The Authority of Arbitrators Regarding Execution Proceedings

Under Turkish law, if a creditor files a claim before an execution office when their receivable is not based on a court judgment or a pledge, the execution office will send a payment order to the debtor. If the debtor files an objection with the execution office, the creditor will be compelled to file legal action against the debtor in order to vacate the objection, with the view of proceeding with the execution proceedings once the objection is vacated.

In case there is a contractual stipulation between the parties that the disputes between them should be subject to arbitration, it is controversial whether the arbitrators are entitled to vacate the debtor’s objection to the execution proceedings and whether or not they may subject the parties to penalties arising out of the Execution and Bankruptcy Law.

In recent case-law, the Court of Appeal has ruled that in such cases, the arbitrators are indeed to entitled to do both (see for instance, 6^th Chamber of Court of Appeal decision dated 13.02.2023, File No. 2023/260 and Decision No. 2023/544; 15^th Chamber of Court of Appeal decision dated 16.05.2011, File No. 2011/826 and Decision No. 2011/2941; 15^th Chamber of Court of Appeal decision dated 03.04.2008, File No. 2008/262 and Decision No. 2008/2138; 15^th Chamber of Court of Appeal decision dated 29.04.2013, File No. 2013/1386 and Decision No. 2013/2794).

These decisions are welcome for reducing the uncertainty on whether or not creditors may opt for seeking collection of their receivables through execution offices when the contractual dispute resolution mechanism is arbitration.