The Court of Cassation Assesses the Limits of Ordering Payment in Arbitration Proceedings Concerning the Annulment of Objections to Execution Proceedings
Introduction
In its decision dated 29 April 2025 and numbered E. 2024/1700, K. 2025/1758 (the Decision), the 6th Civil Chamber of the Turkish Court of Cassation (the Court of Cassation) made significant findings concerning the setting aside of an arbitral award rendered under International Arbitration Law No. 4686 (the IAL).
In the dispute underlying the Decision, the request for the annulment of the objections raised against the execution proceedings was examined by an arbitral tribunal pursuant to the arbitration clause contained in the agreement between the parties. It is understood from the explanations set out in the Decision that the arbitral tribunal not only annulled the objections and ordered the continuation of the execution proceedings but also rendered a separate order for payment in respect of the principal amount and accrued interest subject to the execution proceedings. The 27th Civil Chamber of the Ankara Regional Court of Appeal (the Regional Court of Appeal), acting as the court of first instance, set aside the arbitral award on the grounds that the arbitral tribunal had exceeded the relief sought, thereby creating uncertainty as to the enforcement of the award and resulting in a violation of public policy. The Court of Cassation upheld the Regional Court of Appeal’s decision.
The Decision is particularly significant in terms of the limits of the relief that may be granted by an arbitral tribunal in disputes concerning the annulment of objections to execution proceedings, as well as the relationship between exceeding the relief sought and violation of public policy.
The Dispute Underlying the Decision
The dispute arose from execution proceedings initiated for the recourse of payments made to employees under a subcontracting agreement between the parties.
In the case underlying the Decision, the subcontractor company initiated two separate execution proceedings against the counterparty in order to recoup payments it had been required to make in respect of employment-related claims. Following the debtor company’s objections to these execution proceedings, the creditor initiated arbitration seeking the annulment of the objections, relying on the arbitration clause contained in the agreement between the parties.
The legal nature of an action for annulment of objection (itirazın iptali davası) is relevant to the assessment of the Decision. An action for annulment of objections, as regulated under Article 67 of Enforcement and Bankruptcy Law No. 2004 (the EBL), is a legal remedy aimed at enabling the continuation of execution proceedings that have been stayed because of the debtor’s objection to non-judgment execution proceedings. Where execution proceedings are suspended following the debtor’s objection to the payment order, the creditor may, subject to the conditions set forth in Article 67 of the EBL, seek the annulment of the objection. In such an action, the court examines the existence and amount of the claim subject to the execution proceedings in accordance with the general provisions of law. However, if the action is upheld, the court does not, as a rule, render a separate order for payment of the principal amount subject to the execution proceedings; rather, it orders the partial or complete annulment of the debtor’s objection and the continuation of the suspended execution proceedings in respect of the relevant amount. Accordingly, the claim is recovered through the continuation of the existing execution proceedings that had been stayed due to the objection, rather than on the basis of a new order for payment. Where the relevant conditions are satisfied, the court may separately award items such as denial compensation (icra inkâr tazminatı), litigation costs and attorneys’ fees.
In the case at hand, it is understood that, the arbitral tribunal annulled the objections to the execution proceedings and ordered the continuation of such proceedings, while also rendering a separate order for payment in respect of the principal amount and accrued interest subject to the execution proceedings.
The party against which the award was rendered subsequently applied to the Regional Court of Appeal seeking to have the arbitral award set aside. Among other arguments, the claimant in the setting-aside proceedings asserted that, in a dispute concerning the annulment of objections, the arbitral tribunal should have limited its decision to the annulment of the objections and the continuation of the execution proceedings. The claimant further argued that rendering a separate order for payment in respect of the principal amount and accrued interest subject to the execution proceedings exceeded the relief sought and violated public policy.
Assessment of the Regional Court of Appeal and the Court of Cassation
The Regional Court of Appeal concluded that the arbitral tribunal had rendered an award exceeding the relief sought. In this respect, the Regional Court of Appeal held that the arbitral tribunal should have annulled the objections and ordered the continuation of the execution proceedings, while rendering a separate payment order only in respect of denial compensation, arbitrators’ fees, litigation costs and attorneys’ fees. Accordingly, it found that the arbitral tribunal’s decision to additionally order payment of the principal amount and accrued interest subject to the execution proceedings was not in accordance with the law.
