Transnational Litigation: A Practitioner’s Guide - Volume 1

I. INTRODUCTION

§ 27:1 Substantive and practical overview of key distinguishing issues

At the founding of the Republic, the Turkish legal system was primarily based on the legal system of Continental Europe. Over time, it developed into a unique system using the written multi-layered legislative framework of the Turkish Constitution, statutory codes, and secondary legislation as the primary sources of law. The interpretation of these primary sources of law by the courts depends heavily on both expert academic interpretation in theory and court precedents in practice as persuasive authorities. Certain controlling high court decisions also carry the force of law.

The litigation process is conducted through both written submissions and oral arguments, and includes a trial hearing and up to two layers of appellate review, even intermingling mandatory alternative dispute resolution (“ADR”) mechanisms in certain circumstances. In civil and administrative proceedings, written submissions outweigh oral arguments, whereas the opposite is true for criminal proceedings. Hearings are open to the public and any member of the Turkish Bar Association may physically access court files unless a specific confidentiality order for the lawsuit has been rendered by the court, which in practice only happens in very rare circumstances.

Moreover, in November 2020, Turkey implemented an online hearing system, which allows parties, as well as witnesses and experts, to attend hearings remotely. As of August 2022, 2475 courts nationwide have adopted the online hearing system and Turkey aims to spread this application in the near future.

X. TAKING DOCUMENTARY EVIDENCE IN SUPPORT OF FOREIGN AND DOMESTIC ACTIONS

§ 27:43 In general

The Convention on Evidence provides the general structure for taking of documentary evidence. However, the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents 1961 (the “Convention on Apostille”) provides a special and relatively relaxed procedure for taking documentary evidence with regard to certain public documents.

§ 27:44 Convention on evidence

The Convention on Evidence is directly applicable for taking of documentary evidence domestically. Instead of a summons for witnesses, a court grants an order addressing third parties for submission of documents. Third parties can only refuse submission of documents based on the same grounds as apply to refusals to testify, and provisions for compulsion for witness evidence are applicable for submission of documents. Turkey has reserved its right not to execute requests for documentary evidence for obtaining pre-trial discovery of documents being conducted in Common Law jurisdictions.

§ 27:45 Public documents; Convention on Apostille

Turkey is a party to the Convention on Apostille, and the Convention lists the types of document that are deemed to be public documents. It provides a streamlined procedure for authentication of public documents presented as documentary evidence.

According to the Convention on Apostille, the only requirement to certify the authenticity of a signature, the capacity of the person sign­ing the document, and the identity of the seal or stamp on the document is the single certification document annexed to the document by an authorized body of the issuing country. The authorized bodies to annex such a certification document in Turkey are governorships and deputy-governorships. An apostille does not validate the information and the quality of the document but only certifies the signature and correctness of the seal or stamp that the document bears.

§ 27:46 Taking documentary evidence abroad in support of a domestic action

Similar to the taking of documentary evidence domestically in sup­port of a foreign action, the taking of documentary evidence abroad in support of a domestic action is subject to same procedure for the taking of witness statements abroad.

XI. ADMISSIBILITY AND PRESENTATION AT TRIAL OF EVIDENCE TAKEN DOMESTICALLY OR ABROAD

§ 27:47 In general

The Civil Procedure Code applies in determining whether a docu­ment or witness statement taken abroad is admissible as evidence. As a rule, discovery within the meaning of the Common Law tradition is not provided for in the Turkish legal system. The parties are expected to provide or propose evidence proving the facts that they allege. However, it is possible for parties to request the court to issue writs to the parties or third persons to submit specific information or docu­ments to the case file.

Any evidence is permissible under Turkish law unless it is obtained through unlawful means. Although it also is possible to object to some witnesses on the grounds of their relationship to or a conflict with the parties, courts generally hear these types of witnesses but consider their status when evaluating the weight of their testimony as evidence. Since all witness statements are inconclusive evidence under the Civil Procedure Code, witness statements taken abroad through the procedures referred to above are admissible and treated as inconclusive evidence before Turkish courts.

However, transactions exceeding the amount of TRY 6,640 at the time they were executed may be proved only through written documentation containing the signature of the person who issued the document (signature by hand or registered electronic signature). Apostilles can be issued for documentary evidence abroad that may ei­ther be official or unofficial deeds. If an apostille is issued for a formal deed, it has the same evidentiary value as a formal deed issued in Turkey.

§ 27:48 Legal privilege

The concept of legal privilege and professional secrecy is recognized under the Attorneys Act and the Professional Rules of the various Turkish bar associations. It is prohibited for an attorney to disclose information communicated in the course of his representation (unless expressly permitted by the client), with the exception of suspicious transactions regarding money laundering and terrorism financing in certain situations.

