1. Introduction
Arbitration is a method of dispute resolution where parties prefer to resolve their disputes through arbitrators instead of state courts. Arbitration agreements are frequently used, especially in international commercial disputes and offer parties swift and effective resolutions. The scope of the authority and competence of the arbitral tribunals is of great importance for the efficiency of the arbitration process. However, in some cases, there are conflicting opinions on the determination of the authority and competences of the arbitral tribunal. This article will examine the opinions regarding the authority of the arbitral tribunal to hear the annulment of objection and to adjudicate compensation for denial of the execution.
Most recently, the decision of the 11th Civil Chamber of the Court of Cassation dated 03/04/2024 and numbered 2024/2703 (“Decision No. 2024/2703”) provides a perspective on the authority of arbitral tribunals to rule on the annulment of objections and adjudicate on compensation for denial of execution. This article will examine the decision in question, analyze
the authority of the arbitral tribunal to decide on the annulment of objections and compensation for denial of the execution, and evaluate the decision in light of the opinions in doctrine.
2. Summary of the Decision and Key
Points
In Decision No. 2024/2703, in response to the opinions that the annulment of objection is a type of lawsuit peculiar to the law of enforcement, that the compensation for denial of enforcement is not a compensation arising from the contract and substantive law, that the compensation for denial of enforcement is a sanction foreseen within the enforcement system and is related to the public interest, that the arbitral tribunals do not have the authority to impose sanctions, that their authority is only to resolve disputes related to private law, and that the awarding of the compensation for denial of enforcement is contrary to public order; it has been ruled that the arbitral tribunal is also authorized to decide on the compensation for denial of execution as a consequence of the arbitral tribunal’s ability to hear the annulment of the objection. This decision emphasizes that the arbitral tribunals can evaluate not only the existence of the debt but also whether the creditor has suffered damages due to the debtor’s unjust objection. Thus, the decision emphasizes that the scope of arbitration proceedings is broad and that the arbitral tribunal is competent in such disputes.
3. Doctrinal Views
In the case where a valid arbitration agreement between the parties exists, there are various opinions in the doctrine as to how the claims between the parties would be handled and how the arbitration agreement would affect the right to apply to the court.
According to the Enforcement and Bankruptcy Law (“EBL”), if the debtor
objected to the enforcement proceeding, the creditor could apply to the court for annulment of this objection. However, there are questions as to whether this process can be brought before arbitral tribunals in the case of arbitration agreements. It is accepted that in the arbitration process, parties should prefer arbitral tribunals instead of state courts based on the arbitration agreement. However, when it comes to compensations such as the compensation for the denial of execution, whether arbitral tribunal had the authority to decide on this matter was contentious.
Some legal experts argue that arbitral tribunals did not have authority in such cases, while others suggested that the authority of arbitration boards should be broader and include such cases.
Some legal experts argue that applying to state courts or debt enforcement offices despite an arbitration agreement violates said arbitration agreement, while others claim that debt enforcement offices do not have the status of a court and that it is possible to apply to debt enforcement offices despite an arbitration agreement in an enforcement proceeding without a judgment.
Prof. Ejder Yılmaz, in his article titled “Annulment of Objection in Arbitration and the Rule of Arbitrability”, states that the parties to an arbitration agreement have agreed that the dispute between them will be resolved by private arbitrators other than the “state judiciary”. Here, the term “state jurisdiction” refers not only to the state courts, but also to the ” organization of justice” of the state in general. Since enforcement offices are also included in the “justice organization”, allowing enforcement proceedings by not filing a lawsuit before the arbitrator would be contrary to the arbitral agreement.
In his article titled “Enforcement Denial Compensation in International Arbitration,” Attorney Dr. Necip Fazıl Erbeyin states that if the debtor’s objection suspends the enforcement proceeding, the annulment of objections that will be heard under Article 67 of the EBL should be resolved by the arbitral tribunal, based on the arbitration agreement between the parties. With this opinion, which is the predominant view in doctrine, Dr. Erbeyin argues that the annulment of objections is arbitrable, although he acknowledges that the arbitrability of the annulment of objections is debatable. Dr. Erbeyin also states that the debtor can raise an arbitration objection in the annulment of objections lawsuit, leading to the dismissal of the lawsuit on procedural grounds in the courts. On the other hand, there are opinions stating that the action for annulment of objection cannot be subject to arbitration proceedings since it is an action for determination specific to the enforcement law and aims only to continue the enforcement proceedings that have been suspended due to the objection. In addition, it is also considered that the arbitral tribunal cannot issue final awards binding on the bodies mentioned in the relevant article, since, according to Article 6, paragraph 2 of the International Arbitration Law, “The arbitrator or the arbitral tribunal may not issue an interim injunction or a precautionary attachment that must be enforced by enforcement bodies or executed by other official authorities”.
4. The Role of the Decision in Aligning Türkiye with International Arbitration
Standards
The decision of the 11th Civil Chamber of the Turkish Court of Cassation can be considered a step that brings Türkiye closer to international arbitration standards. In his work, Attorney Dr. Necip Fazıl Erbeyin also provides significant evaluations on the
place of enforcement denial compensation in international arbitration in Türkiye. Dr. Erbeyin states that enforcement denial compensation is regarded as a private law compensation similar to punitive damages in Anglo-Saxon law. In this context, , Dr. Erbeyin emphasizes that granting arbitrators the authority to rule on enforcement denial compensation and regulating this compensation as a procedural penalty in Turkish law would be consistent with international arbitration practices. Therefore, it can be said that with the decision in question, enforcement denial compensation in Türkiye serves as an example that conforms with international standards in terms of its applicability in arbitration processes when compared to similar sanctions in other countries. In this context, aligning Türkiye’s arbitration processes with international standards will also increase the efficiency of the process and contribute to the faster resolution of disputes between parties.
5. Decisions related to the Subject
The decision of the 15th Civil Chamber of the Turkish Court of Cassation (Case Number: 2008/262, Decision Number: 2008/2138, Decision Date: 03-04-2008) is also in line with the Decision No. 2024/2703. In this decision, it is explicitly y stated that arbitrators are authorized to decide on the annulment of objections and consequently on enforcement denial compensation claims. However, in the decision of the 19th Civil Chamber of the Court of Cassation (Case No: 2000/5610, Decision No: 2000/8669, Decision Date: 14.12.2000), it was ruled that the annulment of objection cannot be filed in arbitration. In fact, in this decision, it is stated that an action for annulment of objection cannot be filed before the arbitrator.
Sources
• Court of Cassation 11th Civil
Chamber Decision (Main:
2024/212, Decision: 2024/2703)
• Enforcement and Bankruptcy Law
(İİK)
• Ejder Yılmaz, in his article titled
“Annulment of Objection in
Arbitration and the Rule of
Arbitrability”
• Necip Fazıl Erbeyin, “Denial of
Enforcement Compensation in
International Arbitration”,
Dergipark
• Ali Yeşı̇lirmak, “Could An
Ordinary Execution Proceedings
With Attachment Be Taken Despite
The Existence Of A Valid
Arbitration Agreement?”
