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TURKEY 29 Jun 2010

Arbitration World 3rd edition - Turkey

Editors: Esin Law Firm Dr. Ismail G. Esin

Turkey
Esin Law Firm Dr. Ismail G. Esin 1. USE OF COMMERCIAL ARBITRATION
1.1 Describe the prevalence of commercial arbitrations as a method of settling disputes, both domestic and international.
In Turkey, commercial arbitration has become an important method as a dispute settling mechanism along with the national court system, mostly because of its objective, confidential, time saving and effective character. On one hand it is true to mention that domestic arbitration has recently grown up; on the other hand international arbitration has been the most preferred and increased part of the arbitration practice in Turkey. The simple reasoning for that is the fact that as Turkey has an important location between the continents, is open to merchandise imports and has a big potential labour force, the number of foreign direct investments has considerably increased during the past few decades. Needless to say, contractual relationships with an international character have also increased. The commercial actors in Turkey have started to insert arbitration clauses or to execute arbitration agreements in connection with contracts related to commercial transactions. Parallel to this, legal improvements and updates followed the factual background. The amendment to the Turkish Constitution enabling the large-sized concession agreements and the agreements executed with the administrative bodies to be solved through arbitration was the most significant example. The enactment of International Arbitration Law (dated 21.06.2001 and numbered 4686) (IAL), ratification of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 25.09.1991 (New York Convention), the European Convention on International Commercial Arbitration on 08.05.1991 (European Convention), and the Convention on Settlement of Investment Disputes between States and Nationals of Other States on 27.05.1998 (ICSID) enabled parties in Turkey to comfortably rely on arbitration.

2. LAW ON ARBITRATION
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2.1 What are the principal sources of law and regulation relating to domestic and international arbitration? (Describe the role of federal or state laws and relevance of court decisions.)
In Turkey, there are three principal sources of law that regulate arbitration: (i) the Turkish Code of Civil Procedure dated 18.06.1927 and numbered 1086 (the TCCP) regulating domestic arbitration; (ii) the IAL, which is applicable to disputes taking place in Turkey and having a foreign element or to disputes where the parties, the arbitrator or the arbitral tribunal choose the IAL as the applicable procedural law; and (iii) the International Private and Procedural Law dated 12.12.2007 and numbered 5718 (the IPPL) which applies to the enforcement and the recognition of the arbitral awards where the New York Convention is not applicable. As a civil law country, in Turkey court decisions are not binding in principle except for
the Unification of the Case-law Decisions of the Turkish Supreme Court. These decisions are binding as a law. On the other hand, Supreme Court decisions generally lead the decision-making process of the courts, especially where there is no relevant regulation by the laws.

2.2 List and briefly describe relevant arbitration statutes, international treaties and conventions.
The IAL is a detailed law regulating the international arbitration proceedings falling under its scope. The IAL is enacted under the strong influence of UNCITRAL Model Law and Swiss International Arbitration Law. However, both the structure and the content of IAL differ from the above-mentioned laws. Turkey ratified the New York Convention on 25 September, 1991. Therefore, the recognition and enforcement of foreign arbitral awards are settled under the New York Convention. In addition, Turkey put two reservations while ratifying the Treaty. The first reservation settles that Turkey will apply the Convention only to the recognition and enforcement of awards made in the territory of another contracting state and the second reservation states that Turkey will apply the Convention only to differences arising out of legal relationships, whether contractual or not, that are considered commercial under national law. If the award is rendered in a country that is not a party to the New York Convention, then the provisions of the IPPL shall be applied to the recognition and enforcement of the foreign arbitral award. Turkey also ratified the European Convention on 8 May, 1991 and ICSID on 27 May, 1988. Furthermore, Turkey has signed a number of bilateral investment treaties with more than 60 countries regarding the inducement and protection of the reciprocal investments and economic co-operation agreements. According to bilateral investment treaties and to the Energy Charter Treaty, Turkey consents to international arbitration mechanisms for the settlement of disputes arising from such treaties.

