Interplay Of Arbitration And Bankruptcy Proceedings: A Turkish Law Perspective

The intersection of bankruptcy proceedings and arbitration clauses under Turkish law poses intricate challenges, particularly concerning the rights of creditors to initiate bankruptcy proceedings against a debtor when an arbitration clause exists. To unravel this issue, we will examine the extent to which an arbitration clause may prevent creditors from successfully initiating bankruptcy proceedings in Turkey.

Arbitrability of Bankruptcy Proceedings

Under Turkish law, parties may refer their disputes to arbitration only if the dispute's subject matter is arbitrable. This principle is captured in both Article 1 of the International Arbitration Law (IAL) and Article 408 of the Civil Procedure Law (CPL). Both articles mandate that any dispute (i) relating to in rem rights of immovables located in Turkey and (ii) not within the parties' disposal, cannot be arbitrated. Therefore, bankruptcy proceedings, being of a public policy nature and affecting all creditors of