I. INTRODUCTION
Arbitration is a dispute resolution method frequently resorted to by parties, particularly in international commercial relations. In the preference for this method, advantages such as the possibility of obtaining a faster outcome compared to state courts, the parties’ ability to appoint their own arbitrators, the possibility of conducting the proceedings confidentially, and the possibility of having persons who are experts in the relevant field act as arbitrators are decisive. In Turkish law, international arbitration is governed by the IAL, which was drafted by drawing inspiration from the 1985 UNCITRAL Model Law on International Commercial Arbitration (the “UNCITRAL Model Law”) adopted by the United Nations Commission on International Trade Law (UNCITRAL). One of the principal objectives of the IAL is to preserve the independence of arbitration proceedings and to ensure the finality of arbitral awards. In line with this objective, only a limited number (numerus clausus) of grounds for setting aside arbitral awards have been recognized, and the scope of the action for setting aside has been kept narrow. This limitation aims to preserve the effectiveness of arbitration and to prevent unnecessary court intervention. The action for setting aside constitutes the final stage before an international arbitral award becomes final, and this review serves as a balancing function that both protects the rights of the parties and sustains the reliability of the institution of arbitration.
II. GENERAL FRAMEWORK OF THE GROUNDS FOR SETTING ASIDE
Article 15(A)(1) of the IAL sets out, in a limited number, the grounds on which an arbitral award may be set aside. These grounds cover situations involving non-compliance with the fundamental principles of the arbitration process and are, to a large extent, aligned with the universally accepted grounds for setting aside recognized in doctrine. The grounds for setting aside regulated under Article 34 of the UNCITRAL Model Law also substantially correspond to the provisions of the IAL. This parallelism demonstrates that Turkish international arbitration law is in harmony with international standards. The fact that the grounds for setting aside provided under the IAL are limited in number is of critical importance for preserving the advantages of speed and efficiency offered by arbitration proceedings. Indeed, broad grounds for setting aside may lead parties to easily bring arbitral awards before the courts, thereby eliminating the advantages of finality and speed afforded by arbitration. For this reason, the IAL does not position the action for setting aside as an appeal mechanism, but rather as a limited judicial review mechanism. The setting aside of an arbitral award is not a review concerning the content and merits of the award; rather, it is a formal and procedural review. In an action for setting aside, the court does not assess the correctness or appropriateness of the arbitral award; it examines only whether the award was rendered in violation of certain procedural safeguards.
III. GROUNDS FOR SETTING ASIDE THAT MUST BE RAISED AND PROVED BY THE APPLICANT PARTY
The grounds for setting aside regulated under Article 15(A)(1) of the IAL cover matters relating to whether the arbitration agreement and the arbitration proceedings have been conducted in accordance with law, such as the validity of the arbitration agreement, the proper constitution of the arbitrator or arbitral tribunal, compliance with the arbitration period, whether the arbitrators have acted within the limits of their authority, and whether the proceedings have been conducted in accordance with the procedural safeguards afforded to the parties. Since these grounds essentially concern the rights and interests of the parties in the arbitration process, they are, as a rule, examined only to the extent that they are raised and proved by the applicant party.
1. Incapacity of One of the Parties to the Arbitration Agreement or Invalidity of the Arbitration Agreement Under the Law Chosen by the Parties or, in the Absence of Such Choice of Law, Under Turkish Law
Article 15(A)(1)(a) of the IAL provides that an arbitral award may be set aside where the arbitration agreement does not exist or is invalid. This subparagraph emphasizes the existence and validity of the arbitration agreement, which is one of the most fundamental elements of arbitration. Since arbitration is a dispute resolution method based on the consent of the parties, the absence of a valid arbitration agreement directly affects the legitimacy of the arbitral award. The non-existence of the arbitration agreement means that no arbitration agreement has been concluded between the parties at all. Invalidity, on the other hand, refers to the situation where the arbitration agreement exists but has not been validly concluded from a legal standpoint. Article 4 of the IAL regulates the formal requirements of the arbitration agreement and provides that the arbitration agreement shall be deemed invalid where these requirements are not satisfied. Therefore, where there is no existing or valid arbitration agreement between the parties, the legal basis of the arbitral award disappears, and such award will be subject to setting aside under Article 15(A)(1)(a) of the IAL.
