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Arbitration in Turkey has traditionally been developed as a resolution mechanism used in major commercial disputes involving a foreign party and in cases such as the preparation of the articles of association between the parties. Although the arbitration method is used much less in Turkey compared to litigation, commercial arbitrations are on the rise. Arbitration has increased, especially after the restructuring and replacement of the judiciary and judges, as well as the introduction of the ISTAC institution. This has resulted in more arbitration, rather than litigation, in commercial disputes. More recently, due to the initiative of the ISTAC institution and the change in basic regulations, arbitration has been legally accepted as an alternative to state courts in resolving disputes arising from public procurement contracts.
What is Arbitration
Arbitration can be defined as the agreement of the parties to resolve the disputes that have arisen or may arise between the parties, by independent persons called “arbitrators” instead of the traditional jurisdiction, and as a result of this agreement, on the condition of being within the scope of the subjects permitted by law.
Arbitration can be divided into national and international arbitration. In order for non-national decisions to be enforced in Turkey, they must be enforced according to the conditions set out in the New York Convention, to which Turkey is a party, and Turkish procedural laws.
Arbitration is divided into institutional and ad hoc:
Institutional arbitration: It is a type of arbitration in which the parties entrust the arrangement of the arbitration process to an arbitral institution. There are many arbitration organizations at the national and international level in the world. International Chamber of Commerce (ICC) “International Chamber of Commerce Arbitration Court” and London Court of International Arbitration (LCIA) “London International Arbitration Court” are the most important examples of institutional arbitration. In Turkey, the Istanbul Arbitration Center (ISTAC) is an example of institutional arbitration.
- When the parties choose institutional arbitration, the arbitral institution sets the rules for the arbitration process and performs oversight and administrative functions. Accordingly, it can be argued that institutional arbitration is preferred because of the reliability and the service provided to the parties.
- However, institutional arbitration may also have disadvantages in remuneration; For example, fees for arbitration services and the use of equipment such as courtrooms can be high. In addition, due to the bureaucratic structure of the organization, additional costs and delays may be caused.
Ad hoc arbitration: Unlike institutional arbitration, it is a type of arbitration in which an institution is not involved and the arbitration process is regulated by the parties. According to this type of arbitration procedure, the parties are not subject to local arbitration rules and may choose to apply the arbitration rules prepared by the United Nations Commission on International Commercial Law (UNCITRAL). These rules are the most widely used arbitration rules in international disputes in terms of ad hoc. This matter is governed by Article 1 of the UNCITRAL Arbitration Rules as follows:
“If the parties have agreed that a dispute between them in terms of a certain legal relationship, whether contractual or not, will be resolved in accordance with the UNCITRAL Arbitration Rules, such disputes will be resolved in accordance with these rules, subject to the amendments to be accepted by the parties.”
- Although it is claimed that ad hoc arbitration will be less costly than institutional arbitration since no money is paid to any institution, this is not always true. In institutional arbitration, the fees charged to the parties are determined in advance, but in ad hoc arbitration, arbitrator fees and expenses often create problems in the arbitration process, since there is no authority to determine costs or carry out secretarial procedures.
Advantages of Arbitration
The advantages of the arbitration procedure compared to cases heard in court are:
- Flexibility in procedures.
- Opportunity to choose the language of the transactions.
- Disputes can be resolved much faster than litigation.
- Less cost where the amount of the subject matter of the dispute is high.
- Ability to select arbitrators based on their experience and expertise in dispute resolution.
- Ability to keep the transactions made confidential.
- Much easier and wider applicability.
Disadvantages of Arbitration
The main disadvantage of arbitration is that it can often be much more costly than litigation when the amount in dispute is low.
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Arbitration Legislation in Turkish Law
International and local arbitrations are governed by different laws. The International Arbitration Law applies to international arbitrations established in Turkey or whose implementation is agreed by the parties or arbitrators. Domestic arbitration is subject to the Civil Procedure Law, which is valid only for arbitrations established in Turkey and does not contain any international elements.
Both laws are essentially based on the UNCITRAL Model Law. Swiss international arbitration law is used where the provisions of the International Arbitration Law differ from the UNCITRAL Model Law
Antalya Lawyer Ahmet Alkan Law Office
Antalya Lawyer Ahmet Alkan Law Office was established in Antalya Kepez in 2015 by Lawyer Ahmet Alkan. Alkan Law Office does not compromise its clients’ sacred right to defense in all areas of law, especially family and divorce law.
Antalya Lawyer Alkan Law Office provides not only legal services but also mediation services. Just click here to get information from our expert staff about all your legal transactions.
