Turkish Law Blog

Application of the New York Convention 1958: Is Turkey Arbitration-Friendly Enough?

Esra Kapıcı Esra Kapıcı/ University of Aberdeen
17 March, 2019
496

It may be said that the arbitral practice suffers from the different national laws’ grounds for refusing recognition or enforcement of foreign awards across contracted parties to New York Convention 1958. It is fair to say that, nowadays the states are competing to become the most attractive place for international arbitration in growing their potential in international transactions and business investments by making an effort to improve their arbitration rules with very less restrictions and intervening.

This article will present the practice of the Convention in Turkey, the approach of Turkish arbitration regulations for the recognition and enforcement of the foreign arbitral awards, the consideration as to whether the interpretation of public policy by Turkish judges is legitimate and finally, the arbitration friendly attempts made by Turkish government.

Özsunay and Özsunay say that in Turkey, Turkish International Arbitration Law (TIAC) which is dependent “on the UNCITRAL Model Law on International Commercial Arbitration” and also affected “by the Swiss Federal Private International Law” has diminished the court intervening within the arbitral proceedings and provided a clear procedure regarding “the enforcement of international arbitral awards made in Turkey.”[1] TIAC Article 1 (II) sets out two requirements regarding the scope of this law as follows,  “the place of the arbitration” to be decided as Turkey or the provisions of AIA to be determined as “the governing law [of arbitration.]”[2]

Enforcing the foreign arbitral awards in Turkey shall be regulated under Act on Private International Law and Procedural Law (APIL) in accordance with Article 1.[3] The award has not been binding or set aside falls under the scope of Article 62 (1) (h) Act on Private International and Procedural Law by adopting the Convention and it specfies that if the award has been rendered, it is unable to be recognised and enforced.[4]

Özsunay and Özsunay states that in relation to Article V (2) (b) New York Convention, the public policy containing “all mandatory rules of law and the rules” has been established as a basis of refusing “recognition or enforcement of awards” under Turkish law, however has not been clarified as a rule and shaped by “doctrine and judicial practice.”[5]

Since the publication of Turkish law on arbitration is not well established, here is a case without clarification of the names of the parties, in X v Y dealing with a licensing agreement consented only in English between a Turkish firm and a Swiss firm and Swiss law has been determined as governing law.[6] Under the same X v Y judgement, the enforcement of the arbitration has been refused by Turkish Court of Cassation by reason of lacking the national language necessity for commercial companies “under Law No. 835” and the contract has been enforced except its arbitration clause.[7]

Considerations as to whether the application of public policy in Turkey in international arbitration practice is fair, might be made since the notion of public policy containing a wide range of aspects related to the citizens and country is not specified under law which may refer to a huge discretionary power of the judges. With the just mentioned X v Y in mind, applying the rule regarding the mandatory use of Turkish may be deemed outdated when considered the effects of international trade and prevailed effect of English upon the other languages.

Accordingly, it may be claimed that the interpretation of public policy is not fair in Turkey in terms of international arbitration. However, Özsunay and Özsunay say that the approach of Turkey is arbitration friendly with its efforts establishing the recommendations of UNCITRAL in terms of “the interpretation of Article II (2) and Article VII (1) of the Convention” into the arbitral practice and they further suggest that the problems caused by the judges with insufficient Convention knowledge may be solved with seminars and conferances.[8]

This being said, there are some points stated above Turkey does not have a totally arbitration unfriendly approach on recognition and enforcement of the foreign arbitral awards with its arbitration regulations, however it seems that the extent of public policy is unreasonably wide.

It can be said that the domestic public policy considerations needs to be interpreted narrower in Turkey, in this regard the revision of domestic laws may be suggested to alter the judicial attitudes of Turkish courts.


[1] Ergun Özsunay and Murat R. Özsunay, ‘Interpretation and Application of the New York Convention in Turkey’ George A. Berrman (ed), Recognition and Enforcement of Foreign Arbitral Awards: The Interpretation and Application of the New York Convention by National Courts Springer International Publishing AG 2017 964.

[2] Turkish International Arbitration Law 2001, Article 1 (II).

[3] Act on Private Intternational and Procedural Law 2007, Article 1.

[4] Act on Private International and Procedural Law 2007, Article 62 (1) (h).

[5] Ergun Özsunay and Murat R. Özsunay, ‘Interpretation and Application of the New York Convention in Turkey’ George A. Berrman (ed), Recognition and Enforcement of Foreign Arbitral Awards: The Interpretation and Application of the New York Convention by National Courts Springer International Publishing AG 2017 973.

[6]  X v. Y, Court of Cassation, 11th Civil Law Chamber, File No. 2016/5836, K. 2017/4720, dated 26/09/2017

[7] ibid.

[8] Ergun Özsunay and Murat R. Özsunay, ‘Interpretation and Application of the New York Convention in Turkey’ George A. Berrman (ed), Recognition and Enforcement of Foreign Arbitral Awards: The Interpretation and Application of the New York Convention by National Courts Springer International Publishing AG 2017 974-975.

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