Enforcement of ICSID Arbitration Awards in Turkey, Specific Emphasis on the Recent High Court Decision

Turkey signed the ICSID Convention on June 24, 1987, and the Convention entered into force on April 2, 1989. Since then, Turkey had been party to many arbitral proceedings under ICSID Convention.

According to article 53 of the ICSID Convention, the arbitral award can only be subject to an annulment procedure regulated under articles 52 and 53/1 reads as follows: “The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.” Thus, it is worth underlining that the Contracting States’ courts do not have any jurisdiction to set aside or annul the ICSID arbitral award. On the other hand, ICSID Convention does not point out a specific recognition and enforcement procedure that is valid under the international procedural law. In this context, ICSID arbitral awards differ from other foreign arbitral awards which are subject to a recognition and enforcement procedure under relevant legislation.

The subject matter of the below-mentioned High Court decision is worth examining in consideration with its effect on the execution process of ICSID awards before the Turkish competent courts.

The case reviewed by the Turkish Supreme Court’s (Yargıtay) decision no. E. 2021/875 K. 2021/4586concerns the request for the execution of ICSID (International Center for Settlement of Investment Disputes) award no ARB/10/24 dated 08.03.3016 which obliged a Turkish company (the debtor) to pay to the Republic of Turkmenistan (the creditor) a sum of 1.747.521,00USD as litigation cost (expert expenses, legal cost etc.). As a consequence of the dismissal of the debtors’ request before ICSID, the creditor directly initiated an executive proceeding against the debtor company in order to collect the amount of 1,747,521,00 USD with interest, which was the subject matter of the arbitral award. The creditor did not apply to any other (execution) authority in Turkey beforehand.

While the ICSID Convention lacks a specific procedure to be followed in the enforcement of ICSID awards, it provides under Article 54/1 that each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. According to Yargıtay, although ICSID Convention does not refer to a recognition and enforcement procedure, the Turkish Private International and Procedural Law Act (PILA) no. 5718 article 50 to 60, and article 54/ 2 of the Convention warrant a pre-condition for the execution of ICSID awards. Indeed, ICSID Convention refers to a requirement before the execution of arbitral awards in its art. 54/2 which states: “A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary-General. Each Contracting State shall notify the Secretary-General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation.”

On the grounds that ICSID Convention lacks a specific provision holding the arbitral award to be directly enforceable, Yargıtay ruled that execution of the arbitral awards directly under Turkish law would be impossible without pursuing enforcement proceedings in cases where the Contracting States fail to appoint a competent authority for the implementation and execution of the arbitral awards. In this context, Yargıtay pointed out that the direct enforcement of the ICSID arbitral award without being overseen by any national authority will not comply with both Turkish legal legislation and the ICSID Convention.

As mentioned in the expert panel report dated 13.09.2017, which was taken as a basis by the first instance court, in terms of the enforceability of ICSID arbitral awards in Turkey according to article 54(2) of the ICSID Convention, the competent authority stipulated in the said provision of the ICSID Convention has not been determined and therefore it cannot be concluded that the arbitral award can be directly enforceable without going through the enforcement proceedings. In its final remarks, Yargıtay held that the enforcement court should have decided to cancel the proceedings with the acceptance of the debtor's complaint and should have rejected the judgment of the Court of Appeal. Accordingly, members of Yargitay unanimously decided to annul the decision of the Regional Court of Appeals and to reverse the decision of the enforcement court.

We opine that the abovementioned judgment of Yargıtay should not be misinterpreted to lead to extending the review of the competent authority contrary to the ICSID Convention. It should be emphasized that the competent authority should not carry out an examination of the merits of the case.  The examination of an ICSID arbitral award submitted to the competent authority determined in accordance with article 54(2) of the ICSID Convention is limited to the matter of whether the decision subject to the request is an arbitral award within the scope of the ICSID Convention, subject to the supervision of ICSID. The applicant (the creditor) is responsible to submit its enforcement request with a copy of the ICSID arbitral award approved by the ICSID Secretary-General.  In this context, the competent authority does not have the power to and shall not examine whether the arbitral award is contrary to public order or whether the arbitrators have exceeded their powers (as opposed to the procedure applicable for enforcement of an ordinary arbitral award or foreign judgment), or whether the law on the merits is correctly applied.

It should also be noted that in the Turkish government declaration of February 01, 2017,  the competent authority for the purpose of article 54/2 is determined as follows:  “the commercial court of the first instance ("asliye ticaret mahkemesi") belonging to the subject place, as designated in the written agreement between the parties, and in case of absence of such agreement, the commercial court of the first instance having the jurisdiction over the place of the losing party's domicile, if not, residence, or, in the absence of both, over the place of the subject property of the claim, or in places where a commercial court of the first instance does not exist, the civil court of the first instance ("asliye

In conclusion, we opine that formally determining and authorizing a specific competent authority may eliminate any possible problems of the current situation. It would also serve as a good practice to inform the relevant authority about the purpose and extent of the examination that is supposed to be made by it, in enforcing the ICSID arbitral awards.

@Ömer Kesikli