2. Failure to Comply with the Procedure Agreed by the Parties or Prescribed in the IAL for the Selection of the Arbitrator or the Arbitral Tribunal
Article 15(A)(1)(b) of the IAL permits the setting aside of an arbitral award where the arbitrator or the arbitral tribunal has not been constituted in accordance with the procedure agreed by the parties or prescribed under the IAL. This subparagraph emphasizes the importance of the proper constitution of the arbitrator or arbitral tribunal, which constitutes one of the foundational elements of arbitration proceedings. The constitution of the arbitrator or arbitral tribunal is determined in accordance with the IAL, the agreement of the parties and/or the institutional arbitration rules chosen by the parties. The parties may freely determine the number of arbitrators, the manner in which the arbitrators are to be selected, and whether a sole arbitrator or an arbitral tribunal is to be constituted. An arbitral tribunal that is not constituted in accordance with the IAL or the parties’ agreement does not possess the character of a legitimate adjudicatory body, and any award rendered by it is deemed unlawful.
3. Failure to Render the Award Within the Arbitration Period
Article 15(A)(1)(c) of the IAL provides that an arbitral award may be set aside where it has not been rendered within the arbitration period. This subparagraph emphasizes that arbitration proceedings are subject to a time limit and that the arbitrator or arbitral tribunal is required to render the award within a specified period. The arbitration period is determined by the agreement of the parties, and where the parties do not make any arrangement in this regard, the provisions of the IAL apply. Pursuant to Article 10(B)(2) of the IAL, unless otherwise agreed by the parties, in proceedings with a sole arbitrator, the arbitrator, and in proceedings with more than one arbitrator, the arbitral tribunal, shall render the award on the merits within one year as from the date of the selection of the arbitrator or, in cases with more than one arbitrator, the date on which the minutes of the first meeting of the arbitral tribunal are drawn up. Accordingly, where an arbitral award is rendered after the expiry of the applicable arbitration period, the award may be set aside under Article 15(A)(1)(c) of the IAL.
4. The Arbitrator or the Arbitral Tribunal Unlawfully Deciding That It Has or Does Not Have Jurisdiction
Article 15(A)(1)(d) of the IAL provides that an arbitral award may be set aside where the arbitrator or the arbitral tribunal has unlawfully decided that it has or does not have jurisdiction. This subparagraph defines the limits of the kompetenz-kompetenz principle and allows for the review of decisions rendered by the arbitral tribunal concerning jurisdiction. Pursuant to the kompetenz-kompetenz principle, the arbitral tribunal may decide on its own jurisdiction, and such decision is binding within certain limits. However, the arbitral tribunal’s decision regarding jurisdiction is not absolute, and where an unlawful decision is rendered, it may be subject to an action for setting aside. Within the scope of this subparagraph, two different situations are evaluated. The first is where the arbitral tribunal accepts that it has jurisdiction although it in fact does not. This situation may arise where the arbitration agreement does not exist or is invalid. The second is where the arbitral tribunal accepts that it does not have jurisdiction although it in fact does. This situation arises where, despite the existence of a valid and effective arbitration agreement, the arbitral tribunal renders a decision declining jurisdiction on the basis of an erroneous legal assessment. In both cases, the setting aside of the arbitral award does not constitute a review of the merits of the award, but rather is based on the determination of the unlawfulness of the arbitral tribunal’s position on jurisdiction. In the action for setting aside, the court reviews de novo the arbitral tribunal’s assessment regarding jurisdiction, and this review concerns not the correctness of the arbitral award, but its lawfulness.
