The functions of state courts with regard to arbitration-related matters vary on a wide spectrum, from the collection of evidence through state courts, which would support the functions of the arbitral tribunal, to functions aimed at supervision of arbitration proceedings, such as set-aside actions. Taking these important roles into consideration, the determination of the competent court in arbitration-related matters is very important in order to avoid additional time and cost-related issues arising from the determination of the competent courts.
Under Turkish law, some of the legal provisions regulating competent courts on arbitration-related matters were unclear, which in turn has caused differing interpretations from the Turkish Court of Cassation. To this end, important amendments pertaining to the proceedings to be conducted by Turkish courts as they relate to arbitration proceedings have been introduced through Law numbered 7101 on Amendment of the Enforcement and Bankruptcy Law and Certain Laws ("Law No. 7101"). Accordingly, important provisions that clarify the competent courts in arbitration-related court proceedings have been adopted. Additionally, the provisions regulating domestic and international arbitrations have been harmonized, and provisions reflecting current international arbitration practices have been adopted.
Whereas Law No. 7101 contains various provisions regulating a number of different topics, the amendments made through Law No. 7101 that are analyzed in this article pertain to provisions of International Arbitration Act numbered 4686 ("IAA") and the Code of Civil Procedure numbered 6100 ("CCP") that regulate arbitrations.
Determination of Competent Courts under the IAA
The general rule under the IAA pertaining to competent courts to hear disputes related to arbitration proceedings, namely, Article 3 of the IAA, sets forth that the civil court of first instance located at the legal seat or habitual residence or place of business of the respondent has jurisdiction. If the respondent does not have its legal seat or habitual residence or place of business in Turkey, the Civil Court of First Instance of Istanbul shall be competent to hear the dispute.
Prior to the legislative amendments that are analyzed in this article, controversies existed concerning cases having a commercial nature, and which would fall within the jurisdiction of the commercial courts. These controversies have first been addressed through the amendment introduced by Law No. 6545 to Art. 5 of the Law on Establishment, Jurisdiction, and the Competence of Civil Courts of First Instance and Regional Courts of Appeal. Accordingly, arbitration-related court proceedings to be conducted pursuant to the IAA and CCP shall be within the jurisdiction of the commercial courts.
On the other hand, following the adoption of this provision, decisions have been granted in arbitration-related matters by civil courts of first instance, instead of the commercial courts. Pursuant to this amendment introduced with regard to the competent court, the Court of Cassation granted many decisions emphasizing the competent court for arbitration-related matters, and it reversed the decisions of the civil courts of first instance, which had not been given in accordance with the amendments introduced.1
Finally, through a new provision in the IAA adopted by Law No. 7101, it has been clarified that the competencies granted to the civil court of first instance under the IAA would be undertaken by civil courts or commercial courts of first instance, depending on the subject of the dispute. It should be emphasized that this provision shall be applied with regard to competencies aside from the set-aside actions, which are within the jurisdiction of regional courts of appeal, as shall be explained, below. Accordingly, the objections to be made to the arbitration clauses, lawsuits pertaining to appointment or challenge of arbitrators, request of assistance from state courts concerning collection of evidence, and lawsuits pertaining to the extension of duration of the term of arbitration, shall be within the jurisdiction of either civil courts or commercial courts of first instance, depending on the subject of the dispute.
Competent Courts in Set-Aside Proceedings under the IAA
All of these provisions aside, Law No. 7101 introduced the modification of the competent courts in set-aside proceedings under the IAA. With the amendment made to Art. 15/A/1 of the IAA through Law No. 7101, the competent regional court of appeal has been determined as the competent court for set-aside actions. Accordingly, regional courts of appeal, which have been established in accordance with the adoption of a three-tier appellate review system in Turkey, shall hear set-aside actions, instead of first instance courts.
