Arbitration (tahkim)

Scope

Voluntary arbitration is founded on the arbitration agreement: the parties agree in writing, by a clause placed in the main contract or by a separate agreement, that all or part of their existing or future disputes will be referred to an arbitrator or arbitral tribunal (Code of Civil Procedure (HMK) Art. 412; Law No. 4686, Art. 4). The arbitration provisions of the HMK apply to disputes that contain no foreign element and whose seat of arbitration is Türkiye (HMK Art. 407). A foreign element exists, for instance, where the parties’ places of residence or business are in different states, or where the contract involves a transfer of capital or goods between countries; Law No. 4686 applies where the seat of arbitration is Türkiye or where the parties or arbitrators have chosen this Law (Arts. 1–2). Disputes arising from rights in rem over immovable property and from matters not subject to the parties’ will are not arbitrable (HMK Art. 408). Statutory arbitration routes, such as the mandatory arbitration provided against decisions of sports federations (Constitution Art. 59), are subject to their own special rules.

Practical significance

If a lawsuit is filed in court despite an arbitration agreement, the other party may raise the arbitration plea in the statement of defense; an objection not raised in time is not heard (HMK Arts. 116–117). Upon this objection, unless the agreement is void, ineffective or impossible to perform, the court dismisses the case on procedural grounds (HMK Art. 413; Law No. 4686, Art. 5). Against arbitral awards subject to these two statutes, an action to set aside may be brought before the regional court of appeal (bölge adliye mahkemesi) only on the grounds listed in the statute (HMK Art. 439; Law No. 4686, Art. 15); in arbitration routes under special statutes, the available remedies may differ. In domestic arbitration, the action to set aside is brought within one month from the notification of the award to the parties; the action does not automatically stay enforcement of the award, and enforcement can only be stayed upon provision of security (HMK Art. 439/4). Unless the parties agree otherwise, the arbitrator decides the merits within one year; this period may be extended (HMK Art. 427). The scope of the arbitration clause, the number of arbitrators, and the seat and language of arbitration should therefore be clearly defined in the contract.

Concepts often confused

Arbitration is most often confused with mediation: an arbitrator resolves the dispute by a binding decision; a mediator does not decide, helps the parties reach an agreement and, where necessary, makes a proposal. Domestic arbitration (HMK Art. 407 et seq.) and international arbitration (Law No. 4686) are also distinct: the foreign element and the seat of arbitration determine which regime applies. The grounds for setting aside are largely similar in the two statutes; the difference lies especially in procedure: under the HMK the action to set aside is brought within one month and does not automatically stay enforcement, whereas under Law No. 4686 the period is thirty days, the action automatically stays enforcement, and the parties may waive the right to bring an action to set aside (HMK Art. 439; Law No. 4686, Art. 15). Enforcement in Türkiye of an arbitral award rendered in a foreign country depends on an enforcement (tenfiz) decision (Law No. 5718 on International Private and Procedural Law, Art. 60 et seq.).