Can The Action For Annulment Of Objection Be Heard Before Arbitration? 3 September 2019

The action for annulment of an objection is defined as a special type of case to enforcement proceeding without a judgement in bankruptcy and enforcement law. This issue is stated in Article 67 of the Bankruptcy and Enforcement Law as “the creditor whose executive proceeding is objected may apply to the court within one year from the date of notification of the objection and file the annulment of objection case by means of proving the existence of the claim in accordance with general provisions”. The action for annulment of an objection aims to ensure the continuation of the execution proceeding which suspended automatically due to objection of the debtor. At this point, the issue of the legal character of the action for annulment of an objection causes some hesitations which create significant results in implementation and leads to different opinions in the decisions of the Supreme Court. Indeed, there is no consensus on the character of the action for annulment of an objection neither in the decisions of the Supreme Court nor in the doctrine.

There is no explicit regulation regarding the effects of the arbitration agreement between the creditor and debtor on general enforcement proceedings in the Bankruptcy and Enforcement Code, Code of Civil Procedure and International Arbitration Law.

Arbitration agreement is a legal way that ensures the settlement of disputes between the parties by the arbitrators. In case of concluding a valid arbitration agreement, the parties shall bring the dispute before the arbitrator agreed for the settlement of dispute, instead of applying to the court. Therefore, the trials are conducted and concluded by the arbitrators. The final award of the arbitrator shall be subject to the execution proceeding with judgement provided that procedures and requirement stated in the laws are fulfilled.

According to certain opinions in the doctrine, parties leave the settlement of dispute between them to the arbitrator (excluding the state judiciary) by concluding an arbitration agreement, thus execution proceeding without a judgement cannot be initiated[1]. According to some other views, since the execution proceedings are not a lawsuit, it is possible for parties to make an execution proceeding without a judgement despite the arbitration agreement[2]. However, it should not be forgotten that parties of the arbitration agreement agrees on settling the dispute between them by special arbitrators instead of the “state judiciary”. What should be understood from the state judiciary is not only the state courts but also the judicial organization of the state as a whole. Since the execution offices are undoubtedly within the judicial organization of the state, it violates the arbitration agreement if execution proceedings are allowed to be initiated without applying to the arbitration.

Although the decisions of the Supreme Court differ from chamber to chamber in this issue, the following statements are included in one of the decisions related that execution proceeding cannot be done despite the existence of an arbitration agreement: “In the agreement regarding the plaintiff’s leasing of defendant's compressor, it is decided that the parties will go to the arbitrator. It is understood from the written notification that there has been a dispute between the parties. Plaintiff cannot revoke the arbitration clause unilaterally and start execution proceedings. It is required to be decided that execution proceeding is invalid since the debt is not determined by applying to the arbitration. If the debt is determined by arbitration execution proceeding can be initiated. It is understood from the justification of the court of the first instance that it was decided accordingly. Therefore, the Court decided to approve the decision”[3]. This is because the arbitrators make a final decision as a result of the arbitration trial and this decision binds all executive bodies (such as courts and execution offices). Since the action for annulment of objection is a case which is heard in accordance with the general provisions and settles the dispute for certain, it is quite normal that this case can be heard before the arbitrator.

In conclusion, Ejder Yilmaz's proposal will ensure the elimination of the current contradiction in the doctrine and judicial decisions by clarifying the issue and eliminating of uncertainty. In this case, if all these contradictions cannot be solved by the Supreme Court by the means of a decision of joint chambers, it seems possible to eliminate contradictions by making an amendment in domestic arbitration Article 407 of Code of Civil Procedure and in international arbitration Article 1 of International Arbitration Law as “In case of the existence of an arbitration agreement, it cannot be applied directly to the enforcement proceedings without a judgement without applying to the arbitration”.[4]