It should be emphasized that this provision is in line with current international arbitration practices. More specifically, in international arbitration practices, the legislation in France, Switzerland, and Germany provide provisions stating that set-aside actions shall be heard by courts of appeal. For instance, in France, the set-aside actions to be filed against arbitral awards shall be heard by the court of appeal (Cour d'Appel) located at the place of arbitration2. Similarly, in Switzerland, the Swiss Federal Court has competence to set-aside actions3. Lastly, in Germany, in lawsuits related to arbitrations to be filed before state courts, including set-aside actions, the High Regional Court (Oberlandesgericht, OLG) has jurisdiction4. Under German law, the reason why courts of second instance have jurisdiction concerning the lawsuits on arbitration proceedings to be filed before state courts is that the functions that the courts of first instance would normally assume are undertaken by the arbitral tribunal during arbitration proceedings5. Accordingly, the lawsuits to be filed before state courts would be finalized in a faster and more efficient manner.
In light of our explanations, the provision setting forth that the regional courts of appeal would be competent in set-aside actions concerning arbitral awards is a very positive development.
Determination of Competent Courts under the CCP
The provisions of the CCP are to be applied to arbitration proceedings that do not have a foreign element pursuant to the IAA. Accordingly, these provisions shall be applied to domestic arbitration proceedings.
Prior to the amendments that have been introduced by Law No. 7101, the provisions of the CCP set forth that the regional courts of appeal shall have jurisdiction with regard to the lawsuits to be filed before state courts concerning arbitral proceedings. With the amendment of Art. 410 of the CCP, the competent court for arbitration-related lawsuits has been determined as the civil court or the commercial court of first instance located at the place of arbitration, depending on the subject of the dispute.
Competent Courts in Set-Aside Proceedings under the CCP
Another amendment introduced by Law No. 7101 is the provision pertaining to the jurisdiction of regional courts of appeal located at the seat of arbitration, with regard to set-aside actions to be initiated against the arbitral awards within the scope of the CCP, namely, Art. 439/1 of the CCP. The provision prior to this amendment set forth that the courts of first instance located at the place of arbitration shall be competent with regard to set-aside actions.
Through these amendments introduced, the provisions of the CCP have been harmonized with the IAA. Pursuant to Law No. 7101, the competent court, with regard to lawsuits regarding arbitration proceedings to be initiated before state courts, is the civil court or commercial court of first instance, depending on the subject of dispute, similar to the provisions under the IAA. The set-aside actions are the exception to this general rule that shall be heard by the regional courts of appeal.
A quick review of the provisions regulating competent courts on arbitration-related matters reveals that this issue had been regulated through unclear legal provisions, which caused controversies in practice, and which differ between the IAA and CCP. In order to compensate for this lack of clarity, the legislator introduced many amendments in recent years. Law No. 7101 is the last piece of legislation aiming to eliminate the confusions on the matter, as well as to harmonize the provisions regulating state court proceedings on national and international arbitrations.
Through Law No. 7101, the amendments made to the provisions regulating lawsuits pertaining to arbitration proceedings under the IAA and CCP have been harmonized. Under both legislations, the competent court with regard to set-aside actions against arbitral awards is the regional court of appeal. With regard to other lawsuits pertaining to arbitral proceedings, the civil court or commercial court of first instance shall be competent, depending on the subject of dispute. The provision pertaining to the competence of regional courts of appeal, instead of the courts of first instance in set-aside actions, is in line with international practice on this matter. These provisions would, beyond any doubt, contribute to the arbitration-friendliness of the Turkish legislation.
- Decisions of the 11th Chamber of the Court of Cassation dated 01.12.2016 and numbered 2016/7420 E., 2016/8731 K; dated 07.03.2016 and numbered 2016/1593 E., 2016/2463 K.
- French Code of Civil Procedure, (Code de Procédure Civile), Art. 1519.
- Federal Statute on Private International Law, Art. 191.
- German Code of Civil Procedure, (Zivilprozessordnung, ZPO), Art. 1062.
- Karl-Heinz Bockstiegel, Stefan Kröll, Patricia Nacimiento, Arbitration in Germany: The Model Law in Practice (2nd ed.), p. 18, fn. 69.