3. PRINCIPAL INSTITUTIONS

3.1 What are/describe the principal institutions and/or government agencies that assist in the administration or oversight of international and domestic arbitrations?
One of the principal institutions in Turkey is the Arbitration Court of Istanbul Chamber of Commerce (ACICC). The ACICC provides services for arbitration, mediation and experts according to its regulations for arbitration, mediation and arbitral expertise. In order to benefit from these services at least one of the parties has to be a member of Istanbul Chamber of Commerce or Istanbul Chamber of Industry or Istanbul and Marmara Region Chamber of Sea Commerce. Otherwise, the permission of the Board of Istanbul Chamber of Commerce is required. It is, however, appropriate to mention that the number of cases before ACICC is considerably less significant than expected. This may be explained by the fact that ACICC Rules are very strict and not very much based on the parties will, contrary to the usual arbitration practice. Additionally, Turkish Union of Chambers and Exchange Commodities (TOBB) has arbitration courts in Ankara that engage with the settlement of commercial disputes between parties. Finally, ICC Turkey Branch is an institution operating under the TOBB providing a dynamic platform for its members to find advice on the arbitrators, organising nationwide seminars and conferences on international arbitration and incorporating national committees to discuss and draft facilitating rules and reports on various subjects on international arbitration.

4. ROLE OF THE NATIONAL COURTS


4.1 What is the relationship between agreements to arbitrate and access to the courts? Is there a presumption of arbitrability/policy support for arbitration? Will the courts stay court actions in favour of agreements to arbitrate?
Article 5 of the IAL provides that if a dispute which is the subject of an arbitration agreement is brought before a court, the other party may raise an arbitration objection. The court analyses the validity of the arbitration agreement in hand, according to the relevant clauses in IAL. If the court accepts the arbitration objection, it rejects the case and refers the dispute to the arbitral tribunal. Similarly, should the parties agree on arbitration during the court proceedings, the court ceases the proceeding and refers the file to the arbitral tribunal to be constituted.

4.2 May an arbitral tribunal rule on a partys challenge to its own jurisdiction (competence-competence)? Need a tribunal suspend its proceedings if a party seeks to test jurisdiction in the courts?
The competence-competence principle is accepted under Turkish law. Article 7/H of the IAL provides that the arbitral tribunal may rule on its own jurisdiction including any objections with respect to the existence or validity of the arbitration clause or agreement.

According to the IAL, if a party seeks to test the jurisdiction in the courts, the arbitral proceedings are not suspended. In such case that there is a pending litigation, an arbitral award may be rendered. On the other hand, in domestic arbitration subject to the TCCP, the jurisdiction challenge to the court suspends the arbitral proceedings. The jurisdiction of the arbitral tribunal is to be decided by the court of first instance as a short case.

5. USEFUL REFERENCES
5.1 Provide a selected bibliography of the most influential publications in or relied upon in the jurisdiction books, journals, newsletters and pamphlets.
Ziya Aknc, Milletleraras Tahkim (Istanbul, 2007); Michael R. Will, Milletleraras Mal Satm Hukuku ve Milletleraras Tahkim (Istanbul, 2002); Nuray Eki, Turgut Kalpsz, Mslm Ylmaz, Milletleraras Ticari Uyumazlklarn Tahkim Yoluyla zmne likin stanbul Konferans (Istanbul, 2008); Turgut Kalpsz, Trkiyedeki Milletleraras Tahkim (Banka ve Ticaret Hukuku Aratrma Enstits, Ankara 2007); Nuray Eki, 4686 Sayl Milletleraras Tahkim Kanununa likin Yargtay Kararlar (Istanbul, 2009); Emre Esen, Uluslararas Ticari Tahkimde Tahkim Anlamasnn nc Kiilere Temili (Istanbul, 2008); Ergin Nomer, Nuray Eki, Gnseli ztekin, Milletleraras Tahkim Hukuku Cilt 1, Milletleraras Tahkime likin Mevzuat ve Antlamalar Cilt 2 (Istanbul, 2008); Feyiz Erdoan, Uluslararas Hukuk ve Tahkim (Istanbul, 2004); smail G Esin, Laurence Shore, Gerhard Wegen, Materials on International Arbitration, (stanbul, 2007); Cemal anl, Uluslararas Ticari Akitlerin Hazrlanmas ve Uyumazlklarn zm Yollar (Istanbul, 2005). www.kluwerarbitration.com

6. AGREEMENT TO ARBITRATE
6.1 Are there form and/or content requirements for an enforceable agreement to arbitrate? How may they be satisfied?
Article 4 of IAL regulates that arbitration agreements should be in written form. This is a mandatory provision. Accordingly, an agreement is deemed to be in writing: (i) if it is provided in a document signed by the parties; (ii) if it is made by an exchange of letters, telexes, telegrams, faxes or other means of telecommunication or in electronic form; or (iii) if it is made by way of an exchange of statements of claim and defence, in which the existence of an agreement is alleged by one party and not denied by the other. The arbitration agreement should also be clear, which means that the parties will should be stated expressly and their consent to arbitrate should be given expressly. For example, the parties may not choose both recourse to arbitration and to the national
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courts in case of a dispute. They also can not choose the arbitration as the primary resort and the courts the secondary resort. The will only to arbitrate should be clear. Consequently, any arbitration agreement that meets the above mentioned requirements should be enforceable under Turkish law.

