Introduction
The underlying goal of international arbitration as a means of dispute settlement is to arrive at a binding decision on a dispute, which is considered as recognizable and enforceable in an international context. Th erefore, it is an implied term of an arbitration agreement that the parties will exercise the requirements of the arbitration agreement and carry out the arbitral award1.However, in the event of a failure of a party to comply with the requirements of an award, the winning party may seek recognition and enforcement of the award in the country where the assets of the defaulting party are located2.
Recognition and Enforcement of Arbitral Awards
Recognition and enforcement of the award are the final stages in the arbitration procedure where an arbitral tribunal is not directly involved3. However, a distinction should be made between these two different concepts. Recognition usually means ‘defensive processes’4 where one party asks courts to recognize the award as valid and binding upon the parties between whom it was made5.By contrast, enforcement is a positive action6 where the court is requested not merely to recognize the award, but also to ensure that the award is carried out by applying available legal sanctions7. This Article seeks to examine requirements and procedures for enforcement of international arbitral awards in Turkey in accordance with the following regulations: (i) the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards which is adopted into Turkish Legal System with the Code numbered 3731, dated 8 May 1991 (“Code numbered 3731”), (ii) the International Arbitration Act numbered 4686, dated 21 June 2001 (“IAA”) and (iii) the Turkish Code of Private International Law and Procedural Law numbered 5718, dated 27 November 2007 (“Code numbered 5718”). This article will, firstly, examine enforcement of international awards under the NYC.
Enforcement of Arbitral Awards under the New York Convention
The NYC, which is adopted by 145 States8, is regarded as one of the cornerstones of modern international arbitration9. There is no doubt that arbitration has become the established method of dispute settlement in the international commercial context due to the success of the NYC10. The Convention owes its origins to a Report and preliminary Draft Convention on the Enforcement of International Arbitral Awards prepared by the International Chamber of Commerce (ICC). It replaces the 1927 Geneva Convention between the States that are bound by both conventions, and is a considerable advancement thereon since it provides for a much more simple and efficient mechanism for obtaining recognition and enforcement of foreign awards11. The NYC abolished the requirement of ‘double exequatur,’ which was imposed by the Geneva Convention; that is to say, an award is recognizable and enforceable without any need for a declaration of the courts where the arbitration took place12. Furthermore, the NYC switched the burden of proof for the existence of the grounds for refusing enforcement of an award to the party against whom the enforcement was sought13. As a result, the NYC has been accurately described as the “most successful international instrument in the field of arbitration,"14 and as a convention which “perhaps could lay claim to be the most effective instance of international legislation in the entire history of commercial law15".
Application of the New York Convention
Awards that fall under the Convention’s field of application are foreign arbitral awards which are defined in Article 1 of the Convention. According to Article I, the Convention applies to awards “made in the territory of a State other than the State where recognition and enforcement are sought.”16 Furthermore, it applies to awards “not considered as domestic awards in the State where their recognition and enforcement are sought.” Turkey adopted the NYC by the code numbered 3731 and dated 08.05.1991. Therefore, the NYC shall govern recognition and enforcement of foreign arbitral awards since pursuant to Article 90 of the Turkish Constitution, international conventions have the statutory force and they are regarded as special regulations in respect to the particular field governed by the conventions. Pursuant to the Article 2 of the Code numbered 3731, Turkey adopted the reciprocity and commercial reservations. Under reciprocity reservation, Turkey will only apply the NYC to the awards made in a State which is a party to the NYC. Pursuant to commercial reservation, Turkey limited the application of the Convention to the disputes, whether contractual or not, which are regarded as ‘commercial’ under the national law of Turkey.
Conditions for Enforcement
The NYC imposes a mandatory obligation requiring contracting States to recognize and enforce foreign arbitral awards17, provided that specified conditions are complied with by the party applying for recognition and enforcement of an award. These conditions are set out in Article IV. The main object of Article IV is to facilitate enforcement of awards in international context18. Therefore, minimum requirements are to be fulfilled, accordingly: the party seeking enforcement of an award is required to provide at the time of the application “the duly authenticated original award or duly certified copy thereof; and the original agreement referred to in Article II or a duly certified copy thereof19." These requirements are the only conditions which the NYC imposes on the party applying for enforcement.
According to Article 61 of the Code numbered 5718 a party seeking for enforcement in Turkey shall submit these documents with a petition to the competent Turkish court of first instance. Pursuant to Article 60(2) of the mentioned Code, competent court is the court of first instance which is agreed by the Parties by the contract. In the absence of such agreement, the competent court is the one which is located in the domicile of the party against whom the award is invoked; if not, the one which is located in the habitual residence of that party; if not, the one which is located in the place where assets subject to the enforcement proceedings are located.
