This article examines the refusal by the Istanbul 19th Commercial Court of First Instance (“Commercial Court”) to enforce an arbitral award rendered by the International Court of Arbitration (“ICC”).
For the purpose of this article, the legal findings of the award will not be specifically explained; however, the factual context of the award will be mentioned as far as it relates to the refusal of enforcement.
Background of the Award
The arbitration before the ICC concerned the acquisitions in 2012 of two chrome-mining companies having facilities and required licenses for their operations in Türkiye.
Under their share purchase agreement, the parties had agreed to assign a third party to test the drilling samples provided by the sellers. Buyers afterwards claimed that new testing results of samples demonstrated the ore was
much below the specifications shown in the third-party report and lodged an arbitration before the ICC in 2014.
The parties proposed witness statements to support their claims. They blamed each other for instructing the former manager director of the respondent in obtaining the third-party report, but the tribunal dismissed those allegations even though he confessed that he had tampered with the samples.
A drilling expert of the claimant confessed in his witness statement that he had yielded a fake report upon the claimant’s instructions. However, the ICC also dismissed this confession and awarded against the respondent, observing it had altered the testing results of the first drilling samples.
Decisions of Turkish Courts
Upon the complaint of the respondent, Ankara 13th Criminal Court of First Instance (“Criminal Court”) convicted a witness confessed his crime of forgery of private documents in May 2021. The Commercial Court relied its refusal of enforcement on this conviction, ruling that enforcing the award would violate Turkish public policy.
Legal Issue
Türkiye is a party to the Convention on the Recognition and Enforcement of the Foreign Arbitral Awards (“New York Convention”). Article V(2)(b) of the Convention provides for that parties may refuse recognition and enforcement of a foreign arbitral award if the recognition and enforcement of the award would be contrary to the public policy of that country. Accordingly, the legal issue before the Commercial Court was whether the conviction of a witness by the Criminal Court rendered the ICC award dismissing the statements of this witness unenforceable due to public policy
considerations.
However, this article does not address whether the ICC should have stayed the proceedings due to the criminal action that took place in Türkiye, as whether the criminal prosecution had been pending or not before the ICC issued its final award is unknown.
Turkish Public Policy
The term public policy refers to the fundamental principles, rules, and values of a legal system. Not all statutory rules are
regarded part of the public policy unless the rule is seen as indispensable under national law.
The courts are generally tended to construe the term public policy in a strict way. On the other hand, jurisdictions may differ in their handling this term due to the diversity of fundamental rules, principles, and values among national legal systems.
Le Criminel Tient Le Civil En État
Comparative Law
In comparative law, there are different approaches for the legal issue of whether enforcing foreign awards is contingent upon a pending criminal action concerning the factual matters of the arbitration.
For its specific purpose, this article only mentions French, Luxembourg, and Belgian laws acknowledging the maxim le criminel tient le civil en état.
French law regulates the maxim le criminel tient le civil en état in Art. 4 of the French Code of Criminal Procedure, pursuant to which a civil judge must order to stay the case pending a criminal action concerning the material facts of
the case before the civil court.
La Cour de cassation française ruled in this regard that while the maxim le criminel tient le civil en état is not applicable to international arbitration, the rule in Art. 4 of the French Code of Criminal Procedure nonetheless binds civil courts hearing enforcement or annulment cases of foreign awards if a criminal action is ongoing in France and its outcome will have a direct impact on the civil court decision.
In 2019, la Cour de cassation de Luxembourg had annulled the refusal of la Cour d’Appel de Luxembourg (8e Chambre) to stay a case seeking to set aside a foreign arbitral award pending a criminal investigation as to the falsity of documents submitted to the arbitral tribunal. In 2022, la Cour d’Appel de Luxembourg (3e Chambre) then arrived at a different decision, ordering to stay the case.
Belgium law has a stricter approach in a waythat if a criminal action takes place in Belgium, then even the arbitration tribunals are bound by the maxim le criminel tient le civil en état. The rule is thus accepted as mandatory for both
civil judges and arbitrators.
Turkish Law
As for Turkish law, criminal court decisions bind the civil judges as regards factual matters, even if the court acquitted the suspect. Thus, the civil judge must stay the proceedings until the criminal court gives its judgment regarding factual issues before the civil court.
There is only one provision in Turkish law as to the effects of criminal court judgments on civil cases. According to Art. 74 of the Turkish Code of Obligations, when the judge decides whether the person who caused the damage is at fault
or not and has mental competence or not, he is not bound by the provisions of the criminal law regarding liability, nor the acquittal given by the criminal judge. Likewise, the criminal court judge’s decision on the assessment of the defect and the determination of the damage does not bind the civil court judge. This provision only specifies which findings of
criminal courts does not bind the civil judges (liability, acquittal, assessment of the defect.
and the determination of the damage). Therefore, the legal basis of the binding nature of the criminal court decision is not the Turkish positive law. However, there is also a view that a contrario reasoning of this provision manifests which
findings of the criminal court bind civil judges . Regardless of differing views, there is no dispute that material facts revealed by the criminal courts convicting a suspect are binding upon the civil judge. Further, it is without question that only the final judgments of the criminal courts have a binding nature. Besides academic discussions, Turkish law
stipulates that all disputes in criminal justice concern public policy, as the main purpose of the criminal procedure is to reveal material facts in accordance with the rules and principles set out in the statutes7 . Therefore, the legal basis for the binding nature of the factual findings of criminal courts is accepted to be public policy8 and the need to avoid
conflicting decisions between the criminal and civil courts9 . Whether this principle also has a basis in the statutes does not render this legal conclusion ineffective, given that criminal disputes concern Turkish public policy. Thus, since the factual findings of the Criminal Court have a direct relevance to the award, one should look at whether the conviction of the Criminal Court has become final or not. If the convicted witness did not file an appeal, the decision of the ommercial Court cannot be deemed a violation of the New York Convention since deciding otherwise would violate the binding nature of the factual findings of the Criminal Court and thus Turkish public policy. On the other hand, if the judgment did not become final yet, the Commercial Court should have then ordered to stay the case.
Conclusion
Since the Art. V(2)(b) of the New York Convention and the maxim le criminel tient le civil en état constitutes an essential part of the Turkish public policy, the courts are free to take account of those specific grounds under the Convention for refusal to enforce foreign arbitral awards. Therefore, the Commercial Court’s ignorance of the binding nature of the judgment given by the Criminal Court in that respect would violate the Turkish public policy given that the Criminal Court’s factual findings as to the confession of witness directly concern the award of the ICC.
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