construction contract. The court of first instance dismissed the case on procedural grounds due to the arbitration clause in the contract between the parties.

The claimant filed an appeal and argued that the arbitration clause was invalid, and that the respondent had to prove the arbitration agreement between the parties but failed to substantiate its defences. The claimant stated that for the validity of the arbitration agreement, the defendant should prove that the board of directors signed the arbitration agreement based on an authorisation granted by the claimant. The Regional Court of Appeal rejected the appeal on the merits. Thereupon, the claimant appealed.

In its decision dated 25 January 2023 and numbered 2023/291 E., 2023/259 K., the 6th Civil Chamber of the Court of Cassation found that the claimant had previously filed an objection for arbitration in another case that was commenced by the respondent in the local court, based on the same agreement. In this regard, the court ruled that the claimant’s objection to the validity of the arbitration agreement in the present case constituted a breach of good faith. The court further held that the respondent’s objection to arbitration was justified and that the dispute should be resolved by arbitration. The court thereby upheld the decisions of the court of first instance and the court of appeal.

What Happened in Turkish Arbitration in June 2023?

A cooperation agreement was signed between ISTAC and the Asian International Arbitration Centre.

ISTAC organised a conference titled "Best Practise of Procedural Order No. 1". The conference was moderated by Floriane Lavaud. At the conference, Prof. Dr. Ziya Akıncı, founding partner of our office, delivered a speech titled "Practical and Legal Aspects of PO 1". Dr. Anna Kozmenko informed the participants on "Ruling on Written Submissions, Exhibits and Notifications in PO 1" and Steven Finizio made a presentation on "Ruling on Document Production in PO 1". Hussein Haeri made a presentation on "Ruling on Witnesses, Expert Witnesses and the Hearing in PO 1".

Tagged with: Akıncı Law Office, Ziya Akıncı, Erdem Küçüker, Dispute Resolution, Tahkim