Utku Cosar

Cosar Attorneys at Law

International arbitration law

In Turkey, the procedures and principles regarding international arbitration are governed by the International Arbitration Law No. 4686 (IAL). The IAL was drafted after the United Nations Commission on International Trade Law (UNCITRAL) model and informed by general principles in international arbitration law. Published in the Official Gazette on 5 July 2001, it took effect that day, replacing the earlier regime governed by the Code of Civil Procedure (CCP). The IAL governs general principles, the arbitration agreement, appointments of arbitrators and tribunal, challenges of the same, arbitral responsibilities, termination of their mandate, arbitral jurisdiction, procedure, recourse against awards, and arbitration expenses.

The Court of Appeals has held that arbitration agreements subsequent to the passage of the IAL and proceedings based on such agreements are governed by the IAL, while arbitration agreements made before and arbitral proceedings conducted on the basis of such prior agreements continue to be governed by the CCP.1 For instance, in that case, the arbitration agreement was signed in 1993 but the dispute between the parties did not arise until February 2005, almost four years after the passage of the IAL. The Court of Appeals ruled that it was the date of the arbitration agreement that was relevant, not the date of the dispute or proceedings, so even though the case arose significantly after the IAL, the relevant governing legislation was the CCP. It further held that for proceedings contracted or initiated prior to the IAL passage to be governed by it, parties must specifically agree on this issue in a new arbitral agreement. The court held that regulating the issue in the terms of reference is not enough where the attorneys signing the terms of reference did not have the authority to enter into or amend the arbitration agreement on behalf of the parties.

Form and validity of the agreement

According to article 4 of the IAL, arbitration agreements may be in an arbitration clause or contract, regardless of whether the disagreement itself is contractual in nature: '[An] arbitration agreement is an agreement made by the parties for resolution by way of arbitration of all or certain disputes, which have arisen or which may arise between them in respect of a legal relationship whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.'

The arbitration clause or separate agreement may take many forms, but must be in writing. IAL article 4 specifically disallows any oral agreement to arbitrate, but does allow the agreement to be in a signed, written document, as well as a 'letter, telegram, telex, fax exchange between the parties or in an electronic medium'. Furthermore, if one party alleges in a statement of claim the existence of an arbitration agreement and the responding party fails to object in the statement of defence, the requirement for an arbitration agreement has been met. Finally, according to article 4, 'in case of a reference to a document containing an arbitration clause, which is intended to constitute a part of the main contract, a valid arbitration agreement is considered to have been made.'

According to article 4 of the IAL: 'An arbitration agreement is valid if it is in accordance with the law chosen by the parties to apply to the arbitration agreement or failing such choice, if it is in accordance with Turkish law.'

The Court of Appeals requires the intent to submit to arbitration to be established clearly, without leaving room for doubt, for an arbitration agreement to be valid.2 In that case, the parties agreed the dispute would be submitted to arbitration and that finally, 'the dispute shall be resolved at the courts.' The Court of Appeals ruled that because it was unclear whether the parties had intended to submit their dispute to arbitration or court, there was no definite intent to arbitrate. Indeed, the Court of Appeals has historically required parties to agree on arbitration, leaving no room for ambiguity. Therefore, this decision is merely a reiteration of traditional legal doctrine that the intent to arbitrate must be certain for an arbitral agreement to be valid.

Article 388/2 of the Turkish Code of Obligations (TCO) legislates that unless an agent has been granted special powers in respect of their power of attorney, an arbitral agreement signed by the representative will be invalid. The Court of Appeals has reviewed the validity an arbitration agreement made through such representatives.3 There, the Court of Appeals ruled that if an arbitration agreement is signed through a representative acting with the power of attorney, that representative's authority to sign the arbitration agreement must be clearly specified to be valid.

Likewise, the Court of Appeals has evaluated the amendment of arbitration agreements by representatives.4 In these decisions, the Court of Appeals has held that arbitration agreements cannot be amended merely through terms of reference signed by an attorney. According to the court, the representative power of an attorney signing the terms of reference is limited to appointment of arbitrators, claims, and defences in the arbitral proceedings. This limited power of attorney does not cover entering into or amending arbitration agreements in the name of the parties. Accordingly, an arbitration agreement may be amended or entered into by either the parties themselves or by a representative who has been granted this special power. Attorneys entrusted with claims and defences in the general arbitral proceedings, on the other hand, do not have such power.5

Jurisdictional concerns

The IAL and CCP allow for different procedural paths challenging arbitral jurisdiction. Article 519 of the CCP allows a court to decide on the jurisdiction of arbitrators or the tribunal. Under the IAL, jurisdictional challenges must first be brought to the arbitral tribunal. Only after the tribunal has determined that there is no jurisdiction, or if it determines there is jurisdiction, after a final award, may the jurisdictional challenges of an arbitral panel convened pursuant to the IAL be examined in court.

