Nationality of Arbitration Awards 29 August 2019

In order to arbitral awards that have elements of foreignness to bear consequences in Turkey, it is required to commence separate law suits for enforcement or recognition of the arbitral award according to the presence or absence of qualification of the performability of arbitral award. However, the arbitral awards that do not have any element of foreignness are not required to obtain a performability document before Turkish Courts in order to bear consequences in Turkey. In other words, domestic arbitral awards become executory in Turkey as of the date of award. Due to this distinction, it is important to determine which arbitration awards have foreignness element.

The case of which arbitral awards shall be considered as foreign arbitral awards is not explicitly regulated in our legislation and in practice, it has been decided whether the arbitral awards were counted as foreign arbitral awards by taking into consideration or not by taking into consideration various criteria such as nationality of the arbitrators, the nationality of the parties and the place where the arbitral award is resolved.

Under the Article 1 of the New York Convention, the scope of application of the convention is  specified by means of stating “it shall apply to the arbitral awards made in the State other than the State where enforcement are sought and awards that are not considered as domestic and national in the State where their enforcement are sought.” In the determination of the nationality of the arbitration awards, the Turkish Supreme Court based on the criteria of the law applied to the arbitration procedure. In other words, the arbitral awards, which are subject to Turkish Procedural Law, are considered as “domestic” and these are not required to be enforced, whereas awards that are subject to a foreign procedural law are considered as “foreign” arbitral awards and need to be enforced.

At this point, the criteria used by the Supreme Court in determining the applied procedural law become important. . According to the well-established Supreme Court decisions, the arbitral awards of the professional-institutional arbitration centers established in foreign countries (GAFTA, FOSFA, ICAC, etc.) are considered as foreign since these arbitration courts are constituted under a foreign procedural law and render decisions under the authority of this procedural law. On the other hand, the nationality of arbitral awards given by organizations such as ICC, which is established without grounding on any state authority, cannot be determined solely by referring to the ICC Arbitration Regulation. In addition to this regulation, the nationality of awards shall be determined by taking into consideration the procedural law to be applied to the dispute chosen by the parties and if such procedural law is not chosen, nationality of awards shall be determined by taking into consideration the procedural law of the arbitration place. Consequently; since the arbitral awards which are rendered in Turkey under the ICC rule of arbitration are not considered as foreign by the Turkish Supreme Court, enforcement of these awards in line with the New York Convention is not requested.

Both under the international treaties of which Turkey is a party and under Article 45/2 of Turkish International Private and Procedure Law, the parties are entitled to determine the procedural law to be applied to the arbitration procedure. Therefore, it is not possible to subject a dispute about which parties’ agreed on the application of ICC arbitration rules with their free will to the Turkish Code of Civil Procedure (“CCP); because, these rules regulate the arbitration process in a detailed manner and independently from any state laws. Additionally, in recent conditions, as a result of the increase in legal relationships between the parties that are subject to the different states, the parties choose arbitration for the disputes arising from these legal relations to prevent the application of the legal rules of a foreign state that they have never recognized. While this is the case, it is clear that the Turkish Supreme Court’s subordination of the private law relations which are dominated by the freedom of will, to the CCP instead of the arbitration rules determined by the parties with their own will, does not coincide with the purpose of the New York Convention and current conditions.