Arbitration in the Resolution of Foreign Investment Disputes in Turkey

Historical Development of Arbitration

Arbitration is a form of judgment that involves the resolution of disputes that may arise between the foreign investor and the state, outside the jurisdiction of the state, within the framework of its own procedural rules, by persons called arbitrators or arbitral tribunals.

What makes arbitration appealing in foreign investment disputes is the legitimate concern that, if the dispute is resolved in host state courts, these courts may not be independent and impartial towards the foreign investor.

For this reason, granting the foreign investor the right to apply to arbitration is of great importance in terms of promoting foreign investments. Because, foreign investors’ desire to make investments in states and conditions where they know that they will be treated equally with residents in the country and in case of a dispute, have the right to have the dispute resolved before an impartial arbitration committee, naturally, it will be necessary to see it as an extension of their desire to protect their property rights and guarantee their investments.

The significant increase in the global trade volume and foreign direct investments in the last forty years has forced Turkey to take the necessary measures in terms of the international legal framework in order to adapt to this changing trade and investment environment.

Turkey, on arbitration long before the 1980s,

With the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards

It ratified the 1961 Geneva Conventions on International Commercial Arbitration in 1991.

Later on, Turkey became a party to the 1965 Convention on the Settlement of Investment Disputes Between States and Citizens of Other States (Washington Convention) (ICSID) in 1988, and then this agreement passed through the ratification process and was brought into domestic law with the Cabinet Decision dated 7 October 1988 and numbered 88/13325. has been included.

Legislation Enacted Respectively Regarding Direct Investments

In the arbitration clause or arbitration agreement; Disputes to be resolved through arbitration, arbitration rules to be applied, arbitration place, selection and number of arbitrator or arbitral tribunal, qualifications, authority of arbitral tribunal, trial procedure of arbitral tribunal, language to be used in proceedings, choice of substantive law to be applied to the merits of the dispute, substitution of evidence by parties, selection of experts, One of the Concession Conditions and Agreements on Public Services dated 21 January 2000 and numbered 4501, which stipulates how the dispute will be notified to the other party, the notification period, the arbitration period, the authority and procedure of the arbitral tribunal to collect evidence, the arbitrator’s fee, litigation expenses, attorney’s fee and similar issues. The Law on the Principles to be Followed in the Case of Applying for Arbitration in Disputes,

International Arbitration Law No. 4686, dated 21 June 2001, to be implemented in cases where Turkey is chosen as the place of arbitration and the dispute has a foreign element,

In the article 3/e under the sub-heading of resolution of disputes, “Foreign Direct Investment Law No. 4875 dated 2003, For the settlement of disputes arising from investment agreements subject to private law and investment disputes arising from public service concessions contracts and conditions which are concluded with foreign

investors, foreign investors can apply either to the authorised local courts, or to national or international arbitration or other means of dispute settlement, provided that the conditions in the related regulations are fulfilled and the parties agree thereon.

The Law on International Private and Procedural Law, dated 27 November 2007 and numbered 5718, which includes regulations regarding the recognition and enforcement of foreign arbitral awards.

Civil Procedure Law No. 6100, dated 12.1.2011, in order to apply the relevant provisions in cases where Turkey is the place of arbitration and does not contain any foreign element,

The Istanbul Arbitration Center Law No. 6570, dated November 20, 2014, which regulates the procedures and principles regarding the establishment of the Istanbul Arbitration Center (ISTAC) and the organization and activities of this center, entered into force.

(ICSID-International Center for the Settlement of Investment Disputes)

Objective Establishment Method Organs

ICSID; It is a center established in Washington, USA, within the body of the World Bank, for the settlement of investment disputes between states and citizens of other states with the 1965 Convention on the Settlement of Investment Disputes Between States and Citizens of Other States.

Disputes at the Center are resolved by Mediation or Arbitration, depending on the request of the parties.

Within ICSID; There is the Administrative Council, the Secretariat, the panel of mediators and the panel of arbitrators.

The Administrative Council is the highest administrative decision-making body of ICSID and consists of representatives sent by the contracting states. It performs important tasks such as budgeting, approving the rules of procedure, approving the arbitration application procedure, selecting the general secretary. The President of the World Bank is also the chairman of the Administrative Council.

The Secretary General and his deputies are elected by the Administrative Council for a maximum term of six years. The Secretary General is responsible for the administration and administration of the centre, and acts as the legal representative of the centre.

The panel of mediators and arbitrators consists of four persons appointed by each State party for each panel. The Chairman of the Administrative Council may also appoint ten citizens of different countries to each panel.

