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The recognition, enforcement, and setting aside of foreign court judgements and arbitral awards in Türkiye constitute processes in which the public policy doctrine emerges as one of the most critical criteria for judicial review, both in theory and in practice. Court of Cassation judgements determine the trajectory of case law concerning the scope and application of the public policy concept. In this article, the practical implications and developments are explained through Court of Cassation judgements rendered in recent years.[1]
Mere Inconsistency Between a Foreign Arbitral Award and a Criminal Court Judgement Does Not, In Itself, Constitute a Ground for Refusing Recognition
In its judgement of 8 November 2023, the General Assembly of the Court of Cassation (‘the General Assembly’) reviewed the application for enforcement and recognition of foreign arbitral awards rendered under the International Chamber of Commerce Arbitration Rules. The arbitral proceedings in question were conducted in two stages, and ultimately two arbitral awards were rendered, dated 13 December 2012 and 19 June 2013, respectively. In the recognition proceedings, separate allegations of public policy violation were raised in relation to each arbitral award.
The first instance court held that the arbitral award dated 13 December 2012 conflicted with a final judgement rendered by the Turkish criminal courts; and in respect of the arbitral award dated 19 June 2013, it found that, whilst the valuation report underlying the award had been prepared by the claimant and its initial submission had been rejected, it was subsequently submitted to the case file pursuant to the arbitral tribunal’s order and confidentiality determination, in a manner excluding commercial secrets; the identity of the report’s authors was kept confidential; and the report was evaluated without being disclosed to the respondent. Based upon these grounds, the court concluded that the principles of equality of arms, the right to present evidence, and the publicity of proceedings had been violated, and accordingly dismissed the enforcement applications concerning both arbitral awards on the basis of public policy.
The case was brought before the Court of Cassation, which held that there was no inconsistency between the arbitral award dated 13 December 2012 and the criminal court judgement, considering the reasoning of the acquittal, as the criminal court had concluded that there was insufficient, conclusive, and convincing evidence to support a conviction and that the elements of the alleged offence had not been established. As for the arbitral award dated 19 June 2013, the Court of Cassation found that the non-valuation-related parts of the report had been excluded and that no concrete evidence had been presented to prove that the respondent’s lack of access to the report constituted a procedural irregularity under the applicable arbitral rules; accordingly, it concluded that there had been no public policy violation and reversed the first instance judgement.
Following the reversal, the respondent filed an application for revision of the judgement, and upon reviewing this application, the Court of Cassation found that the partial submission of the report in contravention of the procedural rules agreed upon by the parties, the concealment of the identities of its authors, the lack of disclosure of the valuation models and methodologies applied, the absence of any opportunity for cross-examination of those individuals, and the fact that these limitations were not founded upon any legally valid or reasonable justification, amounted to a violation of the right to defence and constituted a violation of public policy. However, the Court of Cassation also held that the first instance court had erred procedurally and legally by rendering a single judgement rather than separate rulings with respect to each arbitral award, and accordingly reversed the judgement on grounds differing from its initial reasoning. Upon this second reversal based on different grounds, the first instance court resisted its previous judgement, and this judgement was appealed, bringing the matter before the General Assembly.
With regard to the arbitral award dated 19 June 2013, the General Assembly noted that this award had been excluded from the scope of review and held that the claimant had no legitimate interest in appealing this part of the judgement, thereby dismissing the appeal. As for the arbitral award dated 13 December 2012, the Court of Cassation ruled that the acquittal judgement rendered by the criminal court concerning the same factual circumstances did not constitute a ground to refuse the enforcement and recognition of the arbitral award, since the criminal court merely stated that the acts in question did not constitute a criminal offence, but did not make a clear and definitive assessment as to whether those acts were unlawful. Moreover, the arbitral award was rendered on the basis of an infringement of contractual obligations between the parties, which is distinct from criminal liability; consequently, there was no direct inconsistency between the arbitral award and the criminal court’s judgement. The General Assembly concluded that the first instance court’s judgement dismissing the enforcement and recognition of the arbitral award dated 13 December 2012 was incorrect, and reversed the lower court’s ruling in respect of that award. It also found that the court’s failure to render separate rulings for each arbitral award constituted a procedural
error
.[2]
Enforcement of a Foreign Bankruptcy Judgment Rendered Against a Non-Merchant Individual is Against Public Policy
In its judgement of 9 May 2023, the Court of Cassation assessed the public policy implications of an application for enforcement and recognition of a foreign court judgement concerning bankruptcy law. In the present case, enforcement and recognition in Türkiye was sought for a bankruptcy judgement rendered by a Dutch court against the claimant. However, the first instance court dismissed the application on the grounds that the claimant was not a merchant under Turkish law. Referring to Article 43 of the Enforcement and Bankruptcy Law (‘EBL’), the court held that only persons who are merchants or are subject to bankruptcy under special laws may be declared bankrupt in Türkiye, and that this limitation pertains to public policy.
