The Court of Appeal reverses once again its precedent regarding the applicability of arbitration clauses in bankruptcy proceedings

For the last few decades, the Court of Appeal’s (“CoA”) approach to arbitration clauses vis-à-vis bankruptcy cases has been extremely rigid. The CoA used to hold that Turkish courts had exclusive jurisdiction over bankruptcy claims and that, accordingly, parties were precluded from invoking an arbitration clause to enjoin the commencement or continuation of litigation in Turkey.

Beginning in 2013, the CoA changed its approach and ruled that, where an arbitration clause had been agreed upon by the parties, Turkish courts would be barred from deciding on the merits of the dispute and would instead have to stay the bankruptcy proceedings pending resolution of the merits by the arbitral tribunal. This approach amounted to an acknowledgment of, and the giving of legal effect to, the contractual will of the parties.

However, in its decision dated 2021 (decision date: December 21, 2021; decision number: 2019/574 E., 2021/1710 K.), the Grand Chamber of the CoA seemingly reversed course and adopted its previous, more conservative approach. The decision in question was analyzed in our article.

By way of reminder, in that decision, the CoA allowed the bankruptcy proceedings filed by the claimant to continue and permitted the Turkish court to render a judgment on the merits of the dispute, despite the existence of an arbitration clause contractually agreed upon by the parties. The court’s reasoning was that: (i) bankruptcy proceedings are subject to an expedited adjudication method under civil procedure law; (ii) it does not constitute bona fide conduct for a defendant to invoke an arbitration defense where the claimant, as part of its right to legal redress, brings a bankruptcy claim in order to effect collection in an expedited manner; (iii) bankruptcy claims have ramifications not only for the parties to the dispute but also for other creditors and therefore concern public order; (iv) each procedure in a bankruptcy claim constitutes an indivisible whole, and it would not be appropriate to separate its steps and subject them to different procedures; (v) doing so would run counter to the principle of judicial efficiency; and (vi) the statutory provisions governing bankruptcy proceedings do not provide for an exception allowing arbitration of such claims.

Yet, in a new decision rendered by the Grand Chamber of the CoA, the case law has once again been reversed, and a far more arbitration-friendly approach has been adopted (decision date: October 1, 2025; decision number: 2025/512 E., 2025/591 K.). In this decision, the Grand Chamber of the CoA stated that:

• Where there is an arbitration clause concerning the disputed receivable between the parties, the dispute regarding that receivable must first be resolved through arbitration, and only thereafter may a bankruptcy claim be filed. Otherwise, if execution proceedings by way of bankruptcy are initiated and the debtor objects to those proceedings, a preliminary objection based on the arbitration clause may be raised following the filing of the bankruptcy lawsuit.

• If the court determines that the dispute in question is arbitrable, it must dismiss the case on procedural grounds. This is because, if it is determined prior to the bankruptcy claim that the debtor’s objection is unjustified, the objection is lifted and the bankruptcy process commences. Since an action for lifting the objection is also assessed entirely under substantive law, the existence of a valid arbitration clause at this stage likewise necessitates acceptance of the arbitration defense.

• Pursuant to Article 2 of the Turkish Civil Code, everyone is obliged to comply with the rules of good faith when exercising their rights and performing their obligations, and the legal order does not protect the manifest abuse of a right. In light of the principle of pacta sunt servanda, it must be acknowledged that plaintiffs who initiate execution proceedings by way of bankruptcy aim to circumvent the arbitration clause contained in the contract.

• For this reason, although plaintiffs should first apply to arbitration and obtain a decision establishing the existence and amount of the receivable, and only thereafter initiate execution proceedings by way of bankruptcy and file a bankruptcy claim against the debtors, directly initiating execution proceedings by way of bankruptcy and subsequently filing a bankruptcy claim in a manner that eliminates the contractually agreed forum is inappropriate. Accordingly, the defendants’ timely preliminary objection based on the arbitration clause should be upheld, and the case should be dismissed on procedural grounds.

In conclusion, this final arbitration-friendly turn once again closes the back door for claimants seeking to circumvent a previously stipulated arbitration clause.