7. ARBITRABILITY
7.1 Is arbitration mandated for certain types of dispute?
The principle is that parties should be free to choose to arbitrate. However in Turkey, there are a few exceptional cases where the laws foresee mandatory arbitration. The Law on the Resolution of the Disputes between the municipalities and public entities with public budgets and the municipalities and the public entities with private budget (dated 29.06.1938 and numbered 3533) and the Law on the Stock Exchange Market and the Law on the Collective Agreement, Lay off and Lock-Out are the examples where law mandates arbitration for the resolution of disputes.

7.2 Is arbitration prohibited for certain types of dispute (restraints of fundamental public policy)?
Article 1 of the IAL states the non-arbitrable disputes. Accordingly, disputes relating to rights in remover immovables in Turkey and disputes which cannot be subject to the parties will cannot be subject to arbitration either. Therefore, bankruptcy claims or disputes relating to filiation cases and employment issues are not arbitrable. On the other hand, departing from the wording of Article 1 stated above, disputes that are not related to the rights in rem over immovables may be arbitrable. The typical example for this is the disputes arising out of the rental agreements. Quite innovatively, the Turkish Supreme Court in some of its decisions has stated that the sale agreement concerning an immovable is arbitrable since it is not against the public order. However, the Supreme Court also rendered decisions underlying that the pledge for sale agreements may not be subject to arbitration since the transaction before the recording officer relates to the public order. Basically some disputes arising from or in connection with the infringement of intellectual and industrial property rights can be settled before arbitral tribunals. However, it should be noted that arbitrators are not entitled to render an award on the registration of the intellectual property rights with the relevant authorities, but are entitled to decide on the compensation in the event of an infringement of intellectual property rights. The arbitrability of the disputes arising from competition law and disputes between the shareholders and a company arising from the articles of associations of such company varies according to the dispute. The disputes related to the articles of association of a company should be settled before the national courts. The disputes related to the decisions of the Competition Board are to be settled before the administrative courts. On the other hand, disputes purely of a private and commercial nature between parties concerning competition law, such as the disputes arising out of shareholders agreements, are arbitrable. In summary, competition issues not subject to public order are arbitrable.

8. SEPARABILITY OF ARBITRATION CLAUSES


8.1 May an arbitral clause be considered valid even if the rest of the contract in which it is embedded is invalid?
The IAL addresses the separability of the arbitration agreement under its Article 7/H. Such article provides that the arbitration clause which forms an integral part of any contract shall be treated as an agreement independent from the other terms of such contract. An award by the arbitral tribunal that the mentioned contract is null and void shall not automatically entail the invalidity of the arbitration clause. Furthermore, paragraph 4 of Article 4 of the IAL expressly states that an arbitration agreement can not be objected to on the ground that such contract is not valid. The TCCP does not address the separability issue for the arbitration agreement. It only states in Article 516 that the arbitration agreement may be executed both within a contract as an arbitration clause and as an independent agreement. However, the general principle under Turkish law is that even if a clause within a contract is void, it does not affect the remaining parts validity. Therefore the arbitration clause can be considered valid even if the rest of the contract is invalid.

9. QUALIFICATION/APPOINTMENT/LIABILITY OF ARBITRATORS
9.1 Are there specific provisions regulating the qualifications of arbitrators? Are there requirements (including disclosure) for impartiality and independence, and do such requirements differ as between domestic and international arbitrations?
According to the Article 7 of the IAL, the arbitrator(s) shall at first hand be real persons. Secondly, it also states that in case the parties are unable to appoint their arbitrators or the two arbitrators can not appoint the chairman, the First Instance Court is to appoint the chairman or the arbitral tribunal. The court shall take into consideration that the arbitrators: are impartial and independent,

are nationals of a third country. (If a sole arbitrator is to be appointed and the parties are of different nationalities, the court shall also consider that this arbitrator shall be of a nationality other than those of the parties. If three arbitrators are to be appointed, the two arbitrators shall not be of the same nationality as those of the parties.)

