Court of Cassation Delivers Jurisprudential Unification Decision Subjecting All Domestic Arbitral Awards Rendered Following Effective Date of Code of Civil Procedure No. 6100 to Annulment Actions

Recent Development

The General Assembly of Civil Chambers for Jurisprudential Unification of the Turkish Court of Cassation rendered a decision providing that all domestic arbitral awards delivered after 1 October 2011, the effective date of the Code of Civil Procedure No. 6100 (“ New CCP ”), will be challenged with an annulment action, regardless of the date of the arbitration agreement (“ Decision “). The Decision was announced on the Official Gazette dated 18 September 2018.

Background

The former Civil Procedural Law No. 1086 (“ Former CCP ”), which remained in force until the New CCP’s effective date, provided that domestic arbitral awards could be challenged with an appeal. The New CCP, entered into force on 1 October 2011, stated that domestic arbitral awards must be challenged with an annulment action, thereby abolishing the appeal procedure. This difference between the New and Former CCPs’ procedural laws resulted in a split among several Court of Cassation Chambers: Some chambers held the view that the arbitral award would be subject to appeal under the Former CCP if the arbitration agreement was executed before the effective date of the New CCP, even if the award was delivered after the effective date. On the other hand, other chambers ruled that an annulment action under the New CCP would be applicable regardless of the date of arbitration agreement if the award was conferred after the effective date of the New CCP. The General Assembly of Civil Chambers for Jurisprudential Unification reviewed the matter to resolve the split.

What Does the Decision Say?

• The Decision states that a domestic arbitral award is subject to annulment if it is delivered after the effective date of the New CCP, regardless of the date of the arbitration agreement. The Court of Cassation arrived at this resolution by classifying arbitration agreements explicitly as procedural agreements and referencing the immediate application of procedural rules. The classification of arbitration agreements as procedural agreements resolved the conflicting opinions regarding the legal nature of arbitration agreements.
• Procedural law rules take effect immediately. An arbitral award will be subject to an annulment action under the New CCP if delivered after the entry into force of the New CCP. Furthermore, even if the parties to an arbitration agreement have agreed on using the Former CCP to govern the arbitration, arbitral awards made after 1 October 2011 will be subject to the New CCP.
• The formation of an arbitration agreement by the free will of the parties shows a substantive law element. Therefore, arbitration agreements signed before 1 October 2011 are subject to the Former CCP in terms of their formation and validity.
• Compared to the grounds for appeal under Article 533 of the Former CCP, Article 439 of the New CCP provides a broader scope of grounds for which such annulments can be granted. These are listed in a numerus clausus manner. The Decision preserves the Former CCP’s grounds for appeal and includes additional grounds. The Former CCP grounds for appeal are (i) failure to render an award within the specified period; (ii) decision exceeds the arbitrator’s or tribunal’s authority; and (iii) decision does not settle the entirety of the claims. The new grounds for annulment include the incapacity of one of the parties to the arbitration agreement; invalidity of the arbitration agreement; non-compliance with the arbitrator appointment procedure as defined in the parties’ agreement or prescribed by the law; unlawful decision by the arbitrator or the tribunal regarding their own competence; material violation of procedural rules; violation of the principle of equality between the parties and the right to be heard; and the subject matter of the dispute not being arbitrable under Turkish law and the award being contrary to public order.

Conclusion

The Decision states that domestic arbitral awards delivered after 1 October 2011 can only be challenged with an annulment action.