Amendments Introduced through Law No. 7101 on Arbitration Proceedings

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State courts have very important functions concerning
arbitration proceedings. These functions may aim to provide assistance to
arbitration proceedings, such as collection of evidence through state courts,
which would support the functions of the tribunal, or functions aimed at
supervision of arbitration proceedings, such as set-aside actions. The legal
provisions regulating these functions play an important role in the
determination of whether a particular state has an arbitration-friendly
legislation.

Important amendments pertaining to the proceedings to
be conducted by Turkish courts related to arbitration proceedings have been
introduced through Law numbered 7101 on Amendment of the Enforcement and
Bankruptcy Law and Certain Laws[1]
(“Law”). Accordingly, the provisions regulating domestic and international
arbitrations have been harmonized. Additionally, provisions reflecting current
international arbitration practices have been adopted. The amendments
introduced through the Law shall be analyzed in this article.

In
General

Firstly, the Law primarily introduces important
amendments to Enforcement and Bankruptcy Law numbered 2004 (“EBL”). These
amendments shall not be analyzed in depth in this article; however, it is worth
emphasizing the provisions on the abolishment of postponement of bankruptcy,
amendments on the provisions regulating the concordat, modifications on the
provisions on priority of receivables under Art. 206 of the EBL, and
introduction of compulsory electronic notifications concerning the natural and
legal persons set forth under Art. 7/a of Notification Law numbered 7201[2]

The amendments made through the Law which is analyzed
in this article pertain to provisions of International Arbitration Act numbered
4686 (“IAA”) and the Code of Civil Procedure numbered 6100 (“CCP”) regulating
arbitrations.

Amendments
Pertaining to Competent Courts under the IAA

One of the important amendments introduced through the
Law is the modification of the competent courts in set-aside proceedings under
the IAA.

Pursuant to the provision under the IAA prior to this
amendment, the competent court in set-aside proceedings was the civil court of
first instance. In addition to this provision, through the amendment introduced
by Law No. 6545[3] to Art. 5 of the Law on Establishment, Jurisdiction and Competence of Civil
Courts of First Instance and Regional Courts of Appeal, it has been regulated
that the set-aside actions pertaining to arbitration proceedings under the IAA
shall be heard by a panel of judges comprised of one chairman and two members.
Pursuant to these provisions, prior to the amendment of the IAA, the competent
courts for set-aside actions were the commercial courts of first instance.

With the amendment made to Art. 15/A/1 of the IAA
through the Law, the regional court of appeal, which is competent as per the
location of the civil court of first instance pursuant to Art. 3 of the IAA[4], has been determined as the competent court for set-aside actions.

With this provision, the set-aside actions to be
initiated under the IAA shall be heard before the regional courts of appeal,
and not the first instance court. It should be emphasized that this provision
is in line with current international arbitration practice. More specifically,
in international arbitration practice, 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
arbitration[5]. Similarly, in Switzerland, the Swiss Federal Court has competence to set-aside
actions[6]. Lastly,
in Germany, in lawsuits related to arbitration to be filed before state courts,
including set-aside actions, the High Regional Court (Oberlandesgericht, OLG) has jurisdiction[7]. 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 proceedings[8]. 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.

Right
of Appeal against the Decisions to be given in Set-aside Actions under the IAA

Through the amendment of Art. 15/A/7 of the IAA made
by the Law, the decisions to be given in set-aside actions may be subject to
appeal proceedings under the CCP. Pursuant to the provision prior to this
amendment, it was possible to file an appeal against these decisions pursuant
to Code of Civil Procedure numbered 1086; however, it was not possible to file
for revision of decision.

Subsequent to the regional courts of appeal starting
to operate, the provisions of Code of Civil Procedure numbered 1086 on appeal
proceedings have ceased to be applied. With the amendments made by the Law to
the IAA, it has been taken into consideration that the CCP does not regulate
the possibility of revision of decision and, accordingly, it has been clarified
that filing an appeal against these decisions is possible.

Competent
Court as per the Subject of Dispute under the IAA

Through a new provision in the IAA adopted by the Law,
it has been clarified that the competences 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 dispute. It should be emphasized
that this provision shall be applied with regard to competences aside from the
set-aside actions, which are within the jurisdiction of regional courts of
appeal. 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.

Amendments
introduced to the CCP by the Law

Important amendments have been introduced to the
provisions on arbitration of the CCP by the Law. To begin with, with the
amendment of Art. 410 of the CCP, the competent court with regard to the
lawsuits to be filed before state courts concerning arbitral proceedings has
been determined as the civil court of the commercial court of first instance
located at the place of arbitration, depending on the subject of the dispute.
The provision prior to this amendment set forth that the regional courts of
appeal shall have jurisdiction with regard to these lawsuits.

Another amendment introduced by the Law 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, the provisions of the CCP
have been harmonized with the IAA. Pursuant to the Law, 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, which shall be
heard by the regional courts of appeal.

Conclusion

Through the Law, 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.

(First published on the website of Erdem&Erdem Law Office in March 2018:

http://www.erdem-erdem.av.tr/publications/newsletter/amendments-introduced-through-law-no-7101-on-arbitration-proceedings/) 

[1] The Law on Amendment of the
Enforcement and Bankruptcy Law and Certain Laws, Official Gazette (OG), No. 30361,
March 15, 2018

[2] For the memorandum concerning
the important amendments introduced by the Law, please see http://www.erdem-erdem.av.tr/homepage/mail/the-law-numbered-7101-on-the-amendments-in-enforcement-and-bankruptcy-law-and-certain-laws/
(Access date: March 2018).

[3] Law no. 6545 on Amendment of the
Turkish Penal Law and Certain Laws, OG, No. 29044, June 28, 2014.

[4] Pursuant to Art. 3 of the IAA,
concerning the proceedings which fall within the scope of competence of state
courts under the IAA, the civil court of first instance located at the legal
seat or habitual residence or place of business of the respondent, or in case
the respondent does not have its legal seat or habitual residence or place of
business in Turkey, the Civil Court of First Instance in Istanbul shall be
competent to hear the dispute.

[5] French Code of Civil Procedure,
(Code de Procédure Civile), Art. 1519, https://www.legifrance.gouv.fr/affichCode.do;jsessionid=82970190322B23ADA21851631E3097A5.tplgfr23s_1?idSectionTA=LEGISCTA000023427652&cidTexte=LEGITEXT000006070716&dateTexte=20180404
(Access date: March 2018).

[6] Federal Statute on Private
International Law, Art. 191. /developments/wp-content/uploads/sites/19/2018/10/IPRG_english.pdf
(Access date: March 2018).

[7] German Code of Civil Procedure,
(Zivilprozessordnung, ZPO), Art. 1062, https://www.gesetze-im-internet.de/englisch_zpo/englisch_zpo.html#p3674 (Access date: March 2018).

[8] Karl-Heinz Bockstiegel, Stefan
Kröll, Patricia Nacimiento, Arbtration in Germany: The Model Law in Practice (Second
Edition), p. 18, fn. 69, http://www.kluwerarbitration.com (Access date: March 2018).

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