A comprehensive guide to the recognition and enforcement of foreign arbitral awards in Türkiye, covering the framework of the 1958 New York Convention and Articles 60 to 63 of the Turkish PILA, the relationship between the two regimes, Türkiye's reciprocity and commercial nature reservations, the grounds for refusal under Article V of the New York Convention, arbitrability and the public policy exception, and the distinction from foreign court judgments.
In the resolution of international commercial disputes, arbitration is increasingly preferred owing to the advantages of speed, expertise and neutrality it offers over state courts. However, an arbitral award rendered at the end of arbitration proceedings, while resolving the dispute, cannot be executed of itself where the party against whom the award is made does not perform voluntarily. For an arbitral award rendered in a foreign country to produce effect in Türkiye and to be made the subject of compulsory execution, the award must be recognised or enforced by the Turkish courts. There are two basic sets of rules in this field; the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958, which Türkiye ratified in 1991, and Articles 60 to 63 of the Act on Private International Law and Procedural Law No. 5718. This article comprehensively examines the enforcement of foreign arbitral awards in Türkiye, the relationship between the New York Convention and the PILA, the grounds for refusal and the matters requiring attention in practice.
1. The Concept of a Foreign Arbitral Award
A foreign arbitral award is an award rendered at the end of arbitration proceedings by an arbitrator or arbitral tribunal outside the state court and carrying a foreign element. Whether an arbitral award is to be regarded as foreign is determined by criteria such as the seat of arbitration being outside Türkiye or the award being subject to a procedure other than Turkish procedural law. Cases where the seat of arbitration is Türkiye but the parties have chosen a foreign procedural law, as well as cases where the seat of arbitration is abroad, are assessed within this scope. Whether the award was rendered within an institutional arbitration centre or by way of ad hoc arbitration is of no importance as regards recognition and enforcement; both types of arbitral award are subject to the same regime. A foreign arbitral award, while binding between the parties from the moment it is rendered, does not of itself carry executability in Türkiye. The award can produce effect in Türkiye only where the competent Turkish court gives a recognition or enforcement decision. In this respect foreign arbitral awards are subject to a logic similar to that of foreign court judgments; however, the applicable legal framework differs.
2. Two Sets of Rules: the New York Convention and the PILA
There are two basic sets of rules to which recourse may be had in the recognition and enforcement of foreign arbitral awards in Türkiye. The first is the 1958 New York Convention, which Türkiye ratified on 25 September 1991. The second is Articles 60 to 63 of Law No. 5718. As a rule there is no absolute priority of one over the other; both afford the possibility of the enforcement of foreign arbitral awards. That said, since the first article of the PILA affords priority in application to international treaties, in awards falling within the scope of the New York Convention the provisions of the Convention apply in priority. The grounds for refusing enforcement provided for by the New York Convention and the PILA are largely parallel to one another; both sets of rules contain similar grounds for refusal such as the invalidity of the arbitration agreement, violation of the right of defence, the award exceeding the scope, contrariety to public policy and non-arbitrability. In awards rendered in states with which there is a bilateral judicial assistance agreement, the provisions of that agreement are observed in priority. This multi-source structure makes the correct determination of the rules to be applied in the concrete case important.
3. Türkiye's Reservations: Reciprocity and Commercial Nature
When ratifying the New York Convention, Türkiye made two important reservations within the framework of the possibility afforded by the Convention. The first reservation concerns the principle of reciprocity; Türkiye declared that it would apply the Convention only as regards the recognition and enforcement of arbitral awards rendered in the territory of a state party to the Convention. Accordingly, where the seat of arbitration is a country not party to the New York Convention, the award is enforced not under the Convention but according to the provisions of the PILA. The second reservation concerns the requirement of commercial nature; Türkiye declared that it would apply the Convention only to awards arising from contractual or non-contractual legal relationships considered commercial according to Turkish domestic law. Where the dispute cannot be considered of a commercial nature, the provisions of the PILA again come into play. These two reservations are the basic filter determining the field of application of the Convention as regards Türkiye. In practice, the very high number of states party to the New York Convention has de facto broadened the scope of the reciprocity reservation and has made the Convention the principal basis in the enforcement of foreign arbitral awards.