The jurisdictional framework of the IAL, allowing the arbitral tribunal itself to determine jurisdictional questions, is in article 7(H):

The arbitrator or the panel of arbitrators may rule on their own jurisdiction including any objections with respect to the existence or validity of the arbitration agreement. In such ruling, an arbitration clause in a contract shall be treated as independent of the other terms of the contract. A decision by the arbitrator or panel of arbitrators that the main contract is null and void shall not entail ipso jure the invalidity of the arbitration clause [...] [T]he arbitrator or the panel of arbitrators shall examine and decide the jurisdictional objection as a preliminary question. If it decides that it has jurisdiction, it shall continue the arbitral proceedings and make an award.

The Court of Appeals evaluated the application of both laws' jurisdictional scopes in a 27 June 2007 decision.6 In that case, the contesting party first raised the jurisdictional claim in a local court where an arbitration agreement was made under the IAL. The local court ruled the arbitration clause invalid, but the decision was struck down upon Court of Appeal review. The Court of Appeals held that:

[I]n a matter falling within the scope of international arbitration, the authority to decide on whether the dispute can be submitted to arbitration or not and whether the arbitration agreement is valid or not is left to the arbitrators. This plea should be raised in the first statement of defence, at the latest, in the arbitral proceedings. This plea will be examined primarily by the arbitrators and provided the arbitrators decide that they have jurisdiction, the proceedings will continue. Where the dispute is decided on the merits and an action for annulment is filed, this question will be considered by the court as a reason for annulment. If the arbitrators determine they do not have jurisdiction, they will reject the statement of claim on the grounds of their lacking jurisdiction. Under these circumstances, it is clear that in the pending dispute, at this stage the court lacks jurisdiction for review in accordance with Article 519 of the CCP.

For that reason, under the IAL, and unlike under the CCP, a party must first raise a jurisdictional claim to the arbitral panel. This notwithstanding, the Court of Appeals stated the decision on the jurisdictional dispute will be reviewed by the court in an action for annulment to be brought against the final arbitral award.

Content of arbitral awards

Both the CCP and the IAL require a clear and final decision before enforcement of an arbitral ruling. Pursuant to article 14(A) of the IAL: 'In arbitral awards, the names, surnames, titles and addresses of the parties, representatives and attorneys, if any, legal grounds on which the award is based, reasoning thereof, quantum of damages awarded in damages claims, place of arbitration and date of award, names and surnames, signatures, and dissenting votes of the arbitrator or the panel of arbitrators that made the award, and that an action for annulment can be brought against the award shall be stated.' The Court of Appeals, in its decision of 19 February 2007, ruled that arbitral awards must meet the requirements for enforcement as court decisions.7 There, the arbitral tribunal had held that the claimant's awarded damages would include interest, but failed to specify the amount of such interest. The Court of Appeals ruled that such an arbitral award did not meet the requirements for enforcement because both the interest rate and calculated amount of interest must be specified by an arbitral tribunal.

Appeal or annulment of tribunal decisions

Under article 15 of the IAL, actions for annulment of the arbitral award can be filed with the civil courts of first instance.

According to article 15(A) of the IAL, actions for annulment can be filed against an arbitral panel's final decision. The grounds for annulment are as follows:

• invalidity of the arbitration agreement due to incapacity of one of the parties: invalidity of the arbitration agreement under the law the parties have subjected it or failing such choice of law, under Turkish law;
• non-compliance in arbitrator appointment procedure as defined in the agreement of the parties or as proscribed by the IAL;
• failure to make an award within the arbitration period;
• decision by an arbitrator or panel of arbitrators in an unlawful manner that it has or lacks jurisdiction;
• deciding a matter outside the scope of the arbitration agreement, not deciding the entirety of the claim or exceeding authority;
• non-compliance with the procedure agreed to by the parties or if none, the procedure set out in the IAL, with such non-compliance having an effect on the award;
• violation of the principle of equality of the parties;
• non-arbitrability under Turkish law of the subject of dispute; and
• the award being contrary to public order.

The last two aspects, that is, a non-arbitrable subject or public policy concerns, may be considered sua sponte by the judge.

