DEPENDENCE OF THE ARBITRATOR AND THE PARTIES IN ARBITRATION

ABSTRACT

Nowadays, many disputes are subject to “Arbitration” proceedings. In this respect, arbitration practices are important and appear as a method of judicial procedure that is increasing in value day by day. For this reason, arbitration rules mostly include explanations by establishing a consensus on the role of the parties and the arbitrator in disputes subject to arbitration, regarding the nationalities of these subjects, which are of great importance in disputes. In accordance with the Turkish Language Association Dictionary, dependence (Tabiiyet) is defined as an Arabic word as “attachment or dependence on something or someone” or “Nationality”. Pursuant thereto, it would not be wrong to say that the word “dependence” can be expressed as nationality in daily life. Accordingly, the rules regarding the nationality of both parties and the arbitrator(s) during the arbitration proceedings are in different ways for each type of arbitration. Each arbitration authority carries out these proceedings according to its own rules and ensures that a set of rules is established within this scope. In this context, the nationality of the arbitrator and the parties within the scope of arbitration proceedings has become our subject of examination.

When arbitration is examined from many aspects, it is divided into different types. Depending on whether there are foreign elements of the dispute, the types of arbitration may be subject to national and international arbitration.

I. INTRODUCTION

These days, many legal disputes are tried to be solved with different types of dispute resolution methods in the presence of judicial authorities. When the parties to a dispute over a claim are allowed by the legislation, hereat, it comes to an agreement on this matter and they authorize private persons called arbitrators to solve the dispute instead of courts, and the final and binding resolution of the dispute is made by the arbitrators, this is called "Arbitration". To solve a dispute through arbitration, two conditions must be met at the same time. The first of these conditions is that the dispute is suitable for arbitration, and the second is that the parties agree to settle the dispute between them through arbitration1. Within the scope of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 10 June 1958, which has more than 160 parties and was approved by the Republic of Turkey with the Council of Ministers Decision dated 15 August 1991 and numbered 91/2151, it should be underlined that the relevant arbitral award of the dispute must be foreign and about commercial matters. Except for this Convention, other examples can be given that are international conventions to which Turkey has become a party regarding the arbitration proceedings, these are; the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, and the European Convention on International Commercial Arbitration. 

In this manner, it is obvious that the Republic of Turkey is trying to create common mechanisms for arbitration by becoming a party to international agreements like other states in the new commercial world order. When arbitration is examined from many aspects, it is divided into different types. Depending on whether there are foreign elements of the dispute, the types of arbitration may be subject to national and international arbitration. Article 407 of the Code of Civil Procedure, numbered 6100, points out that the execution area of arbitration in disputes that are the subject of national arbitration and states in the clause that arbitration will find an execution area in disputes where Turkey is determined. In international arbitration, there is a foreign element that is resolved by an arbitrator or arbitral tribunal/ board as an alternative solution method. In this arbitration method, the parties must give their consent in order to resolve their disputes with this method. Many of the foreign states enact arbitration laws to regulate international arbitration processes that will take place in their country. Arbitration laws of countries generally cover the validity conditions of arbitration agreements, the objection of arbitration, the relations between arbitration centres and courts, the limits of the contribution and intervention of local courts to the arbitration processes, the formation of the arbitral tribunal, the rejection of the arbitrators, the objections to the authority of the arbitrators and the results of the objection, the authority of the arbitral tribunal to issue injunctions; and they regulate the determination of the rules to be applied to the arbitration procedure and principle, the form and material scope of the decision, the remedies against the decision and the arbitration expenses2 . 

