Turkey: Esin Arbitration Quarterly

1. Significant court decisions in the last trimester concerning arbitration

1.1 Decision of the 11th Civil Chamber of the Court of Cassation on set-aside of an arbitral award¹

The dispute between the parties arose from a share transfer agreement. The parties agreed that any disputes arising from this agreement should be resolved in accordance with the Arbitration Rules of the International Chamber of Commerce (ICC) ("ICC Rules"). In addition, the parties prepared a terms of reference in which they agreed that the arbitral tribunal may extend the arbitration term.

Due to their inability to come to an agreement on the extension of the arbitration term with the respondent (who is the plaintiff in the subsequent set-aside lawsuit initiated against the arbitral award), the claimants (who are the defendants in the subsequent set-aside lawsuit initiated against the arbitral award) filed five requests for extensions of the arbitration term with the Turkish courts during the arbitration proceedings. However, these were all rejected by Turkish courts. On the other hand, the ICC granted 18 extensions of time for failure to complete the arbitration proceedings within six months pursuant to the ICC Rules.

The plaintiff claimed that the arbitral award was rendered after the arbitration period expired, as Turkish courts had rejected the extension requests. The 13th Civil Chamber of the Istanbul Regional Court thereby concluded that the arbitral award was rendered after the expiry of the arbitration term and set aside the arbitral award. Although the regional court determined that the extension made by ICC was invalid, the Court of Cassation concluded that the parties may freely agree on the arbitration rules to be applied to the dispute, unless they are contrary to the mandatory provisions of the Code of Civil Procedure. The arbitration term was extended by the ICC until 31 December 2020, and the final arbitral award was rendered on 14 December 2020. Therefore, the extension of time granted by the ICC was deemed valid. For this reason, the Court of Cassation reversed the decision of the regional court.

1.2 Decision of the 3rd Civil Chamber of Istanbul Regional Court on enforcement of an arbitral award

The dispute between the parties arose from a sales and marketing agreement. The parties agreed on an arbitration clause after a dispute arose from the sales and marketing agreement. Following the arbitration proceedings, the arbitral award was issued on 20 December 2020. The defendant requested a revision of the arbitral award to change the amount awarded, claiming that it had already paid a portion of the sum after the arbitration was first initiated. Therefore, the arbitral award was revised with the plaintiff's approval and became binding on 28 January 2021.

The plaintiff requested that this arbitral award be recognized and enforced by Turkish courts. However, the defendant claimed that it was not duly notified of this arbitral award and the revised award, thus its right of defence was restricted, and that the award sought to be enforced became final without due service. The court of first instance ordered the enforcement of the arbitral award based on the assessment that the arbitration agreement, arbitral award and their certified translations were submitted.

The defendant appealed the decision. In its petition of appeal, the defendant also claimed that this judgment was not duly served. Thereafter, the Third Civil Chamber of the Istanbul Regional Court found that there were no translation documents containing the date on which the arbitral award and the revised award became final and the date of service of these awards to the parties.

Accordingly, there is indeed no documentary evidence that these awards were served on the defendant. It was decided that the court of first instance's decision was based on an incomplete examination, as the court of first instance was not provided with the documents showing that the arbitral award for which enforcement was sought was duly served to the defendant. Therefore, the regional court reversed the decision of the court of first instance.

1.3 Abu Dhabi Court of Cassation's ruling regarding the determination of the seat of arbitration

The Abu Dhabi Court of Cassation rendered a decision on determining the seat of arbitration in the Emirate of Abu Dhabi — and, by extension, the local courts that would have jurisdiction to hear challenges related to the relevant arbitration — when the arbitration agreement between the parties refers to ICC Rules without specifying a seat of arbitration in the Emirate of Abu Dhabi. This issue arises because there are two distinct jurisdictions under the Emirate of Abu Dhabi region, one being in "onshore" Abu Dhabi, where the Abu Dhabi courts have jurisdiction, and the other being within the financial free zone area of the Emirate of Abu Dhabi, the Abu Dhabi Global Market (ADGM), where the ADGM courts have jurisdiction.

Accordingly, the Abu Dhabi Court of Cassation held that when the arbitration agreement specifies that the ICC Rules will be applied to the arbitration proceedings, this indicates that the ADGM courts have jurisdiction in matters related to such arbitration as there is a representative office of the ICC in the ADGM region. Therefore, the existence of a representative office of the ICC played a determining factor in deciding which courts have jurisdiction when it is not expressly stated in the arbitration agreement.³

1.4 The Swiss Federal Supreme Court clarifies the requirements regarding the enforcement of interim attachment orders issued by the ICSID

A recently disclosed case ruling of the Swiss Federal Supreme Court offers guidelines regarding enforcement of the International Centre for Settlement of Investment Disputes (ICSID) awards in Switzerland to establish attachment on the assets of a foreign state. According to the Swiss Federal Supreme Court's judgment, it has been highlighted once again that, for a party to enforce an ICSID award in Switzerland, the party seeking to enforce the award is only required under Articles 54(1) and 54(2) of the ICSID Convention to provide a copy of the award certified by the Secretary General of ICSID and that the award cannot be reviewed on any grounds other than its authenticity. In other words, the Swiss Federal Supreme Court held that an ICSID award cannot be reviewed on merits by the local courts before its enforcement, including a public policy review.

However, with regard to seeking attachment of assets in Switzerland, Swiss case law requires (i) that the foreign state was not exercising its sovereign rights but its private law related rights in the underlying legal relationship and (ii) the party seeking the attachment must demonstrate that the legal relationship between the parties also has a "sufficient link to Swiss territory" and the relevant requirement also applies to the enforcement of ICSID awards. If the above requirement can be fulfilled, it has been ruled by the Swiss Federal Supreme Court that the local court should treat the ICSID award in question as a Swiss court judgment and is obligated to enforce it.⁴

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Footnotes

1. The 11th Civil Chamber of Court of Cassation File No: 2021/4695, Decision No: 2022/6134.

2. The 3rd Civil Chamber of Istanbul Regional Court File No: 2022/1754, Decision No: 2023/13

3. You may find more details here.

4. You may find more details on the case here

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