A new law was introduced on June 21 2001 to regulate international arbitration proceedings in Turkey. The new International Arbitration Law No 4686 is a supplement to the existing domestic arbitration regulation, which is set out in the Code of Civil Procedure (CCP). The Arbitration Law was enacted in parallel with the general trend towards liberalization of international arbitration legislation globally.
The Arbitration Law, however, does not totally supersede the existing provisions of the CCP, which will continue to apply to arbitral disputes that do not fall within the scope of the relevant provisions of the Arbitration Law.
Scope and purpose
The purpose of the Arbitration Law is to regulate the procedures and rules of international arbitration. The Arbitration Law is applicable to disputes between a Turkish national and a foreign national where the seat of arbitration is Turkey or where the Arbitration Law is selected by agreement of the parties, the arbitrator, or the arbitral tribunal.
According to Law No 5401 (the "Law On the Principles to be Complied with and Observed in Arbitrations for the Settlement of Disputes Arising from Concession Agreements and Contracts for Public Services") the resolution of disputes via international arbitration that arise from agreements and contracts for public services and that contain the "foreignness factor" will be subject to the Arbitration Law. On the other hand, disputes outside the scope of the Arbitration Law will be subject to the CCP.
Deadline for award
Pursuant to the Arbitration Law, unless otherwise agreed, the arbitrator or arbitral tribunal must grant its award on the merits of the case within one year of the appointment of the arbitrator for single-arbitrator actions. For proceedings with more than one arbitrator, the award must be granted within a year of the date on which the minutes of the first meeting of the arbitral tribunal are issued.
The term of the arbitration before an award is given may be extended by mutual agreement of the parties or, if the parties cannot agree, by a decision of the Court of First Instance upon application by either party.
The language of the arbitration
Contrary to the CCP, which addresses domestic arbitration, the Arbitration Law states that arbitration may be conducted in Turkish or in the official language of any of the states recognized by the Republic of Turkey. The arbitrator or arbitration committee must determine the language(s) if the parties fail to determine it.
Legal action for annulment of arbitral awards
The only remedy for a party that is not satisfied with the arbitral award is an action for annulment. Under the Arbitration Law, the reasons for annulment are listed and these reasons appear to be exhaustive. For instance, the award can only be annulled if the court determines that: (i) the procedure of selection or appointment of arbitrators set out in the parties' agreement or stipulated in the Arbitration Law is violated; or (ii) the award is not issued within the agreed or legal term for arbitration.
In a major development, and unlike the CCP and its judicial interpretation and implementation by Turkish Courts, the Arbitration Law prevents a judge from reviewing the merits of the dispute when the award is evaluated as the result of the annulment action. The arbitral award may only be annulled for the reasons stated in the Arbitration Law.
Since the Arbitration Law was enacted very recently, it has not been applied to date. Nevertheless, the Arbitration Law has brought about liberal and significant provisions regarding international dispute resolution.