In addition, since it is accepted that the international arbitration processes are divided into types in terms of organization, it will be necessary to refer to Ad Hoc Arbitration and Institutional Arbitration with their systematics the way they differ from each other in this context. When the definition of Ad Hoc Arbitration is given; it is the type of arbitration in which the parties form the arbitrator and the arbitral tribunal by themselves, without being affiliated with any arbitration institution, and in which they determine the proceedings by themselves. It would be right to say that the arbitration rules of the United Nations International Commission on International Commercial Law (“UNCITRAL”) are widely used in practice while the Ad Hoc Arbitration method is practised. In this study, explanations about UNCITRAL arbitration rules will be given below. It will be necessary to say that in Institutional Arbitration, which is another type of arbitration and widely accepted, the proceedings are carried out entirely at the internationally accepted arbitration centres with their own arbitration rules. The reason why the parties prefer the Institutional Arbitration method more is due to the fact that they have a structure that is settled during the resolution of disputes and the set of rules has been determined. The International Chamber of Commerce Arbitration Center (“ICC Arbitration Center”), which is the most frequently applied arbitration centre for dispute resolutions; International Center for Settlement of Investment Disputes (“ICSID”), Hong Kong International Arbitration Center (“HKIAC”), the London Court of International Arbitration (“LCIA”) and the Istanbul Arbitration Center (“ISTAC”), which is one of the prominent arbitration centres in the field of international arbitration in our country; will be examined among the Institutional Arbitration centres concerning the nationalities of the parties and the arbitrators.  

II. NATIONALITY OF THE ARBITRATOR AND THE PARTIES IN ACCORDANCE WITH THE RULES ESTABLISHED BY THE ARBITRATION CENTERS IN ARBITRATION PROCEEDINGS

A. The International Chamber of Commerce Arbitration Center

According to Article 13.1 of the Arbitration Rules of the International Chamber of Commerce, in force as of January 1st 2021, "In confirming or appointing arbitrators, the Court shall consider the prospective arbitrator’s nationality, residence and other relationships with the countries of which the parties or the other arbitrators nationals and the prospective arbitrator’s availability and  ability to conduct the arbitration in accordance with the rules...3" draw attention to its importance. It is clear that with this provision, if the parties to the dispute are of the same nationality as the arbitrator, it is clear that there is concern that this nationality will endanger the independence of the arbitration proceedings. 

In accordance with Article 13.5 of the same Arbitration Rules, here is also an exception, pursuant to the article, that the sole arbitrator or the chairman of the arbitral tribunal must be of a nationality other than the nationality of the parties, and that the sole arbitrator or chairman of the arbitral tribunal may be elected from the nationality of one of the parties, only if the conditions are suitable and the parties do not raise an objection within the given time limit determined by the Court4 . In fact, it is clear that the parties are given the right to choose. Accordingly, the general rule in ICC arbitration is the assignment or appointment of arbitrators who are not dependent on the nationality of any of the parties. The purpose here is not to overshadow the impartiality of the sole arbitrator or the arbitral tribunal during the arbitration, and not to give the opportunity to the parties to object to the decision by referring to the nationality bond after the decision. From a legal point of view, the impartiality of the arbitrator is a prerequisite for a fair resolution of the judicial proceedings. In this regard, in the article written by Dr H. Akif Karaca, it is stated that “The impartiality and independence of the arbitrator is a prerequisite for the fair execution of the proceedings and not violating the public order…5”.

B. Istanbul Arbitration Center

According to the first paragraph of Article 12 of the arbitration rules of the Istanbul Arbitration Center, which is one of the Republic of Turkey’s prominent the arbitration centres and lately made a mark as an arbitration centre, “Every arbitrator must be impartial and independent and they must remain impartial and independent until the proceedings come to an end6,” which regulated the independence and impartiality of the arbitrator. In Article 15 of the same rules, it is stated that "When appointing the arbitrator, the Board shall take into consideration the circumstances that might have influence on the impartiality and independence of the arbitrator, along with the prospective arbitrator’s availability and required ability to conduct the arbitration proceedings7." and this states that the circumstances that may affect the impartiality of the arbitrator will be considered. In this context, although it is obvious that there is no regulation regarding the nationality of the parties and the arbitrators in ISTAC arbitration, it is clear that in the event of situations that may cast a shadow over the impartiality of the parties and the arbitrator, the arbitrator may be rejected. Unlike other arbitration rules, ISTAC arbitration does not accept a point of view that can be attributed to the impartiality of the arbitrators, on the contrary, it can evaluate the arbitration rules in the new world order with a more innovative perspective.