4. Preliminary Conditions for Enforcement and Documents to Be Submitted
For a foreign arbitral award to be enforced in Türkiye, certain preliminary conditions must be satisfied and certain documents submitted. Under the New York Convention, the party seeking enforcement must submit to the court the duly authenticated original of the arbitral award or a copy the conformity of which has been certified, and the original of the arbitration agreement relied upon or a certified copy thereof. Where these documents are in a foreign language, duly certified translations thereof must also be annexed. Similar documents are sought as regards the PILA as well; it is essential that the award has become final and has acquired executability, that there is an arbitration agreement or clause, and that the necessary documents are submitted. At the enforcement stage the task of the court is not to re-examine the substance of the award, but to review whether the conditions for enforcement and the grounds for refusal are present. The complete and due preparation of the documents is decisive for the swift and sound conduct of the process; in practice the principal cause of the delay of enforcement actions is deficiencies in the documents and problems of translation.
5. The Competent Court
The correct determination of the competent court in the enforcement of foreign arbitral awards is one of the most important assessments to be made at the outset of the process. Under the PILA, in the enforcement of foreign arbitral awards the court of the place agreed in writing by the parties has jurisdiction; failing such an agreement, the court of the place of residence in Türkiye of the party against whom the award is made, failing that the place where it is staying, and failing that the place where the property subject to execution is located, has jurisdiction. As regards the competent court, the nature of the arbitral award subject to enforcement is important. It is accepted that in the enforcement of arbitral awards arising from disputes of a commercial nature the commercial courts of first instance are competent. The enforcement proceedings are conducted, as in the enforcement of foreign court judgments, without entering into the substance of the award and observing the prohibition of review. The court examines only the presence of the conditions for enforcement and whether the grounds for refusal exist. Since an action brought before the wrong court concluding with a decision of lack of competence or jurisdiction leads to a serious loss of time, the correct making of this determination at the outset is important.
6. Grounds for Refusal under Article V of the New York Convention
The most important provision of the New York Convention is its Article V, which regulates the limited number of grounds on which enforcement may be refused. This article divides the obstacles to enforcement into two groups. The first group comprises the grounds that the party against whom enforcement is sought must prove; the incapacity of the parties to the arbitration agreement or the invalidity of the agreement, the party against whom the award is made not having been duly notified of the appointment of the arbitrator or of the arbitration proceedings or being otherwise unable to present its case, the award exceeding the scope of the arbitration agreement, the composition of the arbitral tribunal or the arbitral procedure being contrary to the agreement of the parties or to the law of the seat of arbitration, and the award not yet having become binding or having been set aside or suspended according to the law of the seat of arbitration. These grounds are taken into account only where the respondent raises and proves them. This structure of the Convention carries the aim of facilitating enforcement and keeping the grounds for refusal narrow; the burden of proof lies on the party objecting to enforcement, and the grounds are not subject to extensive interpretation.
7. Arbitrability and the Public Policy Exception
The second group of grounds for refusal in Article V of the New York Convention are the grounds that the court examines of its own motion. There are two of these; the subject matter of the dispute not being arbitrable according to the law of the state in which enforcement is sought, and the recognition or enforcement of the award being contrary to the public policy of that state. Arbitrability expresses whether a dispute is of a nature that can be resolved by the parties by way of arbitration; certain disputes of a public nature, over which the parties cannot freely dispose, are not regarded as arbitrable. The public policy exception, on the other hand, makes possible the refusal of enforcement where the arbitral award is manifestly contrary to the fundamental values and indispensable principles of Turkish law. The relevant provision of the PILA also regulates a similar ground for refusal, in the form of the award being contrary to morality or public policy. However, both these grounds must be interpreted narrowly; the public policy review does not mean the re-examination of the substance of the arbitral award. The Court of Cassation emphasises that the public policy exception is an exceptional safeguard and may not be broadened in a manner that would impair the function of arbitration in international trade.