5. The Arbitrator or the Arbitral Tribunal Deciding on a Matter Falling Outside the Scope of the Arbitration Agreement, Failing to Decide on the Entirety of the Claim, or Exceeding Its Authority
Article 15(A)(1)(e) of the IAL provides that an arbitral award may be set aside where the arbitrator or the arbitral tribunal has decided on a matter falling outside the scope of the arbitration agreement, has failed to decide on the entirety of the claim, or has exceeded its authority. Excess of authority by the arbitrator or the arbitral tribunal may occur in three different forms. The first is where the arbitrators decide on matters that are not directly related to the subject matter of the dispute submitted by the parties to arbitration. The second is where the arbitrators fail to render any decision on one of the claims advanced by the parties. The third is where the arbitrators render a decision on a matter that does not fall within the parties’ agreement or arbitration clause. If only a part of the arbitral award contains an excess of authority, then, pursuant to Article 15(A)(3) of the IAL, where it is possible to sever the matters falling within the scope of the arbitration agreement from those falling outside its scope, only the part of the arbitral award that concerns matters outside the scope of the arbitration agreement may be set aside.
6. The Arbitration Proceedings Not Being Conducted in Accordance with the Parties’ Agreement as to Procedure or, in the Absence of Such Agreement, with the Provisions of the IAL, and This Situation Having an Effect on the Merits of the Award
Although arbitration proceedings are subject to more flexible rules compared to state court proceedings, it is mandatory that basic procedural safeguards be afforded to the parties. Within the scope of this subparagraph, two fundamental elements must be assessed. The first is that the proceedings have not been conducted in accordance with the parties’ agreement or, in the absence of such agreement, with the provisions of the IAL. The second is that this procedural violation has had an effect on the merits of the award. In this sense, the mere existence of a procedural violation is not sufficient by itself; the violation must also have affected the outcome of the arbitral award. In practice, violations such as the arbitral tribunal’s failure to grant one of the parties a sufficient opportunity to present its claims and defenses, failure to grant the parties sufficient time, unjustified rejection of requests to submit evidence, or rendering a decision without evaluating the parties’ arguments are assessed within the scope of this subparagraph.
7. Failure to Observe the Principle of Equality of the Parties
Article 15(A)(1)(g) of the IAL provides that an arbitral award may be set aside where the principle of equality of the parties has not been observed. Through this provision, non-compliance with the principle of equality of the parties, which is one of the fundamental principles of arbitration proceedings, has expressly been accepted as a ground for setting aside. The principle of equality of the parties constitutes one of the cornerstones of both national and international arbitration law, and this principle requires that the same procedural rights be granted to both parties and that the arbitrators act impartially. The principle of equality of the parties is directly related to the independence and impartiality of the arbitrators, and violation of this principle fundamentally undermines the legitimacy of the arbitral award. In practice, for it to be accepted that the principle of equality of the parties has been violated, the violation is required to be clear and serious in nature.
IV. GROUNDS FOR SETTING ASIDE TAKEN INTO ACCOUNT EX OFFICIO BY THE REGIONAL COURT OF APPEAL
The grounds for setting aside examined under the previous heading are, as a rule, grounds that must be raised and proved by the applicant party and are assessed primarily within the framework of the parties’ private-law interests. By contrast, the grounds for setting aside regulated under Article 15(A)(2) of the IAL concern situations which, by their nature, go beyond the limits of party autonomy and are more closely connected with the general structure of the legal order. For this reason, these grounds may be taken into account ex officio by the Regional Court of Appeal without the need for them to be separately invoked by the parties. This review, conducted from the perspectives of arbitrability and public policy, demonstrates that arbitration proceedings are subject to review not only within the framework of the relationship between the parties, but also in terms of the fundamental values protected by the legal order.
1. The Dispute Subject to the Award of the Arbitrator or Arbitral Tribunal Not Being Arbitrable Under Turkish Law
The fact that the dispute subject to the award of the arbitrator or the arbitral tribunal is not arbitrable under Turkish law constitutes one of the situations requiring the setting aside of the arbitral award. Arbitrability refers to whether a dispute is suitable to be resolved through arbitration by the parties’ will, and under Turkish law, disputes relating to rights in rem over immovable property located in Türkiye and disputes that are not at the parties’ free disposal are particularly considered to fall outside this scope. Within this framework, certain disputes relating to family law, matters concerning bankruptcy, or disputes arising out of certain contractual relationships in which the protection of one of the parties is at the forefront may, depending on the nature of the concrete case, be counted among the examples that may be subject to an assessment in terms of arbitrability. Accordingly, the determining factor in the review of arbitrability is not merely the parties to the dispute, but also the subject matter of the dispute and the limits of the freedom of disposition granted by the Turkish legal order to party autonomy in this field.