The subjects excluded from arbitration include those that are related to public order. For example, lawsuits regarding real estate are outside the scope of arbitral tribunals where such a lawsuit requires the land registrar to change.8 This case represents a continuation of past decisions, firmly rooted in Turkish law, where such disagreements may only be challenged in court.

According to article 15(A) of the IAL, the non-arbitrable nature under Turkish law of the dispute subject to the award is a reason for annulment. The Court of Appeals, in a decision it rendered on 18 June 2007, stated that lawsuits regarding real estate ownership in Turkey are not arbitrable.9 Lawsuits regarding real estate ownership are the lawsuits that cause the land register to change. In fact, the Court of Appeals repeated its established standpoint in this decision. The court based this decision on the ground that lawsuits causing the land register to change were related to public order.

In its decision on 18 June 2007, the Court of Appeals further held that making the award after the expiry of the arbitration period was a reason for annulment.10 In the event subject to dispute, the duration of arbitral proceedings was set as 10 days and neither the parties nor the tribunal extended the arbitration period. Because of this, the award was delivered after the expiry of this period and was reason for annulment. The Court of Appeals in its decision of 21 December 2006 ruled that the arbitration period would commence from the first meeting of the arbitrators.11

Arbitration under the Law on the Organisation and Duties of the Turkish Football Federation

Turkey has a specific set of laws regulating the legal framework of activities related to football. Law No. 3813, regarding the Organisation and Duties of Turkish Football Federation (TFFL), is the governing legislation. The Turkish Football Federation (TFF), founded by this law, is a member of International Federation of Football Associations (FIFA) and the Union of European Football Associations (UEFA).

Article 12(A) of the TFFL established the Dispute Resolution Chamber. The Dispute Resolution Chamber is the exclusive body authorised to hear and resolve disputes arising from any contract between clubs, between clubs and footballers, technical directors, coaches, player agents, masseurs and competition organisers, as well as between player agents and footballers, technical directors, coaches or other disputes related to football, regardless of the type of contract. Further, these disputes may only be heard by the Dispute Resolution Chamber as article 12(A) of the TFFL subjects such disputes to compulsory arbitration.

After a final decision by the Dispute Resolution Chamber, parties may seek review by the Arbitration Board, likewise created by the TFFL. Article 14 clarifies that the Arbitration Board is the final court of appeal for Dispute Resolution Chamber awards. However, a recent amendment to the TFFL on 29 November 2007 has opened the possibility of further appeal to the Court of Arbitration for Sports (CAS). This would allow parties to challenge Arbitration Board decisions. According to article 14/2 of the TFFL:

The parties' rights to have recourse to the Court of Arbitration for Sports against Arbitration Board awards regarding the disputes arising from the transfer, license and contracts of the sportsmen and disputes arising from the contracts of technical directors and coaches are reserved.'

Article 14/2 has thereby extended competency to the CAS over Arbitration Board decisions.

Notes
1. Court of Appeals Plenary Session of Civil Law Chambers, 18 July 2007, File No. 2007/ 15-444, Decision No. 2007/ 554.
2. Court of Appeals 15th Civil Law Chamber, 18 June 2007, File No. 2007/ 2680, Decision No. 2007/ 4137.
3. Court of Appeals 19th Civil Law Chamber, 21 May 2007, File No. 2007/ 380, Decision No. 2007/ 5114.
4. Court of Appeals Plenary Session of Civil Law Chambers, 18 October 2006, File No.2006/ 15-609, Decision No.2006/ 656; Court of Appeals Plenary Session of Civil Law Chambers, 18 July 2007, File No. 2007/ 15-444, Decision No. 2007/ 554.
5. Court of Appeals Plenary Session of Civil Law Chambers, 18 July 2007, File No. 2007/ 15-444, Decision No. 2007/ 554.
6. Court of Appeals, 15th Civil Law Chamber, 27 June 2007, File No. 2007/ 2145, Decision No. 2007/ 4389.
7. Court of Appeals, 15th Civil Law Chamber, 19 February 2007, File No. 2006/ 7195, Decision No. 2007/ 986.
8. Court of Appeals, 15th Civil Law Chamber, 18 June 2007, File No. 2007/ 2680, Decision No. 2007/ 4137.
9. Court of Appeals, 15th Civil Law Chamber, 18 June 2007, File No. 2007/ 2680, Decision No. 2007/ 4137.
10. Court of Appeals, 15th Civil Law Chamber, 18 June 2007, File No. 2007/ 2680, Decision No. 2007/ 4137.
11. Court of Appeals, 15th Civil Law Chamber, 21 December 2006, File No. 2006/ 7194, Decision No. 2006/ 7542.