The Regional Court of Appeal further held that rendering a separate order for payment of the principal amount and accrued interest, in addition to annulling the objections and ordering the continuation of the execution proceedings, would create uncertainty as to enforcement of the award. It therefore concluded that the arbitral award was not capable of proper enforcement and was contrary to public policy. On these grounds, the Regional Court of Appeal held that the grounds for setting aside under Articles 15/1-e and 15/2-b of the IAL had been established and set aside the arbitral award.
The respondent appealed the Regional Court of Appeal’s decision, arguing that none of the grounds for setting aside under Article 15 of the IAL had arisen, that the terms of reference expressly authorised the arbitral tribunal to determine the claims for recourse together with their ancillary claims, and that the arbitral award did not create any uncertainty as to its enforcement. The respondent further argued that any error made by the arbitral tribunal could, where necessary, be remedied through partial setting aside of the award.
The Court of Cassation noted that the dispute concerned a request to set aside the arbitral award and the supplementary award rendered under the IAL and emphasised that the judicial review of arbitral awards in setting-aside proceedings is confined to the grounds exhaustively enumerated under Article 15 of the IAL. Having regard to the parties’ respective claims and defences, the documents on which they relied, the applicable rules of law and the reasoning set out in the Regional Court of Appeal’s decision, the Court of Cassation upheld the Regional Court of Appeal’s decision on the ground that it was in accordance with procedural and substantive law.
The Decision is particularly significant in terms of the limits of the relief that an arbitral tribunal may grant in arbitration proceedings concerning the annulment of objections to execution proceedings. Although the existence and amount of the claim underlying the execution proceedings are examined in such a dispute, the consequence of a successful action is the annulment of the debtor’s objection and the continuation of the execution proceedings that had been stayed as a result of that objection. Accordingly, as a rule, the principal claim is recovered through the continuation of the existing execution proceedings. Rendering a separate order for payment in respect of the same principal amount and accrued interest, in addition to annulling the objection and ordering the continuation of the execution proceedings, may therefore result in a decision that simultaneously provides for both the continuation of execution proceedings and payment in respect of the same claim.
In the case at hand, the Regional Court of Appeal did not assess the manner in which the arbitral tribunal had rendered its award solely from the perspective of exceeding the relief sought. It also took into account the uncertainty that the resulting award would create at the enforcement stage and, on that basis, concluded that the award was contrary to public policy. The Court of Cassation’s decision to uphold the Regional Court of Appeal’s judgment highlights the importance of ensuring that the operative part of an arbitral award in proceedings concerning the annulment of objections is consistent with the nature of the legal remedy sought and does not create uncertainty at the enforcement stage.
It should nevertheless be noted that, in the Decision, the Court of Cassation did not provide a separate and detailed analysis of the boundaries of public policy. Rather, it upheld the Regional Court of Appeal’s assessment that exceeding the relief sought and the resulting uncertainty as to enforcement amounted to a violation of public policy, finding that assessment to be in accordance with procedural and substantive law. Accordingly, the Decision should not be interpreted as establishing that every instance of exceeding the relief sought, or every uncertainty concerning enforcement, constitutes a violation of public policy in itself. Rather, the Decision should be considered considering the specific circumstances of the case, in which the arbitral tribunal both ordered the continuation of the execution proceedings and rendered a separate order for payment in respect of the same principal amount and accrued interest.
Conclusion
In conclusion, the Decision demonstrates that, in arbitration proceedings, arbitral tribunals should take into account not only the claims relating to the merits of the dispute, but also the nature of the legal remedy sought and the form of relief appropriate to that remedy. Particularly in disputes arising from execution proceedings, due consideration should be given to the effect of the operative part of the award on the existing execution proceedings, and the award should be formulated to avoid conflicting consequences at the enforcement stage. This is also important in mitigating the risk of the arbitral award being set aside.
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