Even when the client grants permission, the attorney is entitled to decline to disclose such information and may not be forced to be a witness involving his client’s confidences. In addition, an attorney may not be subjected to legal or criminal liability for refusing to be a witness. No distinction exists between external and in-house counsel in this regard.

§ 27:67 Immunity of state representatives from civil and criminal jurisdiction

Immunity under 1961 Vienna Convention on Diplomatic Relations

Turkey is party to the 1961 Vienna Convention on Diplomatic Relations (the “1961 Vienna Convention”), and the judicial immunity of state representatives is regulated by the Convention. According to the 1961 Vienna Convention, judicial immunity is provided, in principle, for “diplomatic agents” who are the heads of a mission or members of a diplomatic staff of the mission.

Under the 1961 Vienna Convention, the criminal immunity of diplomatic agents includes all types of actions and acts carried out by an agent. The same principle is applicable for civil and administrative judicial immunity if the exceptions as defined under the 1961 Vienna Convention are met. According to article 31, diplomatic agents may not enjoy immunity from civil and administrative jurisdiction in the case of:

1. An action relating to private immovable property situated in Turkey, unless on behalf of the sending state for the purposes of the mission;

2. An action relating to succession in which the diplomatic agent is involved as executor, administrator, heir, or legatee as a private person and not on behalf of the sending state; and

3. An action relating to professional or commercial activity exercised by a diplomatic agent in Turkey outside his official functions.[1]

The structure for judicial immunity of diplomatic agents with the exceptions referred to above is extended by article 31/3 to measures of execution and, according to article 31/2, diplomatic agents also are immune from the obligation to testify. The 1961 Vienna Convention also provides a general exception to the judicial immunity of diplomatic agents under article 32. A sending state may expressly waive the im­munity of diplomatic agents. Waiver is limited to civil or administra­tive proceedings; a separate waiver is required for execution of judgments.

Another important exception provided by the 1961 Vienna Convention is proceedings initiated by diplomatic agents. If a diplomatic agent initiates legal proceedings in Turkey, judicial immunity is not applied to the counter-claim directly related to the principal claim.

In addition, diplomatic agents and members of the family who reside with the diplomatic agent benefit from the same privileges and immunity as the diplomatic agent, if they are not nationals of Turkey. Judicial immunity is limited by the term of the diplomatic representation; it is possible for diplomatic agents to be subject to the jurisdiction of Turkish courts at the end of their term of office, if immunity for actions directly related to performance of diplomatic duties is independent from the term of office.

Immunity under 1963 Vienna Convention on Consular Relations

Turkey also is party to the 1963 Vienna Convention on Consular Relations (the “1963 Vienna Convention”). Compared to diplomatic agents, consulate officers enjoy more limited immunity from both criminal and civil jurisdiction in Turkey. Under article 43 of the 1963 Vienna Convention, consulate officers are immune from the jurisdiction of Turkish courts only in respect of acts performed in the exercise of consular functions. In addition, two major exceptions are provided under paragraph 2; judicial immunity of consulate officers is not applicable in respect of a civil action either:

1. Arising out of a contract concluded by a consular officer or a consular employee in which he did not contract expressly or impliedly as an agent of the sending state; or

2. By a third party for damages arising from an accident in the receiving state caused by a vehicle, vessel, or aircraft.

Similar to diplomatic agents, the immunity of consulate officers can be expressly waived by the sending state. Such waiver is again limited to judicial proceedings as provided under 1963 Vienna Convention. As with the 1961 Vienna Convention, if a consulate agent initiates a legal proceeding in Turkey, judicial immunity is not applied to the counter-claim directly related to the principal claim. Unlike diplomatic agents, consulate officers do not have complete immunity from the obligation to testify. The 1963 Vienna Convention limits such im­munity to the exercise of consular functions.

XVI. ARBITRATION

§ 27:68 International arbitration

The main legislation governing international arbitration in Turkey is the International Arbitration Code, Act Number 4686.[2]The Code entered into force in 2001 and was modelled on the United Nations Commission on International Trade Law (UNCITRAL) Model Law of 1985 and the international arbitration section of the Swiss Federal Private International Law of 1987.