Grounds for Refusal of Enforcement of an Award
In the event that the party seeking enforcement fulfills the foregoing obligations set forth in Article IV, the award shall be enforced subject to specified exemptions. Language of the convention clearly reveals that exceptions laid down in the Article V are exclusive grounds for refusing recognition and enforcement of arbitral award. Furthermore, Article V of the Convention is discretionary in nature; in other words, the court may enforce the award even the grounds for refusals exist. Besides this, the Convention does not authorize the Courts to re-examine the merits of the dispute. The first paragraph of Article V sets out five separate grounds for denying enforcement, which can be raised by the party whom the award is invoked. In this respect, enforcement of an arbitral award may be denied if the party whom the award is invoked proves that:
The parties to the agreement were under some incapacity under the law applicable to them or, the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or,
He/she was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or,
The award deals with a difference not contemplated or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of submission to arbitration, provided that if the decisions on matters submitted to arbitration can be separated from those not submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or,
The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or failing such agreement was not in accordance with the law of the country where the arbitration took place.
The award has not yet become binding on the parties, or has been set aside, or suspended by a competent authority, of the country in which, or under the law of which, that award was made.
The second paragraph of Article V sets forth two grounds for refusal, which can be invoked by the ,competent court on its own motion. Under Article V (2), recognition and enforcement of arbitral award may be refused if the enforcing court determines that: (a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) the arbitral award is contrary to public policy of the enforcement State. Having examined the enforcement procedure for international arbitral awards that fall into the field of application of the NYC, this article shall examine the enforcement procedure under the IAA.
Enforcement of Arbitral Awards under the International Arbitration Act
According to Article 1(2) of the IAA, this Act shall govern the disputes involving foreign element and where the seat of the arbitration is determined as Turkey or where the parties or arbitrators have chosen this Act as governing law. Under Article 2 of the IAA, dispute shall be regarded as involving a foreign element and the arbitration shall be regarded as international, if;
Domiciles or habitual residence or business place of the Parties to the arbitration agreement locate in different States, or
Domiciles or habitual residence or offices of the Parties situate in the State different from;
the place of the arbitration determined by the arbitration agreement or ascertained pursuant to the agreement,
the place where a substantial part of the obligations of the underlying contract is to be performed or the place with which the subject-matter of the dispute is most closely connected.
At least one partner of the company party to the underlying contract brings foreign capital or conclusion of credit and/or guarantee agreement is required for the execution of the said contract for the purpose of ensuring foreign capital.
Conveyance of capital and goods from one State to another are provided by the underlying contract or legal relationship of the arbitration agreement.
Recourse Against an Award
Application for setting aside the arbitral award must be made to competent court of first instance. This application may not be made within thirty (30) days following the notification of the arbitral award. The judgment regarding the application for setting-aside the award may be appealed pursuant to the provisions of the Code of Civil Procedure numbered 1086 dated 18 June 1927. Any examination at the appeal level is restricted to the grounds for setting the award aside. Pursuant to Article 15 of the IAA an arbitral award may be set aside by the competent court provided that the party making the application proves that:
a party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the Turkish Law; or,
Appointment of the arbitrator or the arbitral tribunal was not in accordance with the agreement of the parties or with the IAA; or,
The arbitral award was not rendered within the arbitration period; or,
Arbitrator or arbitral tribunal decided unlawfully that they have competence or that they do not have authority; or,
Arbitrator or arbitral tribunal decided on the matters beyond the scope of the arbitration agreement, or did not decide on the whole matters, or exceeded their authority; or
Arbitration proceedings was not in accordance with the agreement of the parties or failing such agreement, was not in accordance with the IAA and this situation has an impact on the merits of the award; or,
Principle of fairness between the parties was not applied.
On the other hand the competent court may set the award aside, if it determines that; (a) the subject matter of the dispute subject to the award rendered by the arbitrator or the arbitral tribunal is not capable of settlement or (b) the award violates the public policy.
Enforcement Procedure
Upon the finalization of the judgment regarding the refusal of the application for setting-aside, the civil court of first instance shall give a certificate with respect to the enforceability of the award to the party who made a request for it. In cases where the term provided for the application for setting-aside has expired or where the parties have waived the right to commence an action for setting-aside, civil court of first instance shall automatically examine the grounds for refusal set forth in the Article 15(2),(a) (b) for granting the certificate of enforceability of the award. Having examined the enforcement procedure governed by the IAA, this Article shall proceed to overview enforcement proceedings under the Turkish Code of Private International Law and Procedural Law.
Enforcement of Foreign Arbitral Awards under the Turkish Code of Private International Law and Procedural Law
Pursuant to Article 1 of the Turkish Code of Private International Law and Procedural Law (“Code numbered 5718”) this Code regulates the applicable law to private law transactions and relations with a foreign element, the international jurisdiction of Turkish courts and the recognition and enforcement of foreign judgments. In this context, this Code shall apply to foreign awards which fall outside the field of application of the NYC. According to Article 60(1) foreign arbitral awards which are final and enforceable or binding may be enforced.
Procedure for Enforcement
Under Article 61, a party seeking for enforcement in Turkey shall apply to authorized Turkish court, which is determined pursuant to Article 60, with a petition. Third persons who are not party to arbitration agreement cannot apply for enforcement of arbitral awards. The Party applying for enforcement shall attach following documents to the petition: (a) the duly authenticated original award or duly certified copy thereof; (b) the original agreement referred to in Article II or a duly certified copy thereof; (c) translation and duly certified copy of the foregoing documents.
