National Arbitration in The Civil Procedure Code – II
Some provisions of the Civil Procedure Code numbered 6100 (“CPC”) regarding arbitration have been analyzed in our previous article. In this article, we shall continue to handle the relevant provisions and Article 417 and following articles of the CPC.
Withdrawal or Challenge of Arbitrators
Arbitrators, just like judges, play an important ro-le on judicial activity. Therefore, impartiality and independence of arbitrators are of importance in arbitral proceedings. Pursuant to Article 417/1 of the CPC, the arbitrator shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. In the event such circumstance occurs later, the arbitrator shall without delay disclose any such circumstances to the parties.
Pursuant to Article 417/2 of the CPC, the challenge of arbitrators is possible in the event that the arbitrator does not have the qualifications agreed by the parties, in the presence of a reason for challenge agreed in the arbitration procedures by the parties or if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence.
Article 418 regulates the procedure of challenge of arbitrators in detail. Pursuant to this article, the parties may agree freely on the procedure of challenge of arbitrators. A party that intends to challenge an arbitrator shall send notice of its challenge within two weeks following the appointment of the challenged arbitrator, or within two weeks after the circumstances giving rise to challenge became known to the party, and shall inform the other party of its challenge in written. In the event that the arbitrator does not withdraw or the other party does not agree to the challenge, the arbitrators shall decide on the challenge.
The liability of arbitrators is regulated under Article 419 of the CPC. Pursuant to the said article, unless agreed otherwise by the parties, in the event that the arbitrator who accepted the office in the arbitral proceeding fails to fulfill the task in the absence of a valid reason, it shall compensate the damages of the parties. It is seen that the relevant provision limits the liability of arbitrators.
Filing of the Case and Proceedings
Provisions concerning filing of the case and proceedings are laid down under Article 423 and following articles of the CPC. Article 423 regulates the two essential principles that govern the arbitral proceedings. These principles are equality of parties and right to legal hearing. The parties may freely agree on the procedural rules to be applied to arbitral proceedings, however, these principles may not be infringed and the arbitrators as well shall comply with these principles.
The parties may freely determine the proceduralrules to be applied by the arbitrators, under condition to reserve the compulsory provisions under the arbitration section of the CPC. In the event that the parties do not determine the said rules, the arbitration shall be conducted by the arbitrators while taking into consideration the provisions under the arbitration section of the CPC.
Pursuant to Article 425 of the CPC, the place of arbitration shall be freely determined by the parties or by an arbitration institution agreed by the parties. If the parties have not previously agreed on the place of arbitration, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case. The arbitral tribunal may meet at any location other than the place of arbitration and may conduct procedural actions, under condition to previously notify the parties.
Article 426 of the CPC sets forth different provisions as per the date of filing of the case in arbitration, considering different scenarios. Pursuant to this article, the arbitration case shall be considered to be initiated with the application to the tribunal for the appointment of arbitrators, or to the person, institution or organization who shall appoint the arbitrators, or in the event that the arbitrators shall be appointed by both parties pursuant to the agreement, the arbitration case shall be considered to be initiated with the appointment of the claimant of its own arbitrator and the notification of the other party about the appointment. Additionally, in the event that the names and surnames of the arbitrators are specified in the arbitration agreement, the arbitration case shall be considered to be initiated as soon as the request for arbitration is received by the other party. Pursuant to the second paragraph of this article, in case one of the parties has obtained a decision on provisional injunction or provisional seizure, the arbitration proceedings shall be initiated within two weeks, otherwise the decision on provisional injunction or provisional seizure shall be lifted automatically. As the said decisions are provisional, the proceedings shall be initiated in a short delay.
The fact that arbitration is a dispute resolution process, which proceeds without delay, finds its reflections on Article 427 of the CPC. Pursuant to this article, unless agreed otherwise by the parties, the arbitrators shall decide on the merits of the case within one year, in cases where a sole arbitrator is in charge, from the appointment of the arbitrator; and in cases where several arbitrators are in charge, fromthe date of drafting of the first minutes of meeting by the arbitrators. This time period may be extended with the agreement of parties, and if the parties fail to agree, with the decision of the tribunal.
Statement of claim and statement of defense shall be submitted within the time period agreed by the parties or determined by the arbitrator. Unless agreed otherwise by the parties, the claims or defenses may be amended or supplemented. The arbitrator may refuse this amendment or supplementation in case it may be considered inappropriate to allow such amendment or supplement having regard to the delay in making it or prejudice to other parties in an unfair manner or any other circumstances. Therefore, the efforts aiming to extend arbitral proceedings may be prevented. Pursuant to Article 429 of the CPC, arbitrators may decide that the proceedings would be held based on file or by holding hearings.
