New Istanbul Arbitration Centre Offers Speedy and Cost-Effective Handling of Commercial Disputes

Many years in the making, the Istanbul Arbitration Centre (“ISTAC” or the “Centre”) was finally established in 2015 and began picking up steam in 2016. The first plans to form an arbitration Centre in Istanbul were laid out by the Turkish government in 2009 as part of the country’s action plan and broader strategy to make Istanbul a bigger financial hub.

This action plan includes goals such as simplifying the Turkish tax system, increasing the diversity of financial products and services available in Turkey, and enhancing Turkey’s legal infrastructure. In line with these goals, the concept for the Centre was designed by working groups among Turkish governmental agencies as well as relevant NGOs, which examined and took inspiration from leading arbitration Centres and institutions around the world.

The result is an arbitration Centre which offers innovative and speedy resolutions of domestic and international disputes for competitive fees using rules which conform to accepted international practices.

The Rules

The ISTAC Rules, which appear to be influenced to a significant extent by the ICC rules, were officially adopted in October 2015. We view the ICC influence on the Centre’s rules as an advantage because local parties and practitioners in Turkey have a longstanding preference for and familiarity with the ICC rules. We predict that their transition to the ISTAC rules will be smooth. Similarity to ICC rules is also likely to make international parties more comfortable with ISTAC.

Two features of the ISTAC Rules which set the Centre apart from some of its international competitors and which mark their point of departure from the ICC rules are Fast Track Arbitration and Emergency Arbitration provisions. All disputes with a claim value under TRY 300,000 automatically go through Fast Track Arbitration, and parties to disputes with larger claim amounts may also agree to opt for Fast Track. The Fast Track timetable provides for the selection of an arbitrator within 15 days and the rendering of a final award within three months. The Emergency Arbitration provisions provide for the selection of a sole emergency arbitrator within two days of an application being accepted. The emergency arbitrator is required to establish a procedural timetable within two days of receiving the case file and issue a decision, without holding a hearing if deemed appropriate by the arbitrator, within seven days of receipt of the case file. We should note that the ISTAC Rules allow parties to seek interim measures from national courts concurrent with their involvement in emergency arbitration without waiving arbitration clauses or rights under the ISTAC Rules.

The Centre’s fees are calculated in Turkish liras and are competitive when compared to fees in the international arbitration market. The Centre markets itself as being significantly less expensive than Turkish domestic courts, which in many cases seems likely.

Who’s Who

The members of the International Arbitration Board of the Centre are Ziya Akinci, Jan Paulsson, Hamid Gharavi, Candan Yasan, and Bernard Hanotiau. These are well-respected names on the local and international arbitration stage that we believe will be influential in growing the popularity of the Centre.

Local practitioners have also recently formed the Istanbul Arbitration Association, which aims to make Istanbul a more widely used venue for arbitration (whether under the Centre’s rules or otherwise).

Relevance in Today’s Turkey and Looking Forward

Given Turkey’s desire to continue to attract foreign investment, we see the establishment of the Centre as timely and as a positive development for the Turkish market. Especially because of the current state of emergency, which has been in place since the attempted coup d’état of July 2016 (the direct effects of which have included a shortage in judges and a strain on the Turkish judiciary), we predict that the Centre will become an increasingly utilized legal resource. It has been reported that the new Istanbul airport project and water supply agreement between Turkey and Northern Cyprus contain ISTAC arbitration clauses. Also, on November 19, 2016, the Office of the Turkish Prime Minister issued a communiqué to governmental agencies describing the benefits of using the Centre and encouraging public and private establishments to use the Centre to resolve disputes, so the Centre is also enjoying support from the current administration.

In light of the foregoing, we recommend that legal advisors working on Turkish deals and projects advise their clients about the potential time and cost benefits of using the Centre.

This article was originally published in CEE Legal Matters, a publication covering law firm news and legal developments in Central and Eastern Europe, and is available in the magazine’s print version and online.

Update: Links updated.