Arbitration results in the resolution of private law disputes by an arbitrator or arbitral tribunal, whose final decisions are called “arbitral awards”. Arbitral awards are final, enforceable and binding decisions, similar to rulings in court. This article will compare the available remedies against arbitral awards within the framework of the Code of Civil Procedure (“CCP”) and the International Arbitration Act (“IAA”).
Arbitration may relate to domestic or international arbitration, depending on whether the dispute has any international aspect. The CCP applies to domestic arbitration cases without any cross-border elements whereas the IAA applies to international arbitration proceedings.
The New York Convention, which was adopted on 10 June 1958 and whose signatories include Türkiye, is a crucial regulation on the recognition and enforcement of international commercial arbitral awards. The regulation sets forth various criteria to establish whether an award is domestic or international, including the seat of the award, the parties’ residency in different countries, or the existence of cross-border commercial activities.
The IAA also contains criteria for determining the cross-border quality of an award. Accordingly, a dispute is deemed to have a cross-border aspect if the parties are resident in different countries, the seat of arbitration or the places concerning the dispute are located in different states, foreign capital or international financing is required, or the agreement involves the movement of capital or goods between countries.
Under Turkish law, the only remedy available against arbitral awards is an action for annulment as per article 15 of the IAA, which regulates international arbitration, and article 439 of the CCP, which regulates domestic arbitration. An action for annulment may only be filed against a decision rendered as a result of arbitration, qualifying as an “arbitral award”. It may be brought against an award in procedural or substantive aspects. Since arbitration relies on the will of the parties and aims to minimize the intervention of a court, it is desirable to limit the available remedies against arbitral awards in an effort to reinforce individual will.
Accordingly, article 439 of the CCP stipulates that only an action for annulment can be filed against arbitral awards; likewise, the IAA sets forth that the only remedy against arbitral awards is an action for annulment.
In the framework of the CCP, the proceedings for the annulment of domestic arbitral awards are heard by regional courts urgently and with priority. As a rule, only one of the parties to the dispute subject to arbitration may file an action for annulment.
The valid grounds for annulment actions are listed in article 439 of the CCP, which are considered ex officio by a judge. Arbitral awards may be annulled under following conditions:
- One of the parties is legally incapable, or the arbitration agreement is invalid,
- There is irregularity in the selection of the arbitrator or arbitral tribunal,
- The award has not been rendered within the arbitration period,
- The arbitrator or arbitral tribunal has acted beyond their authority or made a decision outside their authority,
- The arbitration has been conducted irregularly, affecting the nature of the award,
- The principle of equality of the parties and the right to be heard have been violated,
- The dispute is not arbitrable under Turkish law,
- The award disturbs public order.
In an annulment action filed on the grounds that the arbitrator or arbitral tribunal has rendered an award on a matter irrelevant to the arbitration agreement, it is possible to annul only the irrelevant sections if the matters relevant to the arbitration agreement can be separated from those that are irrelevant. There is a final term for the annulment action, which is one month from the date of notification of the award or of the decision of modification, correction or completion to the parties. While the filing of an annulment action does not automatically stay the execution of an award, execution may be suspended upon request, with the provision of an appropriate assurance.
The case is usually resolved upon examination of the file, and the decision can be appealed. The appellate review is limited to the grounds for annulment and is concluded with priority, but this process also does not stay the execution of the award.
Since the annulment action does not require a decision on the nature of the dispute, and the action does not aim for it, the court will only determine whether the grounds for annulment, listed in the law, are present in the case on hand.
The IAA also sets forth that an action for annulment is the only remedy available against international arbitral awards, and the process is quite similar to what is provided in the CCP regarding domestic arbitral awards. Consequently, most explanations are the same, with a few minor differences.
Pursuant to article 15/4 of the IAA, “The filing of an annulment action shall automatically stay the execution of the arbitral award.” Thus, unlike the annulment process under the CCP, the filing of an annulment action against an arbitral award automatically stays the execution of an award under the IAA. The reason is that the refund of the amount collected in the event of the annulment of an award in international arbitration is a more complex and demanding process compared to the process in domestic arbitral awards.
Unlike the CCP, the IAA distinguishes between the grounds for annulment that may be raised by the parties and that will be considered ex officio. As per article 15 in the IAA:
First of all, an annulment decision may be granted if the applicant proves one of the following:
- One of the parties to the arbitration agreement is legally incapable, or the arbitration agreement is invalid under the law chosen by the parties or under Turkish law if no law has been chosen,
- The procedure set by the parties or prescribed by law has not been followed in the selection of the arbitrator or arbitral tribunal,
- The award has not been rendered within the arbitration period,
- It has been found that the arbitrator or arbitral tribunal was unlawfully authorized or unauthorized,
- An award has been rendered on a matter outside the arbitration agreement, the entire claim has not been resolved, or the relevant authority has been exceeded,
- The arbitration has not been carried out in accordance with the procedure agreed upon by the parties or, in the absence of such an agreement, in accordance with the provisions of the law, which has affected the nature of the award,
- The principle of equality of the parties has not been respected.
In addition, an arbitral award may be annulled if the regional court finds that:
- The dispute subject to the arbitral award is not arbitrable under Turkish law,
- The award disturbs public order.
The grounds for annulment are the same; however, while they are considered ex officio as per the CCP, they may be raised by the parties, or the court may consider them ex officio as per the IAA due to the international nature of the arbitration and the principle of limited intervention.
At the end of annulment actions, the court may decide to accept, partially accept or reject the annulment. Acceptance of the case, i.e. the annulment of the arbitral award, requires a new proceeding for the same dispute. However, whether this proceeding will take place in a regional court or through arbitration depends on the grounds on which the award has been annulled. This issue is provided under article 440/7 of the CCP for domestic arbitral awards and article 15 of the IAA for international arbitral awards.
In conclusion, the only remedy available against arbitral awards, whether under the IAA or the CCP, is an action for annulment. Although the CCP and the IAA contain similar provisions regarding annulment actions, there are some differences as the IAA concerns cross-border aspects and adopts the principle of limited intervention due to its international character. The annulment of an arbitral award requires a new proceeding for the dispute in a regional court or through arbitration.
