INTERNATIONAL ARBITRATION

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1 INTERNATIONAL ARBITRATION POWERS OF THE ARBITRATORS İstanbul Bar Association Legal Intern - Namık Çağrı GÜNDOĞDU Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 1

2 INDEX A- THE CONCEPT OF ARBITRATION AND IT S ELEMENTS : 3 B- SOURCES OF INTERNATIONAL ARBITRATION : 4 1- CONVENTIONS : 4 2- THE EUROPEAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION (GENEVA CONVENTION) : 4 a- Scope of Application of the Convention : 4 b- Arbitration Agreement : 6 c- Ad Hoc Arbitration / Arbitral Institutions : 6 d- Parties of the Arbitration Agreement : 6 e- Formation of the Arbitral Tribunal : 6 f- State Parties of Geneva Convention : 8 C- AUTHORITIES OF ARBITRATORS IN ARBITRATION : 8 1- AUTHORITIES OF ARBITRATORS : 8 a- Interim Measures of Protection and Interim Attachments : 8 b- Determination of Arbitrators : 9 c- Challenging an Arbitrator : 9 d- Withdraw of Arbitrator : 9 e- Invalidity of Agreement : 10 f- Lack of Venue and Exceeding the Scope of Authority : 10 g- Arbitration Place : 10 h- Language of Arbitration : 10 i- Amendments and Supplements : 11 j- Hearing Expert Appointment Viewing : 11 k- Substansive Law : 11 l- Decision Making : 11 m- Correction of Award : 11 D- CONCLUSION E- BIBLIOGRAPHY : 12 : 13 Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 2

3 A. THE CONCEPT OF ARBITRATION AND IT S ELEMENTS Subjects of the arbitration are usually civil and commercial disputes. With arbitration, power of making decision is transferred to one or more unofficial arbitrator instead of court with a special declaration of intent. 1 Application of this system especially seen in international area with foreign elements and international trade. 2 Arbitration based on the free wills of the parties. The parties can freely decide the arbitrators, numbers and qualifications of arbitrators, procedure of their election, place of arbitration, the law will be applied on arbitration agreement, arbitration process and substantive law used for dispute settlement, means of proof and the language while they are accepting arbitral proceeding. 3 There are very limited number of mandatory rules in national laws and international contracts, interferes the wills of the parties for preventing abuse of arbitration. 4 Application of arbitration procedure bases on a special decleration of intention, as a rule, an arbitration agreement or arbitration clause. 5 Arbitration agreement, main contract, arbitrator agreement and arbitral proceedings are separated from each other. Arbitral proceedings includes arbitral award. Arbitration agreement is an agreement that it gives an authority to the people chosen by parties for settlement of the legal disputes which are existing (compromis) or may arise in the future (clause compromissiore). Validity of the arbitration agreement is based on that the dispute which is exist or may arise in the future should be determinable while the agreement is made. Whereas it is not necessary that the legal relationship which will cause to come up the dispute, to be existing while the agreement is made. 6 Arbitrator agreement, between arbitrators and the parties, is not different from arbitration agreement for qualification, but it looks like in the character of Law of Obligations more than arbitration agreement. In this regard, general rules of contracts are applicable for arbitrator agreement. 7 Arbitrator agreement can be defined as an agreement between the parties of arbitration contract and arbitrators which is prepared in respect of private law and procedural law terms about a legal relationship based on adjective and material law like 1 KURU Baki, Hukuk Muhakemeleri Usulü, C. VI, 6. Bası, İstanbul 2001, p. 5937; NOMER Ergin, Devletler Hususi Hukuku, 20. Bası, İstanbul 2013, p NOMER Ergin,, p NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, Milletlerarası Tahkim Hukuku, C. I, 4. Bası, İstanbul 2013, p. 1 4 NOMER Ergin, p NOMER Ergin, p KURU Baki, ; NOMER Ergin, p NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, p. 2 Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 3

4 rights and liabilities of the parties. 8 Procedures and merits of the arbitration is determined in this agreement. 9 B. SOURCES OF INTERNATIONAL ARBITRATION 1. CONVENTIONS There are some conventions at the international level, and also there are plenty of laws within the frameworks of these agreements at the national level made by countries about arbitration. From the ways to appeal for arbitration to final decision is regulated in the European Convention on International Commercial Arbitration (Geneva Convention). Second step after the process regulated in Geneva Convention, is that the recognition and approval of the arbitral awards by contracting parties within the frameworks of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards really fast and plain. (The New York Convention) (10 th June 1958). 10 It is considered as coloumn because of that this conventions is widely accepted. 11 There is an international center established with the Washington Convention 12 relates to settlement of investment disputes between states and citizens of other countries for dispute settlement. Main purpose of this center is settling disputes between contract states 13 and citizens of other countries about disputes inflicted from investment with arbitration. There are some special and individual investment agreements between Turkey and other countries, but these agreements will not be examined in this article. 2. THE EUROPEAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION (GENEVA CONVENTION) a) Scope of application of the Convention Geneva Convention is a result of United Nations European Economic Commission s works at 21 th April 1961 for promoting of commerce between European countries and 8 Abbr., Balcı, p Yrd. Doç. Dr. TAŞKIN Alim, Hakem Sözleşmesi, Ankara 2000, p NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, p LEW Julian D.M./MISTELIS Laukas A./KRÖLL Stefan M., Comparative International Commercial Arbitration, Kluwer Law International 2003, 26-21, p Called as Washington Convention for the place where it is signed. 13 Membership of ICSID is open for all countries. (Abbr. Eğilmez A. Mahfi, IMF Dünya Bankası ve Türkiye, İstanbul 1997, p. 119) Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 4

