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Istanbul Arbitration Center (ISTAC) Rules of Arbitration

The Istanbul Arbitration Center ("ISTAC") was established in line with the objectives to form an independent and autonomous institutional arbitration center that is capable of competing internationally. This arbitration center is expected to be ahead of other arbitration institutions in matters such as speed and finalization of awards.

ISTAC Rules of Arbitration and Rules of Mediation ("ISTAC Rules of Arbitration" or "Rules") entered into force on 26 October 2015. The Rules comprise provisions that both reflect generally accepted practices in international arbitration, and provide solutions to the current needs of arbitration and mediation processes.

In our article, we shall provide a brief review of the organizational structure of ISTAC, and ISTAC Rules of Arbitration.

General Information

ISTAC is comprised of a national court, an international court (together, the "Court") and a secretariat ("Secretariat"). The structure and function of the Court and the Secretariat are governed by Appendix II of the ISTAC Rules of Arbitration. The Court shall manage the process of resolution of disputes by the sole arbitrator or the arbitral tribunal.

ISTAC Rules shall be applicable under two scenarios. The first scenario is an agreement for disputes to be resolved pursuant to the ISTAC Rules of Arbitration. The second is for the parties to an ad hoc arbitration to foresee that the arbitrators are appointed by the Court. In the latter case, the Court shall act as the appointing authority.

Arbitral Proceedings

In order for arbitration proceedings to commence, the claimant party shall submit to the Secretariat the arbitration agreement, and the request for arbitration. The claimant may commence the arbitration proceedings by directly submitting a statement of claim in lieu of a request for arbitration.

The respondent party shall respond to the request for arbitration within 30 days. An additional period may be granted to submit the answer to the request for arbitration.

Any objection governing the existence, validity, content, scope and application of the arbitration agreement shall be raised, together with the answer to the request for arbitration. In the event such an objection is raised, or, in the absence of an answer to the request for arbitration, the matter shall be resolved by the sole arbitrator, or the arbitral tribunal. The sole arbitrator or the arbitral tribunal is also authorized to resolve on their competence.

Arbitrators

The parties shall freely determine the number of arbitrators. The Rules refer to one arbitrator as the "sole arbitrator", and to multiple arbitrators (which must be an uneven number of arbitrators) as the "arbitral tribunal/board".

The parties shall unanimously appoint the sole arbitrator. If an agreement cannot be reached, the Court shall appoint the sole arbitrator. For an arbitral tribunal to compose, each party shall elect one arbitrator who shall be charged with determining the third arbitrator. As is the case for the sole arbitrator, in the event the third arbitrator cannot be designated, it shall be appointed by the Court.

In both cases, the arbitrator(s) shall be, and are expected to remain throughout the arbitration proceedings, impartial and independent; otherwise, the rules applicable to the challenge and replacement of arbitrator(s) may be referred to and be applicable.

Arbitral Proceedings

The ISTAC Arbitration Rules regulate the principles and rules applicable to the proceedings under its Section IV entitled "Arbitral Proceedings". Some of the material principles and rules are summarized, below:

  • The parties to a dispute have a right to fair trial. The arbitrator(s) shall conduct the proceedings, fairly, impartially, with a view

to ensure equality of the parties.

  • The proceedings shall be swiftly conducted with a view to cause minimal costs; hence, cost and time effectiveness is essential.
  • Unless agreed to the contrary, the arbitral proceedings shall be confidential.
  • Procedural matters not regulated under the Rules shall be subject to the rules agreed to by the parties, in the absence of which, to the rules determined by the arbitrator(s).
  • All parties to a proceeding shall act in compliance with the good faith principle.
  • Unless otherwise agreed, the place of arbitration shall be Istanbul.
  • The merits of the case shall be subject to the law designated by the parties. In the event that no such law applicable to the merits is specified, the arbitrator(s) shall apply the legal provisions they deem fit.
  • The arbitrator(s) may resort to all methods deemed suitable to determine the facts, including examination of the parties, witnesses, and experts, appointment of experts, and on-site inspections. Similarly, the arbitrator(s) may request a hearing for the examination of witnesses, experts, and specialists.
  • In the event of urgent matters that cannot await the appointment of arbitrator(s), an application may be made to the Secretariat for legal interim measures under Appendix I of the Rules, which are the Istanbul Arbitration Center Emergency Arbitration Rules. Otherwise, unless agreed to the contrary, the arbitrator(s) shall be authorized to apply legal interim measures that they deem fit.

Completion of the Discovery Phase and Award

In principle, the arbitrators shall render their award on the merits within six months starting from the approval of the terms of reference. The swift resolution of proceedings is a need that arose in the practice of arbitration, which also constitutes one of the objectives of the ISTAC. Notwithstanding this, however, through the agreement of the parties, or the request of the arbitrator(s), or ex officio, the Court is authorized to grant extensions to this period.

In the event the parties reach a settlement during the arbitration proceedings, upon the request of the parties and acceptance of the arbitrator(s), the settlement can be made in the form of an award.

Costs

Arbitration costs and advance fees are subject to detailed provisions under the Rules. Special emphasis is made to payment of fees, costs and advance payments in the commencement of the arbitration and the termination of proceedings.

In principle, the parties shall equally bear the costs of arbitration proceedings. However, if an advance payment is not duly made, the proceedings shall be suspended, and the parties shall be so notified. If one of the parties fails to pay their share of advance payments, the other party may pay the necessary advance amount. The arbitral award shall be rendered to comprise the decision governing the costs of arbitration.

Expedited Arbitral Proceedings

One of the most prominent aspects of the ISTAC and the Rules is the emphasis made with respect to time effectiveness. Pursuant to the ISTAC rules on Expedited Arbitration, unless agreed to otherwise by the parties, total claims that do not exceed TRL 300,000 on the date of initiation of arbitration are subject to the rules on expedited arbitration proceedings.

The expedited arbitration aims to shorten the duration of the arbitration proceedings as a whole, and not just the time periods in which the parties are subject to. Therefore, the expedited arbitration rules state that the sole arbitrator shall render his/her award within 3 months from delivery of the arbitration file to himself/herself. In fact, the award shall not be rendered later than one month commencing from the later date of the submission of the final written statement or the completion of the hearing.

Conclusion

ISTAC is the recently established arbitration center in Istanbul, which aims to be an internationally recognized center. The ISTAC Rules of Arbitration serve to establish an institutional arbitration that is independent, autonomous, and which is capable of competing internationally.

In addition to complying with the present generally accepted practices, the ISTAC Rules of Arbitration also aim to cover the needs that arise in practice. The most important example of this is the aim of the Rules to conclude a dispute in the shortest time period possible. This is especially the predominant feature foreseen in the rules applicable to expedited arbitrations for claims that do not exceed TRL 300,000, and which require disputes to be resolved under an award, latest, within three months. The special emphasis made to time and cost-effectiveness in the Rules aims to resolve disputes swiftly, and with minimal costs.

It is reported that ISTAC received its first international requests of arbitration in June 2016, one request from the Middle East, and another from Africa. We hope that ISTAC continues to grow prominently, in line with its current achievements.