C. The London Court of International Arbitration

Pursuant to Article 12 of the Arbitration Rules dated 1 October 2020, which belongs to the London International Court of Arbitration, one of the Institutional Arbitration centres whose prestige is known all over the world, it is underlined that the sole arbitrator or the chairman of the arbitral tribunal should not be subject to the nationality of any of the parties in case the nationalities of the parties to the dispute are different, on the contrary, they are allowed if the parties are from the same nationality and they come to an agreement to choose a sole arbitrator or the chairman of the arbitral tribunal from their nationality8. 

In addition, in the continuation of the same article, it is highlighted that if one of the parties is a natural person, its nationality will mean the citizenship of a natural person, regardless of whether he is a citizen of a country at birth or afterwards. Moreover, when the nationality of the legal person is subject to the dispute it is mentioned that the citizenship of the legal person can be decided based on the jurisdiction of the country where the administrative centre of the legal person is located. If the establishment of a legal person is located in another place and the head office of the legal person is located in another place, it is accepted that there are two nationalities. Besides that, the nationality of the controlling shareholder of the legal person can be taken as a basis in the opinion on the nationality of the legal person. 

In Article number 6.3. it is explained that if a party has more than one nationality, it will be treated according to each nationality9. It is also mentioned in the continuation of the Article that a person with more than one European Union citizenship will be accepted as a citizen of each state. In this context, it is explicit that the London Court of International Arbitration deals with the nationalities of the real persons and legal persons subject to the dispute in a wide manner. From this point of view, it is seen that the impartiality and independence of the arbitrator or the arbitral tribunal are considered based on nationality. 

D. International Center for Settlement of Investment Disputes

When the rules of the International Center for Settlement of Investment Disputes are examined, it shows that the members of the arbitration board should be different from the nationalities of the parties in disputes, according to the 36th paragraph of Article 4 of the Convention, and that the parties could still make an exception to this rule by a joint agreement10. 

If international investment disputes are solved through arbitration, as an exception, the parties are given the right to choose; either of the parties can appoint an arbitrator of their nationality during the proceedings of the arbitration. 

E. Hong Kong International Arbitration Center

Pursuant to the current arbitration rules of the Hong Kong International Arbitration Center Article 11.2 dated 2018, which has expanded its sphere of influence, especially in the Far East and is frequently mentioned all over the world, it is stated that "Subject to Article 11.3, as a general rule, where the parties to an arbitration under these Rules are of different nationalities, a sole or presiding arbitrator shall not have the same nationality as any party unless specifically agreed otherwise by all parties11" the arbitrator must be of a different nationality for the resolution of the dispute. However, in Article number 11.3. it is stated that "Notwithstanding the general rule in Article 11.2, in appropriate circumstances and provided that none of the parties objects within a time limit set by HKIAC, a sole or presiding arbitrator may be of the same nationality as any of the parties12." 

It is acceptable at Hong Kong International Arbitration Center, like other arbitration centers, that they give the parties the right to choose. The decision mechanism on whether the nationality of the arbitrator is important is left to the consent of the parties, and this issue is liberalized so that they do not turn this into an argument later on. However, the condition of favorable conditions should also be underlined here. It should be considered that the favorability is at the discretion of the arbitration centre. 

III. CONCLUSION

When we compare the arbitration methods with this study we have carried out that the majority shows that the general point of view of the arbitration authorities in the reg - ulations is that the nationalities of the arbi - trators should be different from the parties. In addition, it can is be possible to say that the arbitration arrangements regarding the nationality of the arbitrator and the parties in innovative arbitration bodies such as ISTAC are separated from the traditional arbitration centres. 

Moreover, according to the ICC and LCIA ar - bitration rules, while the administrative bod - ies within the centres have the right to de - cide on the issue of the arbitrator's refusal, this decision is given to the other members of the arbitral tribunal according to the IC - SID regulation; and by the entire arbitral tribunal according to the UNCITRAL Mod - el Law in Ad Hoc arbitration. In this respect when we evaluate this matter, different authorities can see the importance of the nationality bond of the arbitrator with the parties. In some arbitration rules, there are also regulations that the parties can bring exceptions with the explicit consent of the decision-maker and the parties. 

