Can Claims Arising From the Contracts That Includes Arbitration Clause Be Subject To Bankruptcy Proceedings? 20 November 2019

The parties may decide to settle the disputes that have arisen or may arise between them within the frame of determined country law and by the arbitrators that they have agreed by putting an arbitration clause to the contract signed between them or by concluding separate arbitration agreement instead of ordinary state judiciary. Article 4 of the International Arbitration Act (“IAA”) no. 4686 defined the arbitration agreement on the basis of the definition in article 2/1 of The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) dated 1958. Pursuant to this article, arbitration agreement is defined as: “an agreement that is concluded so as to settle all or some of disputes that have been arised or may arise from an existing legal relationship, whether or not arising from the agreement, via arbitration is arbitration agreement.”

On the other hand, pursuant to the article 5/2/b of New York Convention, in case the decisions that are recognized or enforced violate the public order of the country that is requested enforcement or recognition, respective country has right to reject the decision of enforcement or recognition. In addition, by means of stating in the article 1/4 of the IAA that “This law shall not apply to the disputes that are not subject to the will of two parties”, it is regulated that the arbitration clause shall not be valid for the matters regarding Turkish public order. In the decision of Court of Cassation General Assembly on the Unification of Judgements dated 28.01.1994, numbered 1993/4 E. 1994/1 K., it was regulated that parties can only conclude arbitration agreements regarding disputes that are not related to the public order.

In consideration of the abovementioned matters, it is apparent that there is uncertainty in the practice about the proceeding of collection of the claims arising from the contracts that include arbitration clause. In the article 154/3 of Enforcement and Bankruptcy Law, it is stated that “If the debtor and creditor appointed authorized court via written agreement, even the executive office of that place shall be deemed authorized for bankruptcy proceedings. In so far; jurisdiction agreement cannot be concluded for bankruptcy cases and the bankruptcy is filed in the commercial court where the debtor’s treatment center is located.” As it can be understood from the said provision, although the authorized executive office can be appointed via contract, the court authorized to decide bankruptcy is the court of debtor’s treatment center and this authority is absolute and related to the public order. As a matter of fact, it is stated in the numbered 2005/5976 E. 2005/10004 K. decision of Court of Cassation that “arbitration agreement is not possible in bankruptcy case.”

As is explained above, since the authority is related to the public order in bankruptcy cases and it is not subject to the will of two parties, it is not convenient for concluding an arbitration agreement. Therefore, until recently, claims arising from contracts that includes arbitration clause could be collected through bankruptcy proceedings that is related to the public order without being subject to the objection of arbitration clause. However, it is stated in the numbered 2016/5765 E. 2018/5560 K. decision of the 23rd Chamber of Court of Cassation that “the rule that the arbitration clause cannot be applied in the bankruptcy case is not related to the stage of determination of the claims but this rule is applied to in terms of state sovereignty principle about given award of bankruptcy ”In accordance with this award of Court of Cassation, the creditor of the contract that includes arbitration clause should determine the claim in the authority that is authorized by the arbitration agreement, then commence bankruptcy proceeding against the debtor with this declaratory judgement and file a bankruptcy case in the Commercial Court of First Instance located in debtor’s treatment center.

This issue may cause many problems in bankruptcy cases of which the creditor is foreign whereas the debtor is Turkish. The creditor shall determine the claim from the agency authorized by the arbitration agreement and have to file bankruptcy case at the debtor's treatment center again and the debtor may be able to object the bankruptcy case filed without the declaratory of claim by the arbitration authority.

As is explained above, the Chambers of Court of Cassation have various awards regarding the bankruptcy proceedings of the claims arising from the contracts that includes arbitration clause. For the follow-up of claims arising from the contract that includes arbitration clause, commencing bankruptcy proceeding without applying to arbitration may shorten or extend the process. For this reason, legal assistance must be taken by competent attorneys regarding the proceeding in which the claims arising from the contracts that include arbitration clause will be collected and then the proceeding should be commenced.

Türkçe Versiyonu İçin: http://www.kasaroglu.av.tr/tr/tahkim-sarti-bulunan-sozlesmelerden-dogan-alacaklarin-iflas-yoluyla-takibi