Arbitration in Turkey: Is It Better Than Court Litigation?

Introduction

Arbitration in Turkey has become an increasingly preferred dispute resolution mechanism, particularly in commercial and international transactions. As foreign investment, cross-border trade, and infrastructure projects expand, parties often choose arbitration clauses instead of submitting disputes to Turkish state courts.

But is arbitration in Turkey truly better than court litigation?

The answer depends on the nature of the dispute, enforcement goals, cost considerations, confidentiality needs, and time sensitivity. While arbitration offers flexibility and international enforceability, it may also involve higher upfront costs and limited appeal mechanisms.

This article provides a comprehensive overview of arbitration in Turkey, including its legal basis, types of arbitration, enforcement rules, comparison with court litigation, and strategic considerations for foreign parties.


1. Legal Framework of Arbitration in Turkey

Arbitration in Turkey is regulated by two primary laws:

1️⃣ Turkish Code of Civil Procedure (Domestic Arbitration)

Applies when:

  • Dispute is domestic
  • No foreign element exists

2️⃣ International Arbitration Law (Law No. 4686)

Applies when:

  • There is a foreign element
  • Parties agree to international arbitration

Turkey is also a party to:

  • The 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards

This makes arbitral awards enforceable in over 160 countries.


2. Types of Arbitration in Turkey

A. Ad Hoc Arbitration

  • No institutional supervision
  • Parties determine procedural rules
  • Flexible but requires careful drafting

B. Institutional Arbitration

Common institutions include:

  • Istanbul Arbitration Centre (ISTAC)
  • ICC Arbitration (frequently used in Turkey-related contracts)

Institutional arbitration provides procedural structure and administrative support.


3. Valid Arbitration Agreement

An arbitration agreement must:

  • Be in writing
  • Clearly express parties’ intent to arbitrate
  • Define scope of disputes

Invalid or poorly drafted clauses may lead to jurisdiction disputes.

Courts generally respect arbitration agreements unless:

  • Subject matter is non-arbitrable
  • Clause violates public policy

4. Arbitrability Under Turkish Law

Not all disputes can be resolved by arbitration.

Generally arbitrable:

  • Commercial disputes
  • Construction contracts
  • Shareholder disputes
  • International trade contracts

Not arbitrable:

  • Criminal matters
  • Family law
  • Administrative law disputes
  • Certain real estate registration issues

Public order matters remain within state courts’ authority.


5. Arbitration Procedure

The arbitration process typically includes:

1️⃣ Appointment of arbitrator(s)
2️⃣ Submission of statements of claim and defense
3️⃣ Evidentiary hearings
4️⃣ Expert reports
5️⃣ Final award issuance

Unlike court litigation:

  • Procedure is flexible
  • Parties may determine rules
  • Hearings may be conducted in English

This is particularly attractive to foreign investors.


6. Duration of Arbitration

Arbitration in Turkey is generally faster than court litigation.

Typical duration:

  • 6–18 months

Compared to:

  • 2–4 years in multi-level court litigation

Speed is one of arbitration’s strongest advantages.


7. Confidentiality

Court proceedings in Turkey are generally public.

Arbitration offers:

  • Confidential hearings
  • Private awards
  • Protection of commercial secrets

For high-value commercial disputes, confidentiality is often decisive.


8. Costs of Arbitration

Arbitration may involve:

  • Arbitrator fees
  • Institutional fees
  • Legal fees
  • Expert fees

While arbitration can be faster, it may be more expensive than court litigation, particularly in high-value disputes.

However, shorter duration may offset long-term litigation costs.


9. Enforcement of Arbitral Awards

One of the greatest strengths of arbitration in Turkey is enforceability.

Domestic arbitral awards:

  • Enforced like court judgments after court approval.

Foreign arbitral awards:

  • Enforced under the New York Convention.
  • Recognition and enforcement procedure required.

Turkish courts generally adopt a pro-enforcement approach.


10. Annulment of Arbitral Awards

Arbitral awards cannot be appealed on merits.

They may only be annulled for limited grounds such as:

  • Invalid arbitration agreement
  • Lack of due process
  • Excess of authority
  • Public policy violation

This ensures finality but limits review.


11. Comparison: Arbitration vs Court Litigation

CriteriaArbitrationCourt Litigation
SpeedFasterSlower
ConfidentialityYesNo
AppealLimitedMulti-level appeal
CostHigher upfrontLower upfront
International EnforceabilityStrongRequires recognition
Procedural FlexibilityHighLimited

The better option depends on strategic priorities.


12. Arbitration for Foreign Investors

Foreign investors prefer arbitration in Turkey because:

  • Proceedings can be conducted in English.
  • Arbitrators may have international expertise.
  • Awards are enforceable globally.
  • Neutral forum can be selected.

In cross-border contracts, arbitration clause is standard practice.


13. Strategic Considerations

Arbitration may be preferable when:

  • Dispute involves large financial value.
  • Confidentiality is critical.
  • Enforcement abroad is expected.
  • Technical expertise is needed.

Court litigation may be preferable when:

  • Cost sensitivity is high.
  • Interim measures are urgent.
  • Strong appellate review is desired.

14. Istanbul Arbitration Centre (ISTAC)

Established to promote Turkey as arbitration hub.

Advantages:

  • Competitive fees
  • Expedited procedures
  • English-language proceedings
  • Modern rules

ISTAC is increasingly used in regional commercial disputes.


15. Risks and Challenges

Potential risks include:

  • Poorly drafted arbitration clauses
  • Arbitrator bias allegations
  • High expert costs
  • Enforcement resistance in rare public policy cases

Careful clause drafting is essential.


Conclusion

Arbitration in Turkey offers speed, confidentiality, flexibility, and strong international enforceability—making it highly attractive for foreign investors and commercial actors.

However, it is not automatically “better” than court litigation. The decision must be based on dispute nature, cost sensitivity, enforcement strategy, and contractual framework.

For international commercial transactions, arbitration in Turkey often provides a balanced, efficient, and enforceable dispute resolution mechanism—especially when supported by proper legal drafting and strategic planning.

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