Disputes are resolved by panels. For this reason, only people who have high morals, who are experts in law, trade, industry and finance, and who are considered reliable to be independent can be appointed to the panels.

ICSID gives the parties the opportunity to determine their arbitrator or mediator through panels, but ICSID itself does not participate in the resolution itself like a mediator or arbitrator.

Taking International Investment Disputes Before ICSID

Conditions

The dispute must arise directly from an international investment.

The states to which the parties to the dispute belong should be parties to the ICSID Convention. The investor must be a citizen of another contracting state.

The parties to the dispute must clearly accept the jurisdiction of ICSID with the arbitration clause (clause) in the investment agreements they have made between them at the beginning or the arbitration agreements that can be made separately. This authority can be recognized by the parties with consent statements even after the dispute has arisen. Consent to the acceptance of Jurisdiction must in all cases be given in writing. No party can unilaterally withdraw their consent after consent has been presented.

ICSID Rules of Procedure

Arbitration Application Request and Registration of the Application

The party applying for arbitration in the resolution of the dispute notifies the arbitration request in writing to the ICSID General Secretariat. The General Secretariat transmits a copy of the request to the other party.

After the Secretary General submits the documents containing the identity information of the parties, the issues of dispute, and their consent to arbitration, he or she evaluates whether the application is within the jurisdiction of ICSID.

If the request is within the jurisdiction of ICSID, the Secretary General records the request and notifies the parties of the situation. Applications outside the Jurisdiction are not recorded.

Organization of the Arbitration Tribunal

The panel may consist of one arbitrator or more than one arbitrator to be determined in an odd number. The number of arbitrators and who the arbitrators will consist of are determined by the agreement of the parties. The arbitrators to be determined may also be outside the ICSID Panel.

If there is a disagreement between the parties regarding the appointment of an arbitrator, the panel will consist of a total of three arbitrators, one arbitrator appointed separately by the parties and one arbitrator who will preside over the committee to be jointly appointed by the parties.

If the parties cannot form a committee as above after the application is sent to the other party, the President of the ICSID Central Administrative Council will appoint the arbitrator or arbitrators who are not appointed upon the request of one of the parties, in consultation with the other party. Arbitrators appointed by the President shall not have the same nationality as the person or state party to the dispute.

Decisions That the Arbitral Tribunal Can Make

Delegations have two procedures for making decisions. It will be decided either by meeting in the presence of all members or by consulting the members individually.

The arbitral tribunal decides the problems with the majority of the members. An absolute majority must be ensured. If the majority is not reached, the committee continues its work.

The panel makes the final decision within 120 days, starting from the end of the phase of proofreading. The decision must be in writing and signed by all voting members.

Final decisions must be in writing and signed for validity. Final decisions should be detailed and reasoned. Decisions cannot be published without the consent of the parties.

Other decisions or injunctions may also be ordered, apart from final decisions that differ in nature and require the Tribunal to withdraw from the case.

Termination of Proceedings in ICSID Arbitration

Forms of Termination

Making a final decision by the arbitral tribunal on the merits of the dispute

The dismissal of the case due to the settlement of the parties,

Express or implied consent of the other party upon a party’s request to have the case dismissed

The parties’ refusal to pursue the case

CONVENTION ON THE  SETTLEMENT OF INVESTMENT DISPUTES  BETWEEN STATES AND NATIONALS OF OTHER STATES

The Contracting States

Considering the need for international cooperation for economic development, and the role of private international investment therein;

Bearing in mind the possibility that from time to time disputes may arise in connection with such investment between Contracting States and nationals of other Contracting States;

Recognizing that while such disputes would usually be subject to national legal processes, international methods of settlement may be appropriate in certain cases;

Attaching particular importance to the availability of facilities for international conciliation or arbitration to which Contracting States and nationals of other Contracting States may submit such disputes if they so desire;

Desiring to establish such facilities under the auspices of the International Bank for Reconstruction and Development;

Recognizing that mutual consent by the parties to submit such disputes to conciliation or to arbitration through such facilities constitutes a binding agreement which requires in particular that due consideration be given to any recommendation of conciliators, and that any arbitral award be complied with; and

Declaring that no Contracting State shall by the mere fact of its ratification, acceptance or approval of this Convention and without its consent be deemed to be under any obligation to submit any particular dispute to conciliation or arbitration, Have agreed as follows:

International Centre for

Settlement of Investment Disputes

Establishment and Organization.