The International Arbitration Code governs arbitrations seated in Turkey and that involve a foreign element. Even if the seat of arbitration is not in Turkey, the parties can contractually subject the arbitration to the International Arbitration Code to the extent that the “foreign element” is present. The following circumstances are qualified as constituting a foreign element under article 2 of the Code:

1. The usual residence, domicile or place of business of any party to the arbitration agreement is located outside Turkey;

2. The usual residence, domicile, or place of business of any party to the arbitration agreement is located in a country not the place of arbitration designated in the arbitration agreement or determined on the basis of this agreement;

3. The usual residence, domicile, or place of business of any party to the arbitration agreement is located in a country not the place where the majority of the obligations under the main agreement will be performed or the place to which the subject of the dispute is primarily, at least one of the shareholders of a company that is a party to the main agreement containing the arbitration clause has injected foreign capital into the company under applicable foreign investment legislation, or when a loan or a guarantee agreement is executed in order to bring foreign investment to Turkey for performance of the relevant agreement; and

4. The main agreement or legal relationship constituting the basis of the arbitration agreement permits the flow of capital or goods from one country to another.

§ 27:69 Domestic arbitration

Domestic arbitration, among local parties and not involving a foreign element, is addressed within the scope of the Civil Procedure Code. The arbitration section of the Civil Procedure Code resolved long-standing conflicts between the International Arbitration Code and the arbitration section of the now defunct Civil Procedure Code of 1927.

The current Civil Procedure Code aligned itself with the International Arbitration Code and, in turn, the UNCITRAL Model Law. Its arbitration section regulates domestic arbitral procedures and the enforcement of domestic arbitral awards in an attempt to encourage domestic arbitration in Turkey.

§ 27:70 Foreign arbitration and enforcement of foreign arbitral awards

The recognition and enforcement of foreign arbitral awards is regulated, under the Code on International Private Law and Procedure, Law Number 5718, which entered into force in 2007 and replaced the old International Private Law and Procedure Number 2675, which had been in force since 1982.

The main difficulty associated with arbitration in Turkey has long stemmed from the fact that international and domestic arbitration and the enforcement of international and domestic arbitral awards are addressed under separate legal frameworks with conflicting regulations. The problem was addressed by the legislature through drafting domestic arbitral procedures and enforcement mechanisms in line with the provisions of the International Arbitration Code and Law Number 5718.

§ 27:71 Arbitral institutions

The Istanbul Chamber of Commerce Arbitration Centre (ITOTAM) and the Istanbul Arbitration Centre (ISTAC) are the major arbitral institutions in Turkey as mentioned above. ITOTAM provided its first Arbitration Rules in 2014 and updated them in 2021. ITOTAM considered the UNCITRAL 2010 Arbitration Rules and other modern arbitration rules, such as the International Chamber of Commerce (ICC) Arbitration Rules (2012), the VIAC Rules of Arbitration, and the Swiss Rules of Arbitration when drafting its rules.

ITOTAM announced the Arbitration Rules for Emergency Arbitration and Arbitration Rules for Small Claims (expedited arbitration) as of 14 April 2016.

Despite the existence of an institutional arbitration mechanism before ITOTAM, the government decided to adopt a new approach towards arbitration in 2014 and attributed importance to the establishment of a new international arbitration institution known as ISTAC.

In line with the approach adopted by the government, the Code on ISTAC was passed into law on 20 November 2014, published in the Official Gazette on 29 November 2014 and entered into force on 1 January 2015. The general assembly of ISTAC consists of 25 members from 14 various governmental organizations, such as the Capital Markets Board, the Union of Chambers and Commodity Exchanges ofTurkey, the Union of Turkish Bar Associations, and non-governmental organizations. ISTAC introduced the ISTAC Arbitration and Mediation Rules on 26 October 2015. The Rules are based on several international arbitration rules, such as the ICC, AAA and LCIA Rules. ISTAC Arbitration also provides emergency arbitration and fast track arbitration.

ISTAC published the rules governing “Mediation-Arbitration,” an alternative dispute resolution procedure which has the characteristics of both mediation and arbitration, in November 2019. The new dispute settlement mechanism, as also referred to as Med-Arb, will enable the use of both mediation and arbitration, two different dispute resolution mechanisms, in two stages of the same proceeding. This two-tier dispute resolution mechanism will make it easier for commercial disputes to be resolved. In this Mediation-Arbitration Dispute Resolution Model, which is the first of its kind in the world to be regulated by written rules, parties will first try to resolve their disputes with mediation, and if they cannot settle, arbitration will be initiated to resolve the dispute.

In addition, ISTAC published its “Online Hearing Rules and Procedures,” enabling participants to conduct hearings through teleconference or video conference without physical attendance in or­der to minimize the spread of COVID-19. In arbitration proceedings conducted pursuant to the ISTAC Rules, hearings or meetings may be conducted through video conference or teleconference upon a party’s request or when the Sole Arbitrator or Arbitral Tribunal deems appropriate. Although the ISTAC Online Hearing Rules and Proce­dures were published during the COVID-19 pandemic, the relevant rules have been permanently introduced. Unlike judicial proceedings, the periods for ISTAC arbitral proceedings were never suspended and the Online Hearing Rules and Procedures introduced by ISTAC were therefore intended to ensure the continuity of arbitral proceedings without interruption.