According to the same article, the appointed arbitrator shall disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence before accepting the appointment. Moreover, the parties may prescribe any qualification that they require for arbitrators, and the court has the power to remove an arbitrator who does not have the respective qualifications required by the arbitration agreement (Article 7/C of the IAL). Likewise, if the parties authorise the court to nominate the arbitrators, then the court will also take into consideration the qualifications set forth by the parties.

Lastly, Article 7/B of the IAL regulates the procedure for the appointment of the arbitrators. The parties are free to decide on the number of the arbitrators, but the number shall be an odd number. The TCCP does not include any relevant clauses concerning the qualifications of the arbitrators to be applied in domestic arbitrations.

9.2 Are there provisions governing the challenge or removal of arbitrators? Do the courts or other jurisdictions play/have a role in any such challenge?
Pursuant to the mandatory provision ruled by Article 7/C of the IAL, the arbitrators may be challenged if: the arbitrator does not carry the qualifications agreed upon by the parties; or

the grounds for a challenge exist pursuant to the arbitration procedure agreed by the parties; or the circumstances exist that give rise to justifiable doubts as to impartiality and independence.

The parties are free to agree on the procedure for challenging an arbitrator. A party which intends to challenge an arbitrator may do so by informing the other party in writing within 30 days of the appointment of the arbitrator or after becoming aware of any circumstances for the challenge of the arbitrator. If the request for challenging the arbitrator is denied by the arbitral tribunal, a party may apply to the court within 30 days of the denial and request the mentioned decision to be set aside and the challenge to be accepted. To challenge an appointed arbitrator or all the members of an arbitral tribunal, the application can only be made to the court. The decisions of the court are final. If the court accepts the challenge, the arbitration is deemed to be terminated. In case the names of the arbitrator/s are not set forth in the arbitration agreement, new arbitrators are to be appointed. Additionally, Article 7/F regulates the withdrawal of the arbitrators. Pursuant to Article 7/F of the IAL, if an arbitrator becomes de jure or de facto unable to perform their functions or fails to act in due course, the said arbitrators mandate is terminated either with their withdrawal or with the parties agreement on their withdrawal. If a dispute arises between the parties as to whether the circumstances exist for the withdrawal of the arbitrator, any of the parties may apply to the court to request the termination of the arbitrators mandate. In this case, the decision of the court is final. Withdrawal of the arbitrator or the other partys consent for the termination of the arbitrators mandate shall not be deemed as an acceptance of grounds for the challenge of an arbitrator. According to Article 7/G of the IAL if any arbitrators mandate terminates for any reason, a substitute arbitrator should be appointed in compliance with the procedure previously applied to the appointment of the arbitrator being replaced. The arbitration period would not cease if one or more arbitrators mandate is terminated. However, if the names of the arbitrators are set forth in the arbitration agreement, or the arbitration is terminated for any other reason, the mandate of the arbitrator is also to be terminated.

9.3 Does legislation govern, or have the courts developed rules regarding the liability of arbitrators for acts related to their decision-making function?
Pursuant to Article 7/E of the IAL, unless otherwise agreed by the parties, if an arbitrator who has accepted the appointment in the arbitral proceedings abstains from performing their functions without reasonable grounds, they shall indemnify the parties for the losses arising there from. The TCCP regulates that arbitrators in the domestic arbitration proceedings have the same responsibility as judges in domestic court proceedings.

10. PARTY REPRESENTATION


10.1 Are there particular qualification requirements for representatives (counsel) appearing in the jurisdictions?
Pursuant to Article 35 of the Law on Attorneyship, pursuing a lawsuit before the tribunal is an explicit right that has been given to the Turkish lawyers. However there is an exception to this rule under the IAL. Pursuant to Article 8/B of the IAL the parties may also be represented by foreign individuals or legal persons during the arbitral proceedings. However, following the above-mentioned Law on Attorneyship these persons can not represent the parties before the state courts in relevant cases with the arbitration proceedings. On the other hand, according to the TCCP the parties must be represented by Turkish lawyers in domestic arbitration proceedings.

11. PLACE OF ARBITRATION/PROCEDURES


11.1 Are there provisions governing the place (seat) of arbitration, or any requirement for arbitral proceedings to be held at the seat?
The place of the arbitration is regulated under Article 9 of the IAL. According to the said article, the place of arbitration shall be freely determined by the parties or the arbitral tribunal if there is no agreement between the parties. Article 9 of the IAL states that the arbitral tribunal may meet at any place for its convenience, provided that it gives prior notice to the parties.

