Landmark Decision of the Court of Appeal – Arbitration & Ineffectiveness of Turkish Court Decisions

The Court of Appeal (“Court”) handed down a landmark decision in a claim requesting the court to set-aside an arbitral award.

The matter presented to the Court involved the question of whether it was the arbitration institution (in this case, the ICC) or the Turkish courts which were competent in terms of extending the time-limit of the arbitral proceedings. The Court stated that where the parties submitted their disputes to an arbitration to be resolved by the rules of an arbitration institution, it will be the arbitration institution rather than the Turkish court which will be competent to grant such an extension. The Court’s decision also effectively means that the law is not peremptory on this issue.

The Court’s decision is even more important due to its potential application in a broader scope. The Court ruled, perhaps for the first time in reported case-law, that a Turkish court’s decision may in fact be ineffective. Specifically, the Court stated that the Turkish court’s decision rejecting the extension of the time-limit to render the arbitral award will not have any legal effect in the current dispute, since it was the ICC which was competent to decide on the issue. The ineffectiveness of certain types of court decisions was a matter already discussed and largely accepted in scholarly work, but this time, the Court explicitly acknowledged and ruled in favor of this possibility.