8. The Validity of the Arbitration Agreement
At the basis of the enforcement of a foreign arbitral award lies the existence of a valid arbitration agreement. Where there is no valid arbitration agreement or clause demonstrating the parties' will to take the dispute to arbitration, this constitutes a ground for refusal as regards both the New York Convention and the PILA. The relevant provision of the PILA regulates this condition in the form of an arbitration agreement not having been made or an arbitration clause not having been inserted in the main contract. The validity of the arbitration agreement is assessed as regards the capacity of the parties and the form and substance of the agreement. The New York Convention requires the arbitration agreement to be in writing; however, this requirement of writing is interpreted flexibly, and, in addition to an agreement bearing the signatures of the parties, agreements made by way of an exchange of letters or telegrams are also regarded as valid. In practice, the courts, where the parties' will to go to arbitration is clear, tend to uphold the arbitration agreement by avoiding a strict assessment of form. Whether the conditions relating to the validity of the arbitration agreement are satisfied is determined, as a rule, according to the law to which the parties have subjected the agreement, and, failing such a choice, according to the law of the place where the arbitral award was rendered.
9. Violation of the Right of Defence
Respect for the parties' rights of defence in the arbitration proceedings is one of the basic conditions of enforcement. The New York Convention provides that enforcement may be refused where the party against whom the award is invoked was not duly notified of the appointment of the arbitrator or of the arbitration procedure, or was otherwise deprived of the possibility of presenting its claims and defences. This regulation is the counterpart in arbitration proceedings of the right to a fair trial and the right to be heard. The failure to duly serve the arbitration notice on the party, its not being informed of the arbitrator selection process, or its not being afforded the opportunity to present its evidence and claims, constitutes an obstacle to enforcement. This ground is taken into account not of the court's own motion but only upon the objection of the party against whom enforcement is sought, and the burden of proof lies on that party. The contractual basis of arbitration and the parties' procedural will gain importance here; however, the limit of procedural freedom is the provision of the basic safeguards of defence. A violation touching the essence of the right of defence prevents the enforcement of the arbitral award in Türkiye.
10. The Award Having Been Set Aside
An important ground preventing the enforcement of a foreign arbitral award is that the award has been set aside or suspended according to the law of the seat of arbitration. The New York Convention provides that enforcement may be refused where the award has been set aside or its execution suspended by a competent authority of the country in which, or under the law of which, the award was made. An action to set aside brought before the courts at the seat of arbitration may remove the legal existence of the arbitral award; the enforcement of a set-aside award in another country is as a rule not possible. For this reason the seat of arbitration and the set-aside regime provided for there must be carefully assessed at the very outset of the arbitration. Where an action to set aside has been brought but has not yet concluded, the enforcement court may consider staying the matter or proceeding with enforcement against security. The award not yet having become binding is similarly an obstacle to enforcement; that the arbitral award has acquired a final and binding character as regards the parties is a precondition of enforcement. These regulations establish the relationship of review between the seat of arbitration and the place of enforcement.
11. The Procedure and Simple Trial
The action for the enforcement of foreign arbitral awards is brought before the competent court by a statement of claim and is subject to the simple procedure of trial. This procedure ensures that the trial is conducted more swiftly and simply than the written procedure. The court, in examining the enforcement application, may not enter into the substance of the award; it reviews only the presence of the conditions for enforcement and whether the grounds for refusal exist. The party against whom enforcement is sought may raise the grounds for refusal listed in Article V of the New York Convention or in the PILA; however, those objections may not relate to the substance of the arbitral award. The court examines the grounds for refusal that must be proved by the parties upon objection, and the grounds of a public nature such as arbitrability and public policy of its own motion. Where the enforcement application is granted, the foreign arbitral award acquires executability in Türkiye like a court judgment and may be made the subject of compulsory execution by being taken to the enforcement offices. During the proceedings, the completeness of the documents, the accuracy of the translations and the complete submission of the evidence relating to the validity of the arbitration agreement are the precondition of the sound operation of the process.