11.2 Are specific procedures mandated in particular cases, or in general?


Article 8/A of the IAL provides that the parties have the liberty to set out the procedure to be followed during arbitration proceedings provided that the procedure does not violate the mandatory provisions of the IAL. Additionally, they are entitled to refer to a procedural law, international or corporate arbitration rules. As stated above, the IAL is a law fundamentally based on the parties will. However, it is appropriate to mention here that IAL Article 7/H stipulates that the jurisdictional objection has a time limit. This objection must be raised within the parties first submissions. The jurisdiction is a preliminary matter to be handled by the arbitral tribunal. Additionally, the time limit for the application for the setting aside of the arbitral
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award is 30 days starting from the notification date. This time limit is mandatory and may not be changed by the parties.

12. EVIDENCE GATHERING


12.1 What is the general approach to the gathering and tendering of evidence at the pleading stage and at the hearing stage (production, discovery, privilege, use of witness statements etc)? Are there differences between domestic and international arbitrations?
The IAL does not have mandatory provisions in this matter; therefore the parties can freely agree on the issues regarding evidence gathering. In this respect, the parties may decide on the procedure and period of the evidence gathering, and they may even execute an evidence agreement. On the other hand, Article 12/B of the IAL provides that each party shall submit the evidence within the period of time determined by the arbitral tribunal. The arbitral tribunal may seek the assistance of the court in taking evidence. In such case the court shall apply the provisions of the TCCP. The application of the provisions of the TCCP regarding the evidence gathering is also not mandatory. Pursuant to Article 17 of the IAL, in case there is a lack of provision under the IAL, the provisions of the TCCP shall not apply to the respective case unless provided otherwise under IAL. Therefore, the arbitral tribunal is not obliged to apply the provisions of the TCCP. According to the Article 11 of the IAL, the arbitral tribunal may decide not to schedule any hearings unless it is requested by one party or the parties. The difference between the domestic arbitration and international arbitration rules concerns the application of the mandatory provisions. The TCCP states that for domestic arbitrations subject to the TCCP, the mandatory provisions concerning the evidence are also applied to domestic arbitrations, while for international arbitrations there is no such restraint. 12.2 What powers of compulsion or court assistance are there for arbitrators to require attendance of witnesses or production of documents, either prior to or at the substantive hearing? Is there a difference between domestic and international tribunals or as between parties and non-parties? Do special provisions exist for arbitrators appointed pursuant to international treaties (ie bilateral or multilateral investment treaties)? There is no provision in the IAL regulating the attendance of witnesses. The arbitral tribunal has no power to rule any third person to attend as witness. The arbitral tribunal may ask for the courts assistance for the hearing of witness as well as for the production of documents by a third party. At this stage, the court applies the TCCP as the procedural rules. Article 527 of the TCCP states that the arbitral tribunal may recourse to the court for the assistance in case the witness does not appear before the tribunal of their own will. The tribunal may also ask for assistance of the court for the production of documents.

13. INTERIM MEASURES/ROLE OF THE TRIBUNAL


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13.1 Are there special provisions relating to the granting of interim and preliminary relief? Have the courts recognised and/or limited any such authority? Do the courts themselves play a role in interim relief in arbitration proceedings?
Article 6 of the IAL regulates the interim measures and interim attachments held by the tribunals. Pursuant to the said article, a party to request before or during the arbitral proceedings an interim measure or attachment from a court or a court to grant such measure is compatible with the parties arbitration agreement. Unless otherwise agreed by the parties, the arbitral tribunal may grant an interim measure upon the request of any party during the arbitration proceedings. The tribunal may condition the granting of an interim measure on the provision of an appropriate security. An arbitral tribunal may not grant interim measures that are exclusively within the control of the governmental bodies. In addition, the tribunal cannot issue orders binding for governmental bodies or grant an interim measure against the third parties. In summary, interim measures granted by the arbitrators are not enforceable before courts and are not binding for official authorities or third parties. If a party does not comply with an interim measure rendered by the arbitral tribunal, the tribunal may ask the courts assistance upon the request of the other party. Additionally, pursuant to Article 10 of the IAL, if a party has obtained an interim measure from the court prior to the commencement of the arbitral proceedings, then the respective party must initiate arbitral proceedings within 30 days of acceptance of such interim measure. Otherwise, the interim measure is automatically annulled. The TCCP regulates that the right to grant interim measures may only be exercised by the courts and therefore the arbitral tribunal is not entitled to grant interim measures in the domestic arbitration proceedings.

