Another Landmark & Pro-Arbitration Ruling from the Court of Appeal

Last year, the Court of Appeal (“Court”) handed down a landmark decision in a claim related to the setting-aside of an arbitral award, where the question was whether it was the arbitration institution (in this case, the ICC) or the Turkish courts, which were competent to extend the time-limit of the arbitral proceedings. The Court ruled that it was the ICC which was competent to decide on the matter and that the Turkish court’s decision would be ineffective, that is to say, that the Turkish court’s decision rejecting the extension of the time-limit to render the arbitral award will not have any legal effect on the arbitral proceedings.

After the Court’s decision, the file was remanded back to the Regional Court; and the Regional Court decided to comply with the Court’s decision. Upon review of plaintiff’s other grounds for setting-aside of the claim, the Regional Court also ruled in a pro-arbitration fashion, by dismissing all the other set-aside grounds of the plaintiff (defendant in the arbitral proceeding). The plaintiff’s allegations were, amongst others, that (i) the arbitral award was unclear, incomprehensible and its operative section was contradictory to its reasoning, (ii) the arbitral tribunal exceeded its authority by applying foreign laws on the basis that the Turkish law allowed it to do so since foreign laws are also a source of Turkish law, instead of the substantive Turkish Laws that the parties agreed on , (iii) the arbitral tribunal accepted a claim which did not exist at the time of the initiation of the arbitration proceedings, but which has arisen afterwards, (iv) the arbitral tribunal exceeded its authority by awarding more than the claim and consequently the principle of fair trial was violated, (v) the plaintiff’s unsubstantiated claims were accepted to be true without proper examination and that the burden of proof was reversed, (vi) the defendant’s due process rights were violated as it was not given the proper right to challenge the expert statements, (vii) the proceedings were not carried out expeditiously and in accordance with the principle of procedural economy, whereby the trial costs were inflated, and (viii) the arbitrator who was appointed by the plaintiff did not act independently.

The Regional Court ruled in its decision that most of the above stated grounds were relevant to the merits of the dispute and, therefore, cannot be reviewed due to the principle of the prohibition of revision au fond. The Regional Court also dismissed plaintiff’s other allegations for lacking any grounds for the setting-aside of the award as per Turkish law. The Regional Court’s decision was later upheld by the Court.

It is a pleasure to see that the Court assumed a pro-arbitration approach and rejected reviewing the majority of the plaintiff’s grounds for the setting-aside of the arbitral award on the basis that it was not entitled to do so, by virtue of the principle of the prohibition of revision au fond. The Court’s approach disallowed the plaintiff’s effort to have this highly complex dispute to be subject to a re-trial by the Turkish courts after the arbitral award was handed down.