12. The Difference between Recognition and Enforcement
As regards foreign arbitral awards too, the concepts of recognition and enforcement are distinguished. Enforcement expresses the award becoming executable in Türkiye; recognition, on the other hand, expresses the award being accepted in the Turkish legal order as res judicata and as conclusive evidence. Enforcement is required for an award containing an order, that is, one condemning a party to perform an obligation, to be applied by way of compulsory execution. By contrast, recognition may suffice as regards an arbitral award relating to the establishment of a legal situation or determining a legal relationship. Recognition most often arises out of the need to invoke the arbitral award as conclusive evidence or res judicata in another action. The New York Convention and the PILA subject recognition and enforcement largely to the same conditions; the absence of the grounds for refusal sought for enforcement is required for recognition as well. The correct making of this distinction is important as regards the determination of the application suited to the concrete need; where execution is aimed at, the route of enforcement, and where only the establishment of the legal validity of the award is aimed at, the route of recognition, is taken.
13. Distinction from Foreign Court Judgments
The enforcement of foreign arbitral awards and the enforcement of foreign court judgments are subject to different legal regimes, and this distinction must not be confused. Foreign court judgments are rendered by courts, which are the judicial organs of a state, and their enforcement is carried out according to Articles 50 to 59 of the PILA; in this regime conditions such as reciprocity, exclusive jurisdiction, public policy and the right of defence are sought. Foreign arbitral awards, on the other hand, are rendered by arbitrators outside state justice, and their enforcement is carried out in priority according to the New York Convention, and in cases falling outside the scope of the Convention according to Articles 60 to 63 of the PILA. The most basic difference between the two regimes is that the enforcement of arbitral awards rests on an international convention and that the grounds for refusal are regulated in that convention in a limited number and in a narrowly interpreted manner. For this reason the correct determination of whether a dispute has been resolved before a state court or in arbitration is the first and most important step determining the enforcement regime to be applied. An enforcement action brought on the basis of the wrong regime may lead to losses of rights and to loss of time.
14. The Advantages of Arbitration and the Ease of Enforcement
The uniform and foreseeable enforcement regime afforded by the New York Convention constitutes one of the greatest advantages of arbitration in international trade. The very high number of states party to the Convention ensures that an arbitral award rendered in one country can be enforced relatively easily and foreseeably in the greater part of the world. This is, compared with the uncertainty of reciprocity in the enforcement of foreign court judgments, a significant advantage in favour of arbitration; one of the principal reasons for the preference for arbitration in international commercial contracts is this. The parties, by taking their disputes to arbitration, obtain a strong assurance as regards the award being enforceable in the country where the other party is located or where its assets are. That said, the full provision of the ease of enforcement depends on the arbitration agreement being validly constituted, the seat of arbitration being correctly chosen and the procedural safeguards being fully observed in the proceedings. The correct structuring of these elements at the outset prevents the obstacles that may be encountered at the enforcement stage later.
15. Conclusion and Practical Recommendations
The enforcement of foreign arbitral awards in Türkiye is subject to a foreseeable regime provided for by the New York Convention and the PILA, supporting the function of arbitration in international trade. The prominent practical considerations in this field are as follows. First, the arbitration agreement must be drafted so as to reflect clearly the will of the parties and to satisfy the conditions of validity; a significant part of the problems at the enforcement stage arises from disputes concerning the validity of the agreement. The seat of arbitration must be chosen carefully, having regard to that country being party to the New York Convention and to the set-aside regime. The meticulous observance of the rights of defence and of the procedural safeguards in the arbitration proceedings prevents public policy and right of defence objections later. At the enforcement stage, the complete preparation of the documents, authentications and translations determines the speed of the process. The commercial nature of the dispute and whether the seat of arbitration is party to the Convention determine the applicable regime and must therefore be correctly assessed at the outset. The observance of the enforcement strategy from the very outset of the arbitration process is the strongest assurance of the award being effectively executable.
The enforcement of foreign arbitral awards is closely connected with the other layers of international arbitration and dispute resolution. Our article on the recognition and enforcement of foreign court judgments in Türkiye, which addresses the different regime of court judgments, our analysis of choice of law and jurisdiction agreements in international commercial contracts and our article on letters of credit and the UCP 600 rules address the matters to which arbitration and enforcement are connected.
For advisory services on the recognition and enforcement of foreign arbitral awards in Türkiye, enforcement proceedings under the New York Convention, the drafting of arbitration agreements and the management of international arbitration disputes, you may contact us at info@guzeloglu.legal.