On 29 November 2014, the Turkish government published a law (No. 6570) authorizing the establishment of the Istanbul Arbitration Center. This new institution is meant to act as supervisor of arbitral proceedings for both international and domestic disputes. The law will enter into force on 1 January 2015.
Implications for arbitration practice
The Istanbul Arbitration Center will provide foreign and domestic companies the opportunity to arbitrate disputes through a specialized institution in Istanbul. This is especially important for companies with projects in Turkey or with Turkish companies, as close proximity to the tribunal can significantly decrease the cost of arbitral proceedings. The center will also be a forum for meetings and conferences, increasing the visibility of arbitration professionals in Turkey and facilitating the identification and selection of arbitrators and experts. As with all arbitration, recourse to the center will be by agreement of the parties.
What the law says
The law is meant to encourage recourse to arbitration in Turkey, especially in disputes with a “foreign element”. The center is intended to further attract foreign investment by providing a more efficient dispute resolution mechanism, especially with regard to complex matters. The law does not specify procedural rules, which is left to the center to develop and adopt. Consistent with the general principles of arbitration, the law also imposes a confidentiality obligation on the center’s employees.
Conclusion
The Istanbul Arbitration Center’s full impact on arbitration in Turkey will only be known after its procedural rules are adopted. Once they are available, contracting parties will have the opportunity to refer disputes to the Istanbul Arbitration Center. Selecting a method of dispute resolution and designating the center in arbitration clauses is a strategic decision which should be carefully considered at the contract drafting stage.
Please do not hesitate to contact our team if you have any questions about arbitration in Turkey.