The Regional Court of Appeal also dismissed the appeal on the merits, emphasising that the foreign judgement was manifestly contrary to Turkish public policy owing to the claimant’s non-merchant status.
The Court of Cassation upheld the lower court’s judgement, finding the reasoning lawful and procedurally correct. Consequently, the Court concluded that, for the enforcement of foreign bankruptcy judgements, it is lawful to consider whether the individual qualifies as a merchant under Turkish law and to evaluate the limitation set forth in Article 43 of the EBL within the scope of public policy.[3]
An Award Rendered in the Presence of a Duly Notified but Absent Arbitrator Does Not Constitute a Ground for Refusal of Recognition
In its judgement of 12 September 2023, the Court of Cassation examined whether the three-member arbitral tribunal had acted in accordance with procedural requirements when rendering its award. In the present case, one of the three arbitrators appointed by the parties failed to attend the deliberations owing to health and work-related reasons, despite having been duly notified of the meeting date; nevertheless, the remaining two arbitrators proceeded to issue the award. The first instance court held that the award rendered by two arbitrators was invalid pursuant to Article 295/2 of the Code of Civil Procedure (‘CCP’). The court further noted, consistent with Court of Cassation precedents, that an award rendered by two arbitrators without the participation of the third in the deliberations of a three-member tribunal is deemed invalid. Accordingly, even though this procedural irregularity had not been raised by the parties, the court found that it had to be taken into consideration ex officio under the setting aside grounds set out in Article 439 of the CCP, and concluded that the award was contrary to public policy pursuant to Article 439/2(g).
However, the Court of Cassation did not uphold this approach and stated in its judgement that, pursuant to Article 295(2) of the CCP, an award rendered by the two arbitrators with concurring votes remains valid even if the third arbitrator who was duly invited to the deliberation did not attend, and that such a circumstance does not constitute a public policy violation. This judgement indicates that procedural irregularities arising during the arbitral proceedings should not automatically be regarded as violation of public policy.[4]
The Application of Compound Interest in an Arbitral Award Does Not Constitute a Public Policy Violation
In its judgement of 16 June 2022, the Court of Cassation reviewed an application for recognition in Türkiye of a foreign arbitral award rendered in London. The respondent argued that there was no valid arbitration clause between the parties, that the appointment of the arbitrator was procedurally flawed, and that the compound interest awarded by the arbitrator was contrary to public policy. The first instance court held that the arbitration clause, which was formed through references made to the charter party, was valid under the New York Convention, and that the application of compound interest alone did not amount to a public policy violation, thereby granting recognition.
The Regional Court of Appeal upheld the judgement, and the Court of Cassation, upon appeal, found the lower court judgements to be in accordance with the law. The judgement provides a detailed assessment of the validity of arbitration clauses incorporated by reference, the exceptions applicable to procedural defects in the arbitrator appointment process, and the limits of public policy objections to compound interest. It affirms that references to the main contract may suffice to establish arbitration intent and that the principle of revision au fond should be preserved in the context of compound interest evaluations.[5]
Whether a Penalty Clause Is Excessive Cannot Be Reviewed Under Public Policy Grounds
In its judgement of 20 June 2022, the Court of Cassation reviewed an application to set aside an arbitral award rendered by the Istanbul Arbitration Centre. The dispute concerned a contractual penalty stipulated in a settlement protocol executed between the parties, arising from an infringement of the non-solicitation obligation. The claimants sought to set aside the award on the grounds that the penalty clause was excessive, no expert examination had been conducted, witness statements had not been considered, and the non-solicitation obligation violated competition law, thereby constituting an infringement of public policy.
However, the Court of Cassation upheld the judgement of the Regional Court of Appeal, which had found that the arbitration clause had been validly concluded between the parties, the arbitrator had acted within the scope of the clause and had not exceeded their authority, the proceedings were conducted in accordance with the expedited arbitration rules of the Istanbul Arbitration Centre as agreed by the parties, and that the principles of party equality and the right to be heard had been respected. The appellate court had further held that the absence of an expert report fell within the discretion of the arbitrator and that the non-solicitation obligation based on a non-compete clause did not violate public policy.
The Court emphasised, in particular, that whether a contractual penalty is excessive cannot be examined through the lens of public policy, as such an assessment would amount to a review of the merits. It was also stated that the non-solicitation obligation was limited in duration, constituted a matter of private law, and did not infringe upon the freedom to work. Finally, the Court concluded that the exclusive jurisdiction of the Competition Authority does not preclude arbitration in private law disputes. In doing so, the Court reaffirmed the limits of public policy objections in relation to penalty clauses and reiterated the principle that the merits of arbitral awards may not be examined by the courts.[6]
Law No. 805 Does Not Constitute a Ground for Refusal of Enforcement in Contracts Concluded Between Foreign Parties
In its judgement of 12 December 2023, the 6th Civil Chamber of the Court of Cassation reviewed objections raised against the recognition of an arbitral award. The respondent argued that the contract, being drafted in a foreign language, violated Law No. 805; that the mandatory pre-arbitration conciliation procedure had not been conducted; that the facility subject to the contract posed risks to public health; and that the right to a fair trial and the right of defence had been infringed. On these grounds, the respondent asserted that the arbitral award was contrary to public policy, both procedurally (violation of fair trial guarantees, limitation of the right to defence, failure to comply with pre-arbitration conciliation obligations) and substantively (existence of a facility allegedly posing risks to public and occupational health and safety).