In the event that the claimant does not submit its statement of claim on time without valid reason, in case the statement of claim is not in due form and the deficiencies are not fulfilled, arbitration proceedings shall be ended pursuant to Article 430/1-a of the CPC. In case that the respondent fails to submit the statement of defense, this would not be considered as acknowledgement or acceptance of case and the proceedings shall proceed.
Pursuant to Article 431, arbitrators may decide to appoint experts to report on the issues determined by the tribunal, that the parties shall make necessary explanations and produce relevant documents to the experts, and to hold viewings. Experts may be heard at the hearing after submitting its reports upon request of one of the parties or in case the arbitrators deem it necessary. At this hearing, any party may interrogate the experts and present expert witnesses in order to testify on the points at issue. Pursuant to Article 432 of the CPC, any of the parties may request the assistance of the tribunal for the collection of evidence with the approval of arbitrators.
Closing of the Proceedings and Arbitral Award
Article 435 of the CPC regulates the closing of the arbitration proceedings. The proceedings shall be closed upon the final arbitral award or in case one of the circumstanceslisted in the relevant article occur. Pursuant to Article 433 of the CPC, unless agreed otherwise by the parties, the arbitrators may decide with the majority of votes. The chairman may decide solely on the procedural matters upon the parties’ or the other arbitrators’ authorization.
The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorized the arbitral tribunal on the relevant matter.
In case of settlement of the parties in the course of arbitration proceedings, the proceedings shall be closed pursuant to Article 434 of the CPC. In case the parties’ request is in compliance with morals or public policy, or in a subject that may be resolved by arbitration, the settlement shall be determined as an arbitral award.
Article 436 of the CPC governs the elements that are required to be included in the arbitral award. Legal grounds on which the award is based and the merits, the rights and obligations attributed to parties under a sequence number specified clearly and conclusively and arbitration expenses and the possibility to initiate an action for annulment are among the important elements that shall be found in the arbitral award.
Pursuant to Article 437, unless a different timeperiod is determined, the parties may, within two weeks after the receipt of the arbitral award, request the correction of any error in computation, any clerical or typographical error, or any error of a similar nature, or the interpretation of a certain issue of part of the arbitral award.
Costs of Arbitration
The arbitration costs include the costs listed under Article 441 of the CPC. Pursuant to Article 442/1 of the CPC, arbitrators may request an advance payment from the parties for the costs of arbitration if necessary. Unless agreed otherwise, the advance payment shall be equally borne by the parties. Unless the parties agree otherwise, the costs shall be borne by the unsuccessful party. In the event that each party is partially successful, the costs shall be allocated to parties in accordance with the success of the parties. Costs of arbitration shall be specified in the award that closes the arbitral proceedings or that determines the settlement of the parties.
Right to Appeal Against the Arbitral Award
The only right to appeal against an arbitral award is the action for annulment and it is regulated under Article 439 of the CPC. The action for annulment shall be initiatedin the court located at the place of arbitration and shall be primarily and urgently tried by the court. The grounds for an annulment are limited to the grounds listed under the second paragraph of the relevant article. In line with the nature of arbitration as a way of dispute resolution, the fact that the law provisions have been properly applied by the arbitrators shall not be discussed in the action for annulment. The action for annulment shall be initiated within one month and unless the relevant court decides otherwise, shall be tried based on file.
The decisions rendered, following an action for annulment may be subject to appeal. The appeal shall be limited to the grounds for annulment listed in the relevant article, and shall be primarily and urgently decided by the court. The appeal shall not suspend the execution of the award.
Pursuant to Article 443 of the CPC, provisionson the new trial which is an extraordinary legal remedy shall be applied, as long as they are suitable for the arbitration.
The provisions of the CPC governing arbitration aim at independent, impartial and accelerated proceedings, by taking current arbitration practices into consideration. The fact that the grounds for annulment of arbitral awards are limited is the outcome of the increasing confidence to arbitral awards.
Even though the provisions of the CPC are greatly influenced by the International Arbitration Act numbered 4686 (“IAA”), CPC does not regulate the terms of reference, unlike the IAA, which may be criticized. The terms of reference are of great importance since it confirms the arbitration agreement between the parties on one hand, and on the other hand, it reflects the agreement of the parties as per the issues regarding the procedure to be followed in arbitration proceedings.
As indicated in our previous article, given the material similarities between the IAA and the CPC, it would be appropriate to regulate the national and international arbitration by summoning the provisions in one code, in order to overcome confusions with respect to the scope of application of the relevant laws.