5 ensuring dissemination of arbitration with organizational way. Convention came into operation at 1964 and accepted by Turkey at 8 th May 1991 with the law number Geneva Convention regulating the arbitral process from arbitrators interfere relying on arbitration agreement or arbitration clause to arbitrators award. 15 There are ten articles in Geneva Convention. First of these articles delimitates arbitration with the subject of international commercial relationship. First article of the Geneva Convention says: This Convention shall apply (1) to arbitration agreements concluded for the purpose of settling disputes arising from international trade between physical or legal persons having, when concluding the agreement, their habitual place of residence or their seat in different Contracting States; (2) to arbitral procedures and awards based on agreements referred to in paragraph 1(a) above. 16 There are two conditions which are objective condition and subjective condition for application of Geneva Convention. Subjective condition is that, habitual residence of the parties must be in different state parties. As a result of this condition, if both of the parties habitual residence is in the same state, Geneva Convention cannot be applied. Objective condition is that, the dispute must be arisen from international commercial relationship. In different words, if there is no international commerce, Geneva Convention is not acceptable for disputes. 17 With this conditions, economic character of relationship between the parties must be related with international commerce. 18 The concept of international commercial relationship must be interpreted broadly. e.g, transporting of goods or services from a state to another in exchange for a price; international sales; license agreements; common agreements for scientific and technical researches; contracts about artistic activities including international tours; radio and TV broadcasting are defined as commercial acivities and Geneva Convention is applicable for these activities ÇELİK Cemil, Yargıtay Dergisi, Temmuz 2003, p. 359 (Abbr. RG /21000) SCHMITTHOFF M. Clive, Schmitthoff s Export Trade The Law & Practice of International Trade, 9th ed., London 1990, p KAPLAN Yavuz, Milletlerarası Tahkimde Usule Aykırılık, Ankara 2002, p NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, p YILMAZ Ejder, Milletlerarası Ticari Tahkime Dair Avrupa (Cenevre) Sözleşmesi ve Türk Tahkim Hukuku Hakkında Bazı Düşünceler Bir Yorum Avrupa-Cenevre/New York Sözleşmeleri ve Türk Tahkim Hukuku Sempozyumu, Ankara 1991, p ŞANLI Cemal, Milletlerarası Ticari Tahkimde Esasa Uygulanacak Hukuk, Ankara 1986, p YILMAZ, 17 Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 5

6 b) Arbitration Agreement There are two possible ways for accepting arbitration in Article I/2-a of Geneva Convention. Parties can sign an individual contract different from main contract and accept arbitration. In this situation, subject of the contract is exclusively arbitration. Parties can add an arbitration clause in main contract. 20 There is really flexible regulation about form of the arbitration clause or arbitration agreement. In the same article it is explained that the arbitration agreement or arbitration clause must signed by the parties, or contained in an exchange of letters, telegrams, or in a communication by teleprinter and, in relations between States whose laws do not require that an arbitration agreement be made in writing, any arbitration agreement concluded in the form authorized by these laws. c) Ad Hoc Arbitration / Arbitral Institutions The term arbitration shall mean not only settlement by arbitrators appointed for each case ( ad hoc arbitration) but also by permanent arbitral institutions. d) Parties of the Arbitration Agreement There are no limitation about the parties of the arbitration agreement or arbitration clause in Geneva Convention. Both real person and legal person can apply arbitration for commercial dispute resolution. legal persons considered by the law which is applicable to them as legal persons of public law have the right to conclude valid arbitration agreement. On signing, ratifying or acceding to this Convention any State shall be entitled to declare that it limits the above faculty to such conditions as may be stated in its declaration. e) Formation of the Arbitral Tribunal Article IV/1-a of the Geneva Convention is regulating the formation of the arbitral tribunal. The parties to an arbitration agreement shall be free to submit their disputes to a permanent arbitral institution; in this case, the arbitration proceedings shall be held in conformity with the rules of the said institution. 21 If the parties submit their disputes to an ad hoc arbitral procedure; in this case, they shall be free inter alia; (1) to appoint arbitrators or to establish means for their appointment in the event of an actual dispute; (2) to determine the place of arbitration; and (3) to lay down the procedure to be followed by the arbitrators. 20 NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, p NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, p. 54 Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 6

7 Article IV/2 of the convention regulates that where the parties have agreed to submit any disputes to an ad hoc arbitration, and where within thirty days of the notification of the request for arbitration to the respondent one of the parties fails to appoint his arbitrator, the latter shall, unless otherwise provided, be appointed at the request of the other party by the President of the competent Chamber of Commerce of the country of the defaulting party's habitual place of residence or seat at the time of the introduction of the request for arbitration. Arbitrators are different from judges in the light of the given information above, such as they are assigned by the parties will and they have no official capacity. Judges cannot be an arbitrator; they can only do their duty. 22 Real person and legal person can be an arbitrator 23 if they have legal capacity to use their civil rights. 24 In Turkish law system, legal person is not in the same standing with real person about legal capacity for using civil rights, and they have limited capacity for having rights. That s why legal person cannot be a chosen arbitrator, only real person can be an arbitrator in the light of Article VII/A-1 of International Arbitration Law 25, Arbitrator can be identified with their name by the parties. In this case, if one of the arbitrators, identified with his name in the contract, does not accept to be an arbitrator, arbitration agreement will be invalid. 26 It is possible to authorize a 3 rd person for selecting arbitrators in the arbitration agreement by parties of the agreement. If this person dies or he does not accept to select arbitrators, then arbitration agreement will be invalid Abbr. POSTACIOĞLU İlhan, Medeni Usul Hukuku Dersleri, Ankara 1975, p. 65; ÇENBERCİ Mustafa, Hakemlