Ercüment Erdem Att. Piraye Erdem

Decision of the General Assembly Regarding Arbitral Awards Subject to Action to Set Aside

September 2018

Introduction

In the decision of the Court of Cassation General Assembly on the Unification of Judgments (“General Assembly”) numbered 2016/2 E. 2018/4 K.[1] (“Decision”), legal remedies available in response to the arbitral awards derived from arbitration agreements concluded prior to 01.10.2011, the date of the entry into force of the Code of Civil Procedure numbered 6100 (“CCP”), were discussed.

The General Assembly ruled that the aforementioned arbitral awards shall be subject to the action to set aside under Article 439 of the CCP, instead of the appeal process regulated under Article 533 of the former Code of Civil Procedure numbered 1086 (“fCPP”). The General Assembly reached this conclusion through a detailed assessment within the scope of the nature of the arbitration agreements and the rule of immediate implementation of the procedural provisions.

Assessment Regarding the Nature of the Arbitration Agreements

In the Decision, the nature of the arbitration agreements, which is also a matter of discussion in the doctrine and leading to conflicts amongst the Chambers of the Court of Cassation was analyzed under (i) the material law contract, (ii) the procedural law contract and (iii) the mixed contract arguments.

According to the material law contract argument the arbitration agreements are qualified as private law contracts that become effective in accordance with the will of the parties[2]. In this respect, it was emphasized that the arbitral awards are considered as contracts instead of court rulings hence they shall be subject to the invalidity of the contracts regulations.

It was indicated that, according to the procedural law contract argument, the results of the arbitration agreements are seen in the procedural law and arbitral awards are qualified as res judicata and may be enforced. Hence, the arbitration agreements are defined as procedural law contracts by the supporters of this opinion.

It was emphasized that, according to the mixed contract argument combining the above mentioned arguments on a common ground, the arbitration agreements have both procedural and material contract qualities. It was stated that, whereas the characteristics of a material law contracts are visible in the process of contract conclusion and the areas that are subject to the will of the parties; the enforceability of the arbitral award is an important reflection of the procedural law contracts[3].

It was emphasized by the General Assembly who evaluated the aforementioned opinions, the results of the arbitration agreements are seen predominantly in procedural law and the arbitration agreements do not have the characteristics of the material law contract, such as creation or abolition of a right[4]. In this respect, it was concluded that the arbitration agreements are predominantly procedural contracts[5].

Evaluation of the Principles Regarding the Ratione Temporis Application of Laws

In the Decision, following the assessment of the procedural nature of the arbitration agreement, the difference between the ratione temporis application of the amendments on the material and the procedural law was discussed.

In this context, it was emphasized that the amendments on the material law are not retroactive, in other words they are applied to the legal cases and relations that occurred after their entry into force (in principle); whereas, the amendments to the procedural law are subject to the principle of immediate implementation[6].

As underlined in the preamble of the decision, no special transitional provision regarding the ratione temporis implementation of the arbitration clauses is regulated under the CCP. In this respect, it was stated that the transition provisions not stipulated by the law cannot be stipulated by the will of the parties; hence, the parties are not given the freedom to choose the applicable legal remedies to the arbitral award.

Therefore, it was concluded that the provisions of the CCP shall be applied immediately to any incomplete transactions in the arbitration proceedings as of the date of the entry into force of the CCP. What is more, even if the arbitration agreement was concluded when the fCPP was still in force, in the event the arbitral award is issued after the entry into force of the CCP, the arbitral award may only be subject to an annulment action as per the CCP.

Dissenting Vote

In the preamble of the dissenting vote, the importance of the parties’ will to determine the procedure in arbitration was emphasized and it was argued that the arbitration agreement is a material law transaction. It was emphasized that subjecting parties to provisions that could not be foreseen at the time of the conclusion of the contract would constitute a violation of the parties will and the principle of legal certainty stipulated under Article 2 of the Constitution.

In this respect, it was concluded that as a result of the legal proceeding that is conducted under the scope of an arbitral agreement concluded prior to the entry into force of the CCP, provisions regarding the manner of appeal regulated under the fCPP shall be applied to any arbitral award that was issued after the entry into force of the CCP.

Conclusion

In its decision numbered 2016/2 E. 2018/4 K., the General Assembly evaluated the nature of the arbitration agreement under the scope of a material law contract, a provisional law contract and mixed contract arguments and reached the conclusion that the arbitration agreements predominantly qualify as procedural law contracts. In light of the nature of procedural law contracts, the ratione temporis application of laws led to the conclusion that the arbitration agreements shall be subject to the rule of direct implementation of procedural provisions as the CCP does not stipulate a special transactional provision in this respect.

In conclusion, in the disputes stemming from an arbitration agreement that was concluded while the fCPP was still in force, the arbitral awards issued after 01.10.2011which is the date of entry into force of the CPL, shall be subject to the setting aside procedure.

[1] Please see Official Gazette dated 18.09.2018 and numbered 30539 for the Decision.

[2] For detailed explanation regarding the material contract argument please see: Aydemir, Fatih: Türk Hukukunda Tahkim Sözleşmesi, 1st Edition, İstanbul 2017, p. 67.

[3] For detailed explanation regarding the mixed contract opinion please see: Yeşilova, Bilgehan: “Milletlerarası Tahkimin Hukuki Niteliği Üzerine Düşünceler ve Güncel Gelişmeler”, Türkiye Barolar Birliği Dergisi, Number 76, 2008, p. 109.

[4] The same opinion is adopted in the decision of the Court of Cassation dated 22.02.202 and numbered 2011/19-735 E. and 2012/93 K..

[5] According to the opinion of procedural law contract, parties’ subjecting themselves to the settlement of their ongoing or future disputes by arbitrators, demonstrates that the arbitration agreement has a procedural characteristic. For detailed explanation regarding the procedural contract argument please see: Aydemir, ibid, p. 72; Pekcanıtez, Hakan; Atalay, Oğuz; Özekes Muhammet: Medeni Usul Hukuku, 14th Edition, Ankara 2013, p. 1074.

[6] According to the principle of immediate implementation, the new law covers procedural procedures that have not yet been concluded. For detailed information, see: Postacıoğlu, İlhan E.: Medeni Usul Hukuku Dersleri, 7.Edition, İstanbul 2015, p.14; Pekcanıtez; Atalay; Özekes: ibid, p.70.