14. TAXATION OF ARBITRATORS FEES


14.1 Does the state, or any of its sub-divisions, purport to tax domestically the fees of foreign arbitrators conducting hearings in the state? Is there a difference if the arbitration is seated in the state or elsewhere?
The Income Tax Law dated 31.12.1960 and numbered 193 in its Article 65 (3) regulates the taxation of incomes for arbitrators in arbitration proceedings held in Turkey. The article does not refer to the nationality of the arbitrators. Arbitration proceedings also do not fall into the scope of Article 5 of the same law, which states the exceptional activities for foreigners that are not taxed. Therefore, foreign arbitrators are subject to taxation for their income arising out of arbitration proceedings, unless there is a bilateral treaty which foresees otherwise. Turkish arbitrators eventually are subject to taxation for their business activity related to the arbitration proceedings.

15. DEFAULT PROCEEDINGS


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15.1 Are there provisions governing a tribunals ability to determine the controversy in the absence of a party who, on appropriate notice, fails to appear at or seek adjournment of the arbitral proceedings?
Article 11/C of the IAL regulates the consequences of default of a party. Pursuant to Article 11/C, if one of the parties does not attend the arbitral proceedings, the following provisions shall apply: (i) If the claimant fails to submit its statement of claim without any reasonable ground within the period of time provided, the arbitral tribunal shall terminate the arbitral proceedings; (ii) If the statement of claim is not in compliance with the requirements stated under the IAL and the non-compliance is not remedied within a period of time determined by the arbitral tribunal, the arbitral tribunal shall terminate the arbitral proceedings, (iii) If the defendant fails to submit its statement of defence, the proceedings shall continue without treating this failure as admitting the claimants allegations, (iv) If any party fails to appear at a hearing or fails to produce its evidence without a reasonable ground, the arbitral tribunal may continue the arbitral proceedings and may render an award on the basis of the evidence submitted.

16. THE ARBITRAL AWARD


16.1 Must an award take any particular form, eg in writing, signed, dated, place, the need for reasons, delivery, etc?
Pursuant to Article 13 of the IAL and 531 of the TCCP, unless otherwise agreed by the parties, an arbitral award shall be rendered by a majority of the members of the arbitral tribunal. If the parties or other members of the tribunal give authorisation, the chairman may resolve certain issues regarding the arbitration procedure such as arbitral costs, additional time requests, etc. The parties are not free to decide on the form of the award. Pursuant to Article 14 of the IAL, the award shall include: the names, titles, and addresses of the parties, their agents or attorneys, if any;

the legal grounds and the reasoning of the award and the amount of compensation if such a claim has been made; the seat of arbitration and date of the award; the names, signatures and counter votes of the arbitrator or the arbitrators; and the fact that the award may be challenged with an action to set aside.

Under the IAL, unless the parties agree otherwise, the time limit for rendering the award is one year upon the notification of the arbitral award to the parties. In such case the parties or the arbitral tribunal may request the court to extend this period. Where there is a sole arbitrator, the award shall be rendered within one year from the appointment of the arbitrator; and where there is more than one arbitrator, the award shall be rendered from the issuance of the minutes of the first meeting of the arbitral tribunal. The time period for domestic arbitration proceedings executed under the TCCP is six months.
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The arbitral tribunal shall notify parties in order for the award to become final and the parties to be able to challenge the award, if required. A request for setting aside can be initiated within 30 days starting from the notification of the award to the parties and such time limit cannot be changed by the parties.

16.2 Are there limits on arbitrators powers to fashion appropriate remedies, eg punitive or exemplary damages, rectification, injunctions, interest and costs?
Pursuant to Article 16/D of the IAL, unless otherwise agreed by the parties, the losing party bears the costs of arbitration (including the fees and expenses of arbitrators and experts, attorneys fees according to the minimum rate determined under the schedule of wages for attorneys, expenses of notifications, expenses incurred by the witnesses to the extent approved by the tribunal). If both parties partially prevail, the expenses of arbitration are apportioned between the parties according to the degree they prevail. Moreover, the IAL contains no specific reference to interest on either the costs of arbitration or principal claims. The tribunal will resolve this issue by taking into account the law applicable to the merits of the case, contractual terms regarding interest and interest on damages.