2. The Award Being Contrary to Public Policy
Contrariety to public policy is one of the situations requiring the setting aside of an arbitral award, and public policy refers to the body of rules that protect the fundamental principles on which the legal order rests, the moral understanding of society, and its essential interests. Within this scope, safeguards relating to fundamental rights and constitutional principles are also taken into consideration in the assessment of public policy. However, since contrariety to public policy is not a fixed concept the limits of which can be determined with precision in advance, it must be assessed in light of the characteristics of the concrete case, the time, and the context of the dispute. Nevertheless, the concept of public policy should not be turned into a general instrument for expanding the grounds for setting aside; indeed, the exceptional nature of court intervention in arbitration proceedings requires that public policy review also be applied narrowly and proportionately. For this reason, the essential issue in the review of contrariety to public policy is whether the arbitral award creates an open and serious conflict with the fundamental structure of the Turkish legal order.
V. CONCLUSION
In conclusion, the setting aside of an arbitral award is not a legal remedy that enables a re-examination of the merits of awards rendered in arbitration proceedings, but rather a limited judicial review mechanism that supervises whether the arbitration process has been conducted in accordance with party autonomy, procedure, and the fundamental boundaries of the legal order. The fact that the grounds for setting aside are regulated in a limited number under the International Arbitration Law serves the purpose of preserving the speed, finality, and effectiveness of arbitration, and within this framework the court’s review is directed not to the correctness of the arbitral award, but to its lawfulness. In this respect, while the parties’ procedural safeguards and party autonomy are protected on the one hand, the indispensable limits of the legal order, such as arbitrability and public policy, are also safeguarded on the other. Therefore, the system relating to the setting aside of arbitral awards constitutes one of the most visible reflections of the delicate balance established between the independence of arbitration and the necessity of judicial review.
B. KEY TAKEAWAYS
(1)The grounds for setting aside regulated under the IAL have been established with the aim of protecting the independence of arbitration proceedings and ensuring the finality of arbitral awards.
(2)The action for setting aside an arbitral award is not a legal remedy that enables a re-examination of the arbitral award on the merits, but rather a limited judicial review mechanism.
(3)The grounds for setting aside arbitral awards are regulated in a limited number under the IAL, and this system serves the purpose of preserving the speed, effectiveness, and finality of arbitration.
(4)The grounds for setting aside provided under the IAL are, in general, largely aligned with the principles accepted in international arbitration law and with the grounds for setting aside contained in the UNCITRAL Model Law.
(5)The grounds for setting aside regulated under Article 15(A)(1) of the IAL concern situations that essentially relate to the parties’ rights and interests in the arbitration process, such as the validity of the arbitration agreement, the proper appointment of arbitrators, compliance with the arbitration period, preservation of the limits of jurisdiction, and observance of procedural safeguards.
(6)Since the non-existence or invalidity of the arbitration agreement removes the very basis of the arbitration proceedings, it constitutes one of the most fundamental grounds that may require the setting aside of the arbitral award.
(7)The constitution of the arbitrator or arbitral tribunal in a manner contrary to the parties’ agreement or the procedure prescribed by law, and the failure to render the arbitral award within the prescribed arbitration period, are among the procedural defects that may lead to the setting aside of the arbitral award.
(8)The arbitrator or arbitral tribunal’s unlawfully deciding that it has or does not have jurisdiction, exceeding the scope of the arbitration agreement, or failing to decide on the entirety of the parties’ claims are also accepted as grounds for setting aside.
(9)The failure to conduct arbitration proceedings in accordance with the parties’ agreement or the applicable procedural rules, and the failure to observe the principle of equality of the parties, are among the significant violations that may result in the setting aside of the arbitral award.
(10)The grounds of arbitrability and contrariety to public policy regulated under Article 15(A)(2) of the IAL may be taken into account ex officio by the Regional Court of Appeal due to their nature going beyond the limits of party autonomy, and this demonstrates that arbitration proceedings are also reviewed in terms of the fundamental values of the legal order.
