The Turkish Court of Cassation, in its judgment in the remand of two appeals from the Istanbul Court of Appeals dated 12 October 2022, has held that the Turkish state courts have jurisdiction to rule on challenges to interim measures ordered by Turkish state courts in disputes involving a foreign element.
In the first judgment (15th Civ. Div. Istanbul Court of Appeals), a request to block the enforcement of guarantees was filed with the first instance court in a dispute involving a foreign element, an arbitration clause, and the place of arbitration in Geneva. The request for interim measures was granted by the court. An arbitration proceeding was then initiated before the ICC. Following the challenge to the measure by one party before the state court, the other party argued that the competent body for the challenge was not the state court but the arbitration tribunal. The first instance court agreed. The decision was appealed. The 15th Civil Division of the Istanbul Court of Appeals annulled the decision of the first instance court, finding that the state court was competent.
In the second judgment (45th Civ. Div. Istanbul Court of Appeals), a challenge to the validity of an interim measure granted by a Turkish court was filed before that same court while an arbitration proceeding was ongoing in Algeria. The opposing party argued that the arbitration tribunal was competent to deal with the challenge and not the state court. The first instance court ruled that it was competent, but the 45th Civil Division of the Istanbul Court of Appeals annulled that decision, finding that the arbitration tribunal was indeed competent to deal with the challenge.
The Turkish Court of Cassation clarified that in principle, the Law on International Arbitration (MTK) does not apply to the two disputes in question as the place of arbitration was not determined in Turkey in the contract between the parties and the law was not chosen by the parties or the arbitration tribunal. However, exceptionally (pursuant to Article 1), Articles 5 and 6 of the law are also applicable even if the place of arbitration is determined outside Turkey. Therefore, when a request for interim measures is made in the context of a dispute involving an arbitration with a foreign element, Article 6 of the law will be applicable.
The last paragraph of Article 6 of MTK states that “decisions on interim measures/conservatory measures or conservatory seizures granted by the state court at the request of one of the parties before or during arbitration proceedings shall automatically become void when the decision of the arbitrator or arbitration tribunal is made enforceable or when the request is rejected by the arbitrator or arbitration tribunal”. According to the Court of Cassation, “this provision of the law, when evaluated in light of its stated motivation, does not seem to grant the arbitration tribunal the power to modify or order the parties to renounce an interim measure taken by the state court… Therefore, appeals against interim measure decisions taken by Turkish courts will be able to be examined by Turkish courts, regardless of whether or not an arbitration action has been brought”.
The reason for the adoption of Article 6 of the law is as follows: “interim measures or conservatory seizures granted by the state court before or during arbitration proceedings cannot be annulled by the decision of the arbitrator or arbitration tribunal. That is why Article 6 provides that conservatory measures or conservatory seizures shall automatically become void when the arbitration request is rejected by the arbitrator or arbitration tribunal or when the arbitrator’s decision is made enforceable”.
The provision in question in the MTK law and its justification are at odds with the goal of the law, which is to encourage the growth of arbitration. The arbitrator, who is the most competent jurisdiction to decide when an interim measure should be lifted or changed, is chosen by the parties to make a final decision on the substance of the dispute. In the practice of international arbitration, particularly ICSID arbitration (such as in the case of Amco Asia Corporation and others v Republic of Indonesia, ICSID, Case No. ARB/81/1), it is generally accepted that arbitrators are not bound by interim measure decisions made by state courts. If an interim measure request is made to the state court due to the urgency of the situation, it is ultimately up to the arbitrator, who is competent to handle the substance of the dispute, to modify the measure or order the parties to give up a measure previously obtained from a state jurisdiction.