This article delves into the enforcement of arbitral awards in Türkiye, with a focus on strategies for enforcing foreign awards. It examines the interplay between local and international legislation, addressing procedural requirements and key legal considerations.
Arbitration has increasingly been recognized as a viable alternative for resolving international commercial and investment disputes. The enforceability of foreign arbitral awards is a pivotal element in the context of international commercial and investment relations.
“Enforcement” may bear different definitions and practices in different jurisdictions. In terms of Turkish Arbitration Law, enforcement (tenfiz in Turkish) refers to the procedure of obtaining a Turkish court order, giving the award the power and effect of a national court judgment. Absent a specific international treaty, direct enforcement of foreign awards is not permissible. Therefore, an award creditor must first file a lawsuit before the commercial courts in Turkey to obtain a judgement, whereby the Turkish court will, under certain circumstances, confirm the “enforceability” (icra edilebilirlik in Turkish) of the award in the Turkish territory as a Turkish court judgment. Enforceability of a judgment or an award refers to the right of award creditors to apply to an execution office (the enforcing authority in the Turkish legal system) to take control of debtors' assets by seizing them and selling them through public auction for the satisfaction of the creditors' receivables.
Accordingly, enforcement signifies that the arbitral award has met the conditions stipulated by law, thereby attaining the power of a Turkish court judgment that mandates compliance with the award by all, and enabling enforcement through execution offices to satisfy the creditor's receivables. Unless the arbitral award is declared to be enforceable in the Turkish territory by a final Turkish court judgement, the award creditor will have no right to request execution offices to enforce the award and the award does not serve as a final judgment or conclusive evidence in Turkish courts.
The determination of whether an arbitral award is foreign is based on the seat of arbitration and the procedural rules applied to the arbitration proceedings. For instance, under Law No. 4686 on International Arbitration (the "IAL"), which stipulates the procedural rules applicable to arbitration of disputes involving foreign element, an arbitral award is not foreign if (i) the seat of arbitration is Türkiye, or (ii) the parties or the arbitrators/arbitral tribunal elect to apply the IAL rules. If an arbitral award is not foreign, the award creditor is not required to file a lawsuit for its enforcement. The award is directly enforceable in the Turkish territory upon obtaining an “enforceability annotation” (icra edilebilirlik şerhi in Turkish) by the court of first instance, unless the award debtor files a lawsuit for the “annulment” of the award before the Regional Court of Appeals, whose decision may then be appealed before the Court of Cassation. In such case, the appellate courts will review the conditions for the award's enforceability and the award cannot be enforceable until a final decision in favour the award creditor is given.
Therefore, an award rendered in a foreign state whether under the procedural laws of that state, another state, or other institutional rules, is considered “foreign” and requires the award creditor to file a lawsuit. Conversely, the award creditor is not required to file an enforcement lawsuit for an award (i) issued in Turkey, regardless of the procedural rules applied to the arbitral proceedings, or (ii) issued abroad under the procedural rules of the IAL.
Rules Applicable
The primary piece of legislation concerning the enforcement of foreign arbitral awards is Law No. 5718 on International Private and Procedural Law (the "IPPL"). Türkiye also ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "NY Convention") in 1992 and since then, enforcement of awards made in Türkiye as a contracting state has been governed by the NY Convention.
Pursuant to the IPPL, to enforce a foreign arbitral award in Türkiye, an application must be submitted to the competent civil court. The enforcement request should be submitted to the court of first instance of the place that the parties may have agreed in advance. In the absence of such an agreement, jurisdiction lies with (i) the court of the place where the award debtor is located, or (ii) the court of the place where the award debtor's assets are found, if the award debtor does not have a business address in Türkiye.
The enforcement of foreign arbitral awards in Türkiye is also regulated by the NY Convention. Türkiye has made two reservations concerning the NY Convention: (i) the NY Convention will apply to the recognition and enforcement of awards made only in the territory of another contracting state on the basis of reciprocity; and (ii) it will apply to differences arising out of legal relationships, whether contractual or not, that are considered commercial under Turkish law.
The rules of the IPPL and the NY Convention rules largely align and focus on the existence of a valid arbitration agreement, the arbitrability of the dispute subject to the award, due process, and public policy and morality. Similar to the NY Convention, the IPPL provides that the arbitrability of the dispute and the violation of public policy shall be reviewed by the Turkish Courts ex-officio. Additionally, the Turkish courts shall also review ex-officio the existence of an arbitration agreement or an arbitration clause in the principal agreement, even if the award debtor does not raise any objection against its existence.
The parties have the right to appeal the judgement of the first instance courts before the Regional Courts of Appeal. Otherwise, the first instance courts' decision will be final. The parties also have the right to appeal the decisions of the Regional Courts of Appeal before the Court of Cassation. If the first instance courts' judgement is appealed at any stage, the award will not be enforceable until a final judgement is given.
Conclusion
Effective resolution of disputes is crucial for the sustainability of international commercial and investment relations. While arbitration may be a viable alternative for the resolution of disputes, the enforcement of such awards is essential to achieve the objectives pursued through arbitration. The enforcement process varies depending on the nature of the award and, analysis indicates that the enforcement of non-foreign awards generally involves a more streamlined process compared to the enforcement of foreign arbitral awards. Consequently, when drafting an arbitration clause, selecting Türkiye as the seat of arbitration, especially when substantial assets of the opposing party are in Türkiye, can facilitate a more efficient collection of receivables.
With thanks to Dilberay Yıldırım for her assistance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.