Arbitration Clause

Also known as: Arbitration Agreement, Arbitration, ISTAC, International Arbitration, Tahkim Şartı

In short

A written contract clause by which the parties agree that their disputes will be resolved by an arbitrator or arbitral tribunal instead of state courts.

An arbitration clause is a contract clause by which the parties agree that their disputes will be resolved by arbitrators instead of state courts. It is commonly used in international commercial contracts to obtain a neutral forum and an award that is easily enforceable abroad.

Legal Framework

Domestic arbitration: Disputes without a foreign element and seated in Turkey are governed by the Code of Civil Procedure (Arts. 407-444).
International arbitration: Disputes with a foreign element and seated in Turkey are governed by International Arbitration Law No. 4686.
Foreign arbitral awards: Their enforcement in Turkey requires recognition and enforcement; Turkey is a party to the 1958 New York Convention.

Validity Requirements

The arbitration clause must be in writing; it may be a clause in the main contract or a separate agreement. It may also be formed through correspondence such as email.
The dispute must be arbitrable.
The parties’ intention to arbitrate must be clear; optional wording such as “disputes will be resolved by arbitration or in court” carries a risk of invalidity.

Institutional and Ad Hoc Arbitration

Institutional arbitration: The dispute is resolved under the rules of an institution such as the Istanbul Arbitration Centre (ISTAC) or the ICC. Using the institution’s model clause is recommended.
Ad hoc arbitration: The parties set the process themselves. It is more flexible but prone to procedural disputes.

A good arbitration clause clearly states the institution or rules, number of arbitrators, seat and language.

Arbitration Objection and Interim Measures

If a case is filed in court despite the clause, the defendant may raise an arbitration objection. It is a preliminary objection and must be raised in the statement of defence. During arbitration, interim measures may be sought from the court or the arbitral tribunal.

Challenging the Award

No appeal lies against an arbitral award; only an action to set it aside may be brought on limited grounds listed in the law. Arbitration replaces state courts and thus differs from a jurisdiction agreement.

Frequently Asked Questions

What happens if a case is filed in court despite an arbitration clause?

If the defendant raises an arbitration objection, the court dismisses the case on procedural grounds. The arbitration objection is a preliminary objection and must be raised in the statement of defence. If not raised in time, the court continues to hear the case.

Can every dispute be resolved by arbitration?

No. Disputes concerning rights in rem over real estate and disputes arising from matters not subject to the parties' will are not arbitrable. The validity of arbitration clauses is also limited in consumer and employment disputes.

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