The first instance court granted recognition, holding that the contract had been concluded between foreign companies and did not constitute an infringement of public policy. The court further noted that the allegations concerning public health risks fell within the scope of a review of the merits, and such matters could not serve as grounds for refusing enforcement.
The Regional Court of Appeal upheld the judgement, emphasising that Law No. 805 is only applicable where both parties to the contract are Turkish nationals, and consequently the use of a foreign language in the contract and proceedings did not infringe public policy. The court also found that the parties had the opportunity to present their claims and defences, including counterclaims, during the arbitration proceedings, and that the principles of equality of arms and the right to a fair trial had not been violated.
The Court of Cassation affirmed the judgement, finding the lower courts’ reasoning accurate and lawful. It held that the right of defence had not been restricted, no public policy violation had occurred, and the arbitral award had been rendered in accordance with both procedure and law. The Court of Cassation particularly underlined that the submission of evidence, the opportunity to file counterclaims, and the exercise of procedural rights within the arbitration process precluded allegations of unfair trial. It concluded that objections concerning public health and environmental safety were related to the merits of the arbitral award and thus could not be evaluated within the scope of public policy violation.[7]
Conflicting Arbitral Awards Rendered in Relation to the Same Dispute Constitute a Violation of Public Policy
In its judgement of 15 June 2022, the Court of Cassation reviewed an application to set aside arbitral awards rendered under the Rules of the Istanbul Chamber of Commerce Arbitration Centre. The parties were involved in two separate arbitration proceedings arising from the same contract but in different capacities: in Case No. 2019/7, the claimant was the party transferring the portfolio, whilst in Case No. 2019/9, the claimant was the transferee company. Each case was adjudicated by a different sole arbitrator, and conflicting assessments were made as to whether the contractual obligations of the same company had been duly performed. The Regional Court of Appeal dismissed the applications to set aside on the grounds that there was no complete identity of parties and claims in the two arbitral proceedings, that the arbitrators had discretion in evaluating the evidence, and that the divergence between the awards did not constitute a ground for setting aside.
However, the Court of Cassation held that, whilst courts are precluded from examining the merits of arbitral awards, conflicting awards based on the same factual circumstances may result in contradictory outcomes, which undermine the principles of legal certainty, transparency, and consistency, thereby constituting a public policy violation. According to the Court, whilst the award in Case No. 2019/7 found that the claimant had failed to fully perform its obligations, the award in Case No. 2019/9 concluded that the same party was not entitled to restitution of the contract price because it had fulfilled its obligations. Owing to this inconsistency, the Court found that the lower courts should have enquired into whether the award in Case No. 2019/7 had become final and should have assessed the potential res judicata effect. Rendering a judgement without conducting such an enquiry was found to be procedurally improper and contrary to public policy.
Consequently, the Court of Cassation reversed the judgement, finding that the inconsistency between the arbitral awards concerning the same set of facts constituted a violation of public policy.[8]
Conclusion
In recent years, the Court of Cassation has adopted a narrow interpretation of the public policy concept and has refrained from engaging in a review on the merits in setting aside and recognition proceedings brought against arbitral awards. The overall approach of the Court of Cassation is aligned with an arbitration-friendly stance. This reflects a positive judicial attitude towards the development of arbitration in Türkiye.
Authored by Mehveş Erdem Kamiloğlu, Erdem & Erdem Managing Associate.
[1] Kamiloğlu, Mehveş Erdem. 2021. “Public Policy as Grounds for Refusal of Recognition.” Erdem & Erdem. Access Date: June 1, 2025 (https://www.erdem-erdem.av.tr/en/insights/public-policy-as-grounds-for-refusal-of-recognition).
[2] General Assembly of the Court of Cassation dated 08.11.2023, Case No: 2022/660, Decision No: 2023/1066.
[3] Court of Cassation 6th Civil Chamber dated 09.05.2023, Case No: 2023/1965, Decision No: 2023/1732.
[4] Court of Cassation 6th Civil Chamber dated 12.12.2023, Case No: 2023/2416, Decision No: 2023/2676.
[5] Court of Cassation, 11th Civil Chamber dated 16.06.2022, Case No: 2020/7985, Decision No: 2022/4932.
[6] Court of Cassation 11th Civil Chamber dated 20.06.2022, Case No: 2021/3492, Decision No: 2022/5025.
[7] Court of Cassation 6th Civil Chamber dated 12.12.2023, Case No: 2023/3007, Decision No: 2023/4212.
[8] Court of Cassation 11th Civil Chamber dated 15.06.2022, Case No: 2022/2105, Decision No: 2022/4906.