Recognition and enforcement of international arbitral awards in Turkiye

Simel Sarialioğlu
Paksoy, Istanbul

Doğuhan Uygun
Paksoy, Istanbul

​​​​​​​Can Yılmaz
​​​​​​​Paksoy, Istanbul

It is undeniable that an arbitral award is nothing but a pyrrhic victory without a successful enforcement. This most certainly puts a premium on the jurisdiction(s) where an enforcement would be sought and urges the parties to be aware of the enforcement regime therein. The Turkish arbitration regime, as well as the regulations regarding the recognition and enforcement of awards, is parallel to the legal regimes of the prominent arbitration hubs as it is based on the Model Law.^[1]

Following the accession to the New York Convention^[2] in 1992, Türkiye has been experiencing a more arbitration friendly landscape when it comes to recognition and enforcement of foreign arbitral awards, which is becoming more aligned with the international practice day by day. Yet there are certain procedural and practical nuances to be aware of under Turkish law in terms of the recognition and enforcement of foreign arbitral awards.

Applicable legislation

There are two pieces of legislation regulating the procedure and conditions for enforcement of foreign, or international, arbitral awards; the New York Convention and the International Private and Procedural Law No. 5718 (“IPL”). An arbitral award concerning a commercial dispute and rendered in a state that is party to the New York Convention shall be enforced in Türkiye in accordance with the New York Convention and the relevant provisions of the IPL.
The IPL, on the other hand, applies in case an arbitral award is rendered in a state that is not party to the New York Convention. The requirements for recognition and enforcement under the IPL are quite similar to those of the New York Convention.

Procedure and fees 

The procedure to be followed in recognition and enforcement requests is regulated under the IPL. Accordingly, a lawsuit has to be filed to claim recognition and enforcement of an award before the commercial court of first instance where the award debtor is domiciled, present, or where the assets, which are likely to be subject to enforcement, are located. Parties are free to designate, in written form, which court shall have jurisdiction. The decision given by the first instance court is appealable and subject to a two-tiered appeal review respectively before (ii) the Regional Appellate Court and (iii) the Court of Appeal as the last resort. 

In accordance with the Law on (Court) Fees and a 2019 decision of the General Assembly of the Court of Appeal, enforcement cases are subject to a fixed filing fee (approx. USD 7).

Unless there is a bilateral or multilateral agreement between Türkiye and the country of origin of the party seeking enforcement, such party will be asked to deposit a foreigner’s security (caution judicatum solvi) when filing the lawsuit. The court is authorised to determine the security amount, which should be appropriate for covering the judicial costs and the damages that may be suffered by the counterparty. The claimant will be exempted from such security if there is a reciprocal exemption. The amount of security generally ranges between 15% and 40% of the claim amount.

Provisional remedies

To hedge against the risk of dissipation or disposal of the assets by the award debtor, the award creditor may request provisional remedies prior to, concurrently with or after filing the lawsuit for the recognition and enforcement of the award. These remedies can be in the form of a preliminary injunction and preliminary attachment. The award creditor has to provide adequate evidence to convince the court prima facie that the likelihood of dissipation or disposal is significant. In case a request is granted, it is likely for the court to order deposition of a security equal to 15% - 40% of the amount awarded. 

Court’s examination and points to consider 

Barring few controversial decisions, the Turkish Courts have been applying prohibition of révision au fond more strictly and without hesitation especially in the recent years. In this respect, courts limit their examination to the requirements set forth under the New York Convention (or the IPL).

A debtor, unwilling to comply with an arbitral award, is likely to challenge an enforcement case and raise several grounds for refusal of the recognition and enforcement request. In Turkish practice, amongst them the public policy stands atop. Turkish law does not provide a definition of the public policy; thus, whether or not enforcement of an arbitral award would be against Turkish public policy is evaluated on a case-by-case basis. As per the frequently referred definition by the Court of Appeal, General Assembly on the Unification of Judgments (whose decisions are binding for all levels of Turkish courts) “Violation of Turkish public policy shall be deemed in circumstances where there is a manifest violation of a mandatory provision of Turkish Law”. Building up on this approach, the Court of Appeal, as a norm, holds the view that the public policy should be interpreted in a narrow manner and a breach, misapplication or disregard of a provision of law per se does not require annulment of an award. 

In the recent decisions rendered by the Court of Appeal and Istanbul Regional Court of Appeal, infringement of the right to a fair trial and the right to present its case, rendering an arbitral decision ultra petita, reliance on an arbitration agreement signed by a non-authorized representative and existence of grounds for suspicions regarding the impartiality of the arbitrators were found to be in violation of public policy. On the other hand, refusal by the arbitral tribunal to obtain an expert report, applying the notification procedure of the applicable law (which is not aligned with the Turkish notification laws) were not deemed as grounds for non-enforcement or annulment. 

The Court of Appeal is also sensitive about the parties’ consent to arbitrate and thus seeks an absolute certainty in the consent to arbitrate. In line with this long-standing approach, any dispute resolution clause providing parties with a choice between state courts and arbitration is deemed null and void. Taking this into account, in cases where an enforcement is likely to be sought in Türkiye, it is crucial for parties to avoid dispute resolution clauses authorising state courts alongside arbitration.

Conclusion

All in all, save for its certain particularities the procedure and practice in Türkiye concerning the recognition and enforcement of foreign awards are quite similar to those of globally renowned jurisdictions. To add that, the Turkish courts have kept pace with their counterparts in those jurisdictions by adopting a pro-arbitration approach, duly applying the recognition and enforcement criteria of the New York Convention and respecting the age-old principles such as revision au fond. 

^[1]United Nations Commission on International Trade Law Model Law on International Commercial Arbitration 1985.

^[2]Convention on the Recognition of Enforcement of Arbitral Awards 1958.