Under 61(2) of the Code, Article 57 regarding enforcement of foreign judgments shall apply to enforcement of foreign arbitral awards. In this context, any foreign awards for which enforcement is granted by the competent court shall be enforced as judgments rendered by Turkish Courts. Judgments regarding approval or denial of enforcement of arbitral awards may be appealed in accordance with the general provisions of the Code of Civil Procedure. An appeal against such judgments shall stay the enforcement.
Grounds for Refusal
Under Article 62 of the Code, enforcement of a foreign arbitral award shall be refused, if it is proved by the party against whom the award is invoked that;
the matter of the foreign award is not arbitrable according to Turkish Law,
a party has not been duly represented before the arbitral tribunal and did not afterwards accept the acts and actions in arbitration in clear terms,
the respondent has not been duly informed of the appointment of arbitrators or has not been given opportunity to present or defend its case,
the arbitration agreement or clause is considered invalid in accordance with the law agreed upon by the parties, or in its absence, with the law where the award was rendered,
the appointment of arbitrators or the arbitral procedure applied by the arbitrators contravenes the agreement of the parties, or in the absence of such agreement, the law of the place of arbitration,
the arbitral award is related to an issue not covered by the arbitration agreement or clause or beyond the scope of such agreement, or the clause. In this latter case, only the part exceeding the limit of the arbitration agreement or clause shall not be enforced.
the arbitral award has not become final, enforceable or binding in accordance with the law applicable to the award, or in its absence, the law of the place of arbitration, or with the applicable procedure the award is subject to.
On the other hand, competent court may refuse enforcement of an arbitral award on its own motion, if it determines that; (a) no arbitration agreement has ever been entered into or the underlying contracts do not contain any arbitral clause, or (b) the arbitral award is against general ethics or public policy.
Conclusion
One of the most significant factor making arbitration as preferred method of dispute resolution is the enforceability of an arbitral award both internationally and nationally. This article reviewed the enforcement procedures of international awards in Turkey under the following regulations: (i) the New York Convention which is adopted into Turkish Legal system by the Code numbered 3731, (ii) the International Arbitration Act (“IAA”) and (iii) the Turkish Code of Private International Law and Procedural Law numbered (“Code numbered 5718”). Under the NYC, States are obliged to enforce the arbitral awards unless one of the grounds for refusals set forth in Article V exists. With respect to the Code numbered 5715 which governs recognition and enforcement of foreign awards falling outside the field of application of the NYC, an arbitral award may be enforced unless the party against whom the award is sought proves the existence of the conditions set forth in Article 62(1). On the other hand, competent court may deny enforcement of an arbitral award on the grounds set forth in Article 62(1) a, b on its own motion. With regard to the IAA, this regulation governs the disputes involving foreign element and the disputes where the seat of the arbitration is determined as Turkey or the disputes where the parties or arbitrators have chosen this Act as governing law. A party may apply to the competent court for setting the award aside on the grounds specified in Article15 of the IAA following thirty (30) days as from the date of the notification of the arbitral award. In the event that application for setting the award aside is refused, the civil court of first instance shall grant a certificate with respect to the enforceability of the award to the requesting party. On the other hand, in the event that the term for the application for setting-aside has expired or the parties have waived the right to commence an action for setting-aside, civil court of first instance shall examine the grounds for refusal set forth in the Article 15(2), (a) (b) on its own motion for granting the certificate of enforceability of the award.
FOOTNOTE
1 A Redfern, M Hunter, Redfern and Hunter on International Arbitration (5th edn, OUP 2009) 621.
2 A and K Tweeddale, Arbitration of Commercial Disputes (OUP 2007) 409.
3 Tweeddale (n 2) 408.
4 Redfern (n 1) 627.
5 Redfern (n 1) 629; Tweeddale (n 2) 408.
6 Tweeddale (n 2) 408.
7 For further information regarding “available legal sanctions” see Redfern (n 2) 628.
8 See <http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html> accessed 16 November 2011.
9 AJ van den Berg, ‘The New York Convention: Its Intended Effects, Its Interpretation, Salient Problem Areas’ (1996) ASA Special Series
no.9, 25.
10 M Kerr, ‘Concord and Conflict in International Arbitration’ (1997) 13 Arb.Int’l 121, 127; L Mustill, ‘Arbitration: History and Background’
(1989) 6 J.Int’l Arb. 43. <http://law.queensu.ca/international/globalLawProgramsAtTheBISC/courseInfo/courseOutlines/commercialArbitration2010/
Mustill1989.pdf> accessed 20 August 2011.
11 Redfern (n 1) 72.
12 P Sanders, ‘The making of the Convention’ in Enforcing Arbitration Awards under the New York Convention Experience and Prospects
(United Nations Publication 1999) 4.
13 Sanders (n 12)4.
14 L Mustill, ‘Arbitration: History and Background’ (1989) 6 J.Int’l Arb 5.
15 Ibid 5.
16 Art.I.
17 Art.III.
18 J Paulsson, ‘The New York Convention in International Practice- Problems of Assimilation’ (1996) ASA Special Series 100, 105.
19 Art.IV (1).