17. RECOURSE FROM AN AWARD


17.1 Are there provisions governing modification, clarification or correction of an award?
Article 14/B of the IAL regulates the correction of factual errors and interpretation of an arbitral award in whole or in part. According to the said article any party may apply to the arbitral tribunal with notice to the other party within 30 days of the notification of the arbitral award: (i) to correct any calculation or clerical errors or errors of a similar nature in the award; (ii) to request full or partial interpretation of the award. If the tribunal finds the request appropriate upon consultation with the other party, it shall correct the error in the award or shall render an interpretation of the award within 30 days of the notification of the request. The tribunal may also correct the errors on its own within 30 days of the award date. Within the same period, any party may request that the tribunal make an additional award for claims presented during the arbitral proceedings that were omitted in the award. If the arbitral tribunal finds the request appropriate it shall render an additional award within 60 days. The correction and interpretation of awards and additional awards are part of the award and therefore the parties shall be duly notified.

17.2 May an award be appealed to or set aside by the courts? If so, on what grounds and by what procedures?
The IAL provides that an award may be set aside in certain limited circumstances. Article 15/A provides that the only recourse against an arbitral award is for setting aside. This application shall be filed to the court and shall be quickly resolved with priority. Grounds for setting aside an award:

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1. Reasons to be proved by the applicant party: (a) a party to the arbitration agreement was incompetent or the arbitration agreement is not valid under the governing law designated by the parties or, failing such designation of law, under Turkish law; (b) the arbitral tribunal was not appointed in accordance with the procedure determined in the agreement of the parties or set forth in the IAL; (c) the award was not rendered within the arbitration term; (d) the arbitral tribunal decided with respect to their competency contrary to law; (e) the arbitral tribunal rendered an award on a matter beyond the scope of the arbitration agreement, or did not render an award on the entire request, or exceeded its authorisation; (f) the arbitral proceedings were not conducted in accordance with the procedure agreed by the parties or, failing such agreement, in accordance with the provisions of the IAL and this situation has affected the substance of the award; (g) the principle of equity of the parties was not properly considered; or 2. Reasons to be determined by the court: (a) the dispute subject to the award of the arbitral tribunal may not be settled by arbitration under Turkish law; (b) the award is contrary to public order. If, during the lawsuit filed to set aside the award on the grounds that the award contains matters beyond the scope of the arbitration agreement, the part of the award addressing matters within the scope of the arbitration agreement may be separated from the part of the award which lays beyond the scope of the arbitration agreement. Therefore, there may only be a partial set aside. 3. Procedure The lawsuit for setting aside may be filed within 30 days starting from the date when the arbitral award is notified to the parties. The execution of the award shall be suspended automatically upon the filing of the lawsuit. Unless otherwise determined by the court, the request for setting aside the award shall be decided based on the documents and information available in the file. The parties may waive, partially or wholly, their right to file a lawsuit for setting aside the award. However according to Article 15 of the IAL, only the parties with a domicile outside Turkey, may use such waiver right. In other words, Turkish parties may not waive their rights for filing a setting aside lawsuit; if they waive, the waiver is deemed void. Although the judgment rendered in the setting aside case may be appealed under the TCCP, they may not be subject to correction. The appeal shall be limited to the reasons for setting aside the award and shall be decided urgently. Where the decision to set aside the award is not appealed or the award is set aside for the reasons provided in subsections (b), (d), (e), (f), (g), of section 1 and subsection (b) of section 2 of this article, unless otherwise agreed by the parties, the arbitrators and the arbitration term may be re-determined by the parties. The parties also may appoint the previous arbitrators.

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Article 15/B of the IAL provides that upon a final decision denying the request to set aside the award, the court shall issue to the claimant a document indicating that the award is enforceable. The issuance of this document is not subject to any fees. When the time limit for application to the court for set aside has expired or the parties have waived their right to recourse, the court ex officio shall take into consideration parts (a) and (b) of section 2 when issuing the documents stating that the award is enforceable. On the other hand, the TCCP regulates the appeal procedure for the domestic arbitrations. The parties may not a priori waive their right to appeal the award unlike the international arbitration procedure. According to the Article 533 of the TCCP, the domestic arbitral award may be appealed in the following circumstances: (i) if the award is rendered after the time limit; (ii) if the arbitral tribunal awarded a matter that was not subject-matter of the parties prayer for reliefs; (iii) if the arbitral tribunal has exceeded its jurisdiction; or (iv) if the arbitral tribunal did not render the award corresponding to each item of the prayer for reliefs of the parties.

