Chapter 8: Mediation and International Commercial Arbitration

Mediation

The Law on Mediation of Civil Law Disputes (“Mediation Law”) was published in the Official Gazette dated June 22, 2012 and entered into force on June 22, 2013. The Regulation on the Law on Mediation of Civil Law Disputes was published in the Official Gazette dated January 26, 2013 and entered into force on June 22, 2013.

What is Mediation and When can the Parties Refer to Mediation?

According to Article 2/1/b of the Mediation Law, mediation is a dispute resolution method conducted voluntarily with the participation of an impartial and independent third person who has gone through a special training and who, by applying systematic techniques, is bringing the parties together to discuss and negotiate; ensuring mutual understanding between the parties and the development of a communication process in order for them to produce their own solutions, and who may suggest a resolution in case it becomes apparent that the parties may not find a mutual solution.

Mediation in Civil Law Disputes

According to Article 3/1 of the Mediation Law, the parties are free to refer to, continue, terminate or withdraw from mediation proceedings. Therefore, the parties may not refer to or be forced to refer to mediation unless both of the parties wish so. In practice, usually a prior mediation agreement exists as a part of a main contract between the parties. However, despite a prior written mediation agreement, the parties may always refer to courts. It is not possible for the parties to refer to mediation for all kinds of disputes. The disputes arising out of subject matters related with public policy cannot be referred to mediation.

Mediation in Labor Law Disputes

The new Labor Courts Law, which was published in the Official Gazette on October 12, 2017, makes mediation in labor disputes mandatory as of January 1, 2018. According to Article 3 of this new Law, the disputes concerning receivables or indemnity arising out of law, individual or collective labor agreement, and reemployment cases shall be first brought before a mediator. Only cases relating to accidents at work place or occupational illnesses are an exception. A party to a labor dispute may not just ignore the mediation negotiations even though he/ she is not willing to find a solution through mediation, because his/her non-attendance to the negotiations will be penalized at the end of the court proceedings. The costs of mediation will be equally shared by the parties if they reach a settlement. If not, such costs will be borne by the Ministry of Justice and will be paid by the losing party at the end of the relevant court proceedings.

Who can be a Mediator?

According to Article 20 of the Mediation Law, only Turkish citizens, who are graduates of law faculties, and who possess at least five year experience in his/her profession, may be a mediator.

Mediation Procedure

According to Article 9 of the Mediation Law, the mediator shall act diligently, impartially and in person. e mediator shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality. e mediator may not later act as the lawyer of one of the parties in a subsequent lawsuit related with the dispute. According to Article 9/3, the mediator shall seek to maintain fair treatment of the parties. According to Article 15 of the Mediation Law, after his/her appointment, the mediator must invite the parties to the first meeting as soon as possible. The parties may attend the mediation negotiations by themselves or accompanied by their lawyers. The mediator may suggest a resolution to the dispute, only if it becomes apparent that the parties will not be able to agree upon a mutual solution, the mediator and the parties shall keep all information confidential.

Enforcement of the Settlement Agreement Reached at the End of Mediation

If the settlement agreement is signed only by the parties, that agreement needs an approval from the court in order to be enforced as a court judgment. A settlement agreement bearing the signatures of the parties, their lawyers and the mediator, may be enforced as a court judgment without any approval from a court.

International Commercial Arbitration

Arbitration is a specially established mechanism for the final and binding determination of disputes, concerning a contractual or other relationship, by independent arbitrators, in accordance with rules chosen by the parties.

Advantages of Arbitration

• Neutrality
• Expert arbitrators
• Flexibility
• Confidentiality
• Expedition
• Enforcement

Forms of Arbitration

Institutional arbitration: Institutional arbitration is where parties prefer to enjoy the arbitration services provided by an institution, and choose to submit their disputes to an arbitration procedure under the rules of that institution.

Ad hoc arbitration: When parties are silent and have not selected an institutional arbitration, the arbitration will be ad hoc .

Legal Sources of Arbitration

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”): The major facilitator for the development of an international arbitration regime was the adoption of the New York Convention in 1958. The Convention seeks to provide common legislative standards for the recognition of arbitration agreements, and recognition and enforcement of foreign arbitral awards under the laws of contracting countries.

Party autonomy (arbitration agreement): Party autonomy is the primary source of the arbitration and the procedure. e arbitration will be governed by what the parties have agreed in the arbitration agreement.

Institutional Arbitration Rules: There are many arbitration institutions providing arbitration services, each with its own arbitration rules and procedures.

UNCITRAL Arbitration Rules: UNCITRAL is the abbreviation for United Nations Commission on International Trade Law. e UNCITRAL Rules for ad hoc arbitration were prepared with the intention to be acceptable in developed and developing countries, and in common law and civil law jurisdictions.

The UNCITRAL Model Law on International Commercial Arbitration (“UNCITRAL Model Law”) and National Arbitration Laws: As a result of the development of established arbitration practice in the 1970s, it became clear that some uniformity was needed to reflect the commonly accepted standards for international arbitration.

Arbitration Agreement

The arbitration agreement is an agreement whereby two or more parties agree that a dispute which has arisen or may arise between them in connection with a particular legal relationship will finally be settled by one or more arbitrators.

The arbitration agreement has three effects:

• the arbitration agreement establishes an obligation to arbitrate between the parties.
• an arbitration agreement vests the arbitrators with the necessary power to resolve those disputes that the parties agreed to entrust to the arbitral tribunal.
• a valid arbitration agreement excludes the jurisdiction of national courts.

A valid arbitration agreement is subject to the following four requirements:

• The arbitration agreement must meet the requirements as to its form provided by the relevant law.
• The arbitration agreement must clearly indicate the parties’ consent to submit to arbitration certain disputes which have arisen or which may arise between them in respect of a defined legal relationship.
• It is required that the subject matter of the dispute can be validly submitted to arbitration.
• The parties to an arbitration agreement must have capacity to enter into an arbitration agreement on their own behalf; and/or the parties must be capable of entering into an arbitration agreement in the name and on behalf of another person or entity.

Place of Arbitration (Seat of Arbitration)

The choice of the place of arbitration has significant legal consequences.

• It influences which law governs the arbitration procedure. Unless otherwise agreed upon by the parties, the legal provisions on arbitration of the place of arbitration are applied.
• It determines which courts can exercise supervisory and supportive powers in relation to the arbitration.
• It determines the competence and the procedure before the national courts to rule upon applications to set aside any arbitral award.

Turkish International Arbitration Law

The Turkish International Arbitration Law was published in the Official Gazette on June 21, 2001 and entered into force on July 5, 2001. It is mostly inspired by the UNCITRAL Model Law and the relevant articles of the Swiss Private International Law.

Arbitration Agreement

Article 4/I of the Turkish International Arbitration Law defines an arbitration agreement as follows: “ Arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. ”

The arbitration agreement shall be in writing. The Turkish International Arbitration Law accepts the principle of separability. A valid arbitration agreement obliges the parties to resort to arbitration for the resolution of the dispute subject to the relevant arbitration agreement instead of national courts. Even if there is a valid arbitration agreement between the parties, they may request from a court an interim measure of protection or an interim attachment.

Arbitrators

The parties are free to determine the number of arbitrators. However, the number shall be odd. If the number of arbitrators is not determined by the parties, three arbitrators shall be appointed (Article 7A).