It is clear that in which cases the arbitrator's obligation has to be independent and im - partial will be violated, a separate eval - uation should be made for each dispute. At the same time, past professional re - lationships between the arbitrator and the parties or their lawyers should be evaluated according to the frequency of these relationships in terms of intensity and time. It should be noted that the ar - bitrators should treat the parties equal - ly during the proceedings and not act contrary to basic procedural principles. Another important issue is the existence of situations where the arbitrators or law - yers who took part in similar cases be - fore cannot be impartial in subsequent disputes due to the limited scope of dis - putes in investment arbitration. 

In general, if we evaluate the nationality of the arbitrator and the parties it would be acceptable to say that the point of view, as a general rule is that it is important and the selection of the arbitrator when considered in terms of the concepts of nationality and citizenship, may lead to the rejection of the arbitrator by the arbitration centres. How - ever, considering that the point of view has changed in recent years and new arbitration centres have not even released regulations on this issue, it is acceptable to say that the point of view may change in the near future on these issues.  

BIBLIOGRAPHY

ERGIN NOMER, NURAY EKŞI, GÜNSELI ÖZTEKIN GELGEL, “Milletlerarası Tahkim Hukuku-Cilt 1”, Beta Publications, İstanbul, November 2016, Page 1.

CEMAL ŞANLI, “Uluslararası Ticari Akitlerin Hazırlanması ve Uyuşmazlıkların Çözüm Yolları”, İstanbul 2016, Page 304.

ICC Arbitration Rules as effective on 01.01.2021, Art.13. Parag.1.

ICC Arbitration Rules as effective on 01.01.2021, Art.13 Parag.5.

H. AKIF KARACA, “Milletlerarası Tahkimde Hakemin Reddi Sebebi Olarak Hakemin Tarafsızlığını ve Bağımsızlığını Ortadan Kaldıran Haller”, Marmara University Faculty of Law Research of Law Journal, Volume 21, Number 1, 2015, Page 235 https://dergipark.org.tr/tr/ download/article-file/271094 (Accessed Date:28.12.2021).

İstanbul Arbitration Center, Rules of Arbitration and Mediation, Art. 12/1. İstanbul Arbitration Center, Rules of Arbitration and Mediation, Art. 15/1.

The London Court of Arbitration, Arbitration Rules dated 01.10.2020, Art.12. The London Court of Arbitration, Arbitration Rules dated 01.10.2020, Art.6/3.

Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 4th Part 36th paragraph of Arbitration Section.

Hong Kong International Arbitration Center, Arbitration Rules as effective on 2018, Art. 11/2.

Hong Kong International Arbitration Center, Arbitration Rules as effective on 2018, Art. 11/3.

FOOTNOTE

1 Ergin Nomer, Nuray Ekşi, Günseli Öztekin Gelgel, “Milletlerarası Tahkim Hukuku-Cilt 1”, Beta Publication, İstanbul, November 2016, Page 1

2 Cemal Şanlı, “Uluslararası Ticari Akitlerin Hazırlanması ve Uyuşmazlıkların Çözüm Yolları”, İstanbul 2016, Page 304.

3 ICC Arbitration Rules Effective 01.01.2021, Art.13. Parag.1.

4 ICC Arbitration Rules Effective 01.01.2021, Art.13 Parag.5.

5 H. Akif Karaca, “Milletlerarası Tahkimde Hakemin Reddi Sebebi Olarak Hakemin Tarafsızlığını ve Bağımsızlığını Ortadan Kaldıran Haller”, Marmara University Faculty of Law Research of Law Journal, Volume 21, Number 1, 2015, Page 235 https://dergipark.org.tr/tr/download/article-file/271094 (Accessed Date:28.12.2021).

6 İstanbul Arbitration Center, Rules of Arbitration and Mediation, Art. 12/1.

7 İstanbul Arbitration Center, Rules of Arbitration and Mediation, Art. 15/1.

8 The London Court of Arbitration, Arbitration Rules dated 01.10.2020, Art.12.

9 The London Court of Arbitration, Arbitration Rules dated 01.10.2020, Art.6/3.

10 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 4th Part 36th paragraph of Arbitration Section.

11 Hong Kong International Arbitration Center, Arbitration Rules as effective of 2018, Art. 11/2.

12 Hong Kong International Arbitration Center, Arbitration Rules as effective of 2018, Art. 11/3.