International arbitration is getting more widespread. There are three important reasons why parties tend to choose arbitration:
-Arbitration allows proceeding quickly.
-Parties have the possibility to participate in choosing the arbitrators.
-Arbitration is usually far less costly than proceeding through litigation.
The main legislation regulating international arbitration is the International Arbitration Law numbered 4686.
Under Turkish law, the recognition and enforcement procedure is regulated under International Private and Procedure Law (IPPL) and the New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
International conventions inspire confidence in the rule of law, ensure fair treatment in the resolution of disputes arising over contractual rights and obligation and strengthen respect for binding commitments.
The New York Convention is one of the most important treaties in the area of international commercial law. The Convention was ratified on May 8th, 1991 and came into effect on October 1st, 1992. The convention has been ratified by 165 Parties.
Meaning of Foreign Arbitral Award:
According to Art. 1, the New York Convention applies to awards “made in the territory of a State other than the State where the recognition and enforcement of such awards are sought”.
Scope of the New York Convention:
Turkey has made two reservations as stated below: the reciprocity reservation and commercial reservation.
- The Convention will apply only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law.
- The Convention will apply to the recognition and enforcement of awards made only in the territory of another Contracting State.
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Refusal of Recognition and Enforcement of the Arbitral Award
Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement are sought, proof that as stated below.
1-) Validity of the Agreement: (Art. V/1-a)
The arbitration agreement is an agreement by the parties to submit all or certain disputes which have arisen or which may arise between them in respect of a defined 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.
According to Art. V/1-a of the Convention, the competent authority may refuse the request for the recognition and enforcement of the arbitral award, if the parties were, under the applicable law, not capable to conclude the relevant arbitration agreement or the relevant arbitration agreement is not valid under the relevant law.
Furthermore, pursuant to Art. 2, the arbitration agreement shall be in writing. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.
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2-) The Right of Defence: (Art. V/1-b)
As enshrined in Article 47 of the Charter of Fundamental Rights and Article 6 of the European Convention of Human Rights, everyone should have the right to an effective remedy and a fair trial.
Parties should have been provided with an opportunity to present their case. They should have had an opportunity to be heard regarding their evidence, defences and claims.
The right of defence also stated that in the Convention: If the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case, the competent authority may refuse the request for the recognition and enforcement of the award.
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3-) Issues Beyond the Scope (Art. V/1-c)
An arbitration agreement is about the settlement of disputes that arise or may arise from a particular legal relationship between the parties. Arbitrators can only decide on the disputes subject to the arbitration agreement.
The disputes referred to and excluded from the arbitrators’ authority should be explicitly stated during the preparation of the agreement.
If the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission there may be refused for the request for the recognition and enforcement of the arbitral award.
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4-) Law of The Arbitration Country (Art. V/1-d)
The competent court may refuse recognition and enforcement where the constitution of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of an agreement, with the law of the country where the arbitration took place.
Procedural irregularities have to be raised and proven by the party challenging the recognition and enforcement of an award.
It should be noted that Art. V/1-d does not stipulate any requirements for the content of the parties’ agreement. The parties can agree on a national procedural law or institutional rules to govern procedural matters or can agree on their own rules independent of any system.
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5-) The Binding Nature of an Award (Art. V/1-e)
Under the 1927 Geneva Convention, establishing the finality of the award could only be achieved by obtaining a leave of enforcement in the courts of the country of the seat of the arbitration. This required the party seeking enforcement to effectively obtain two decisions, one at the country where the award was issued and one at the place of enforcement, therefore delaying proceedings and generating more costs.
The drafters of the New York Convention abandoned the requirement of finality of the award. Pursuant to the Convention, each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon.
However, art. V/1-e of the Convention allows national courts to refuse the recognition or enforcement of an award if the party opposing enforcement establishes that the award has not yet become binding on the parties or has been set aside or suspended.
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6-) Subject Matter of the Dispute (Art. V/2-a)
The courts of a Contracting State refuse recognition and enforcement of an award if they find that the subject matter of the difference which led to the award is not capable of settlement by arbitration under the law of the country where recognition and enforcement are sought.
According to Turkish Law; arbitration shall not be applicable to disputes related to real rights concerning immovables and to disputes that are not within the parties’ disposal.
7-) The Public Policy Exception (Art. V/2-b)
Art. V/2-b of the Convention enables the enforcement courts to refuse recognition and enforcement of an award when they find that such recognition or enforcement would be contrary to its public policy.
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For detailed information please see;
-Şanlı, Cemal; Uluslararası Ticari Akitlerin Yapılması ve Uyuşmazlıkların Çözüm Yolları, Istanbul 2019.
–https://newyorkconvention1958.org/
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