18. ENFORCEMENT OF AWARD


18.1 What are the procedures and standards for enforcing an award? Is there a difference between domestic and nondomestic awards?
For arbitral awards subject to the TCCP and to the IAL, there are no enforcement or recognition proceedings required. The court issues an official order upon request by the party stating that the arbitral award is enforceable. For international awards, as Turkey is a party to the New York Convention, the grounds for recognition and enforcement set forth in the New York Convention should be applied if the award is rendered in a country that is a party to the New York Convention. If the award is rendered in a country which is not a party to the New York Convention then the provisions stated under the IPPL applies for the recognition and enforcement of the awards. Since the provisions of the New York Convention and the IPPL are parallel, the following criteria stated under the New York Convention may be stated as the grounds for refusal of the recognition and the enforcement of the arbitral award: invalidity of arbitration agreement;

violation of due process by failure to give proper notice; partys inability to present the case; if the tribunal exceeds its mandate; irregular procedure or composition of tribunal; violation of the public policy of the country of enforcement; and if the award is not binding or has been suspended or set aside.

19. CONFIDENTIALITY OF PROCEEDINGS


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19.1 What are the confidentiality requirements of the arbitral process, ie existence of the arbitration, pleadings, documents produced, hearing, award?
There is no provision under the IAL that regulates confidentiality. The parties can freely agree for the confidentiality of the arbitration proceedings and the arbitral tribunal will apply these provisions. However, the ACICC regulations for example, explicitly ensure the confidentiality of disputes, arbitral proceedings, documents and hearings unless otherwise agreed by the parties. On the other hand, where court assistance or intervention is required, proceedings taking place before a court are publicly accessible.

20. UNIQUE JURISDICTIONAL ATTRIBUTES


20.1 Is there any particular aspect of the approach to arbitration in the jurisdiction that bears special mention?
The increasing number of foreign investments and establishment of multinational corporations, have caused arbitration proceedings and other ADR methods such as mediation to become something of a necessity in Turkey.

Restrictive approach by the Turkish Supreme Court


The amendment to the Constitution enabling large-sized concession agreements and agreements executed with the administrative bodies to be solved through arbitration mentioned above faced strong objections. Prior to this amendment, the State Council had a settled case law against the arbitrability of concession disputes or disputes where a party is an administrative body. However, arbitration in foreign investment disputes became an international obligation since Turkey enabled foreign investors to benefit from different investment arbitration mechanisms with respect to investment treaty disputes without a need for an arbitration agreement by giving its consent to such mechanism under the investment treaties. The Turkish Supreme Court has on the other hand a considerably restrictive approach to the arbitrability of disputes and mainly to jurisdictional matters. The problem occurs especially when there are parallel proceedings before the court and before the arbitral tribunal. The tendency of the court is to rule its own jurisdiction by restrictively applying the conditions of the validity of arbitration agreements. Lastly, the Turkish Supreme Court in one of its principal decisions in 1994 used public order reasoning to reverse an arbitral award rendered in accordance with the TCCP, stating that the arbitral tribunal did not properly apply Turkish substantial law. As indicated above, for domestic arbitration proceedings subject to the TCCP, the TCCP regulates the appeal procedure following the issuance of an arbitral award. There is no revision on merits in the appeal procedure; however the Supreme Courts said decision bears the risk of a review on the merits based on public order, which is against the arbitration principles based on the binding force of arbitral awards.

Significant regulations
The IAL regulates a term of one year for arbitration proceedings. The parties may extend the term by mutual agreement. Otherwise the arbitral tribunal should render its award within the legally-fixed term. Should the arbitral tribunal fail to do so; the arbitral award may be subject to set aside.
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Another significant regulation under Turkish law concerns the waiver right from the setting aside lawsuit. According to Article 15 of the IAL, the parties may waive their rights to file a setting aside lawsuit. However, the same article restricts its own scope by stating that only the parties with a domicile outside Turkey may waive such right. In other words, even if parties agree to waive their rights to apply for setting aside, such agreement will not be deemed valid for the Turkish party. The Turkish party will be entitled to apply for setting aside which will obviously create an inequality between the parties. Lastly, pursuant to Article 388/2 of the Turkish Code of Obligations, there is a special requirement for agreeing on arbitration and executing an arbitration agreement. The general proxies are not sufficient for executing an arbitration agreement on behalf of another person. The proxy needs a special power of attorney expressly including the power to agree on and to execute arbitration clauses.

Miscellaneous
It is appropriate here to mention that a law on mediation has been drafted and will soon be put on the agenda of the Turkish Parliament. Nevertheless, the said law has been deeply and significantly criticised by the Turkish Bar Association and several local bar associations. The main argument of the opposition is the fact that creating a binding mediation system where the actors are not obliged to be lawyers will result in inequalities and soon enough in corruption.

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