§ 27:72 Arbitral tribunal jurisdiction and court interference

The arbitral tribunal may rule on its own jurisdiction, including any objections regarding the existence or validity of the arbitration agreement.[3]A plea that the arbitral tribunal does not have jurisdic­tion must be raised in, or prior to, the submission of, the statement of defense.[4]A party is not precluded from raising such plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. The arbitral tribunal will rule on the above-mentioned plea as a preliminary question and, if it should decide that it hasjurisdiction, it will resume the arbitral proceedings.[5]Such a decision by the arbitral tribunal cannot be appealed to the courts.

Court interference with the arbitral process is very limited. A court may only intervene in any dispute referred to arbitration to the extent permitted by the provisions of the International Arbitration Code (to the extent it is an international arbitration subject to that Code). If the parties agree to refer the dispute to arbitration pending a court case on the same subject matter, the court would stay the adjudication proceedings and refer the arbitration method of their choice.[6]If court proceedings in a dispute that is subject to arbitration are initi­ated, the other party may raise an arbitration objection with the court. If the arbitration objection is accepted, the court will dismiss the lawsuit on procedural grounds.[7]If any of the parties requests the court to impose a preliminary injunction or provisional attachment prior to, or during the arbitral proceedings, this will not constitute a breach of the arbitration agreement.[8]

If any of the parties fail to enforce the preliminary injunction or provisional attachment rendered by the arbitrator or arbitral tribunal, the other party may request the competent court to issue an order for preliminary injunction or provisional attachment.[9]The parties may file a request for interim protective measures in accordance with the Civil Procedure Code and the Execution and Bankruptcy Code at any stage of the proceedings.[10]The arbitrator or arbitral tribunal may seek assistance of the Court of First Instance to collect evidence.

§ 27:73 Challenging and appealing arbitration award in court

Turkish arbitration legislation (be it international arbitration as governed by the International Arbitration Code or domestic arbitration as governed by the Civil Procedure Code) excludes the possibility of any appeal on the merits of the dispute.[11]It only provides for the setting aside of an award under the limited grounds of procedure, arbitrability, and public policy, which are determined in an exclusive manner.

Application for the setting aside of an award is made to the Regional Court of Appeal.[12]If the defendant’s usual residence, domicile, or place of business is located outside Turkey, the Istanbul Civil the Court of First Instance will have jurisdiction to hear the application. The parties can appeal a decision to set aside an award in line with the provisions of the Civil Procedure Code. An appeal is limited to the legal grounds applicable to the setting aside of the award.[13]An arbitral award may be set aside by the court if:

1. A party to the arbitration agreement lacks the necessary competence;

2. The arbitration agreement is invalid under the applicable law or, if the applicable law is not agreed by the parties, under the law of Turkey;

3. The arbitrator or the arbitral tribunal was not appointed in accordance with the procedure agreed between the parties or in accordance with the international arbitration code; the award was not rendered within the agreed or statutory term for arbitration;

4. The arbitrator or the arbitral tribunal did not have jurisdiction to hear the dispute;

5. The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, the award contains decisions on matters beyond the scope of the submission to arbitration or the arbitrator or the arbitral tribunal has exceeded its competence;

6. The arbitral proceedings were not carried out in accordance with the procedures agreed between the parties or, failing such agreement, in accordance with the procedures of the international arbitration code and this failure had an impact on the merits of the award;

7. The principle of equality of the parties was not respected;

8. The subject matter of the dispute is not capable of settlement by arbitration under Turkish law; or

9. The award is in conflict with Turkish public policy.[14]

An action for setting aside the award should be filed before the competent Regional Court of Appeal within 30 days from delivery of the award or, as case may be, of the correction, interpretation of complementary award.[15]The court will give priority to this action and conclude it urgently. Pursuant to the International Arbitration Code, the parties may partially or fully waive their right to file an action to set aside the award.[16]However, parties residing abroad may fully waive their right to file a setting-aside action only by an express dec­laration in writing or as provided by the arbitration agreement.[17]

§ 27:74 Power to order interim measures

Upon request by one of the parties, the arbitral tribunal may issue a preliminary injunction or attachment during the arbitral proceedings. Since the possible damages that the other party might incur because of a preliminary injunction or attachment should be secured, the International Arbitration Act permits the arbitral tribunal to demand an appropriate guarantee or security from the requesting party prior to rendering a preliminary injunction or attachment.[18]

The International Arbitration Act limits the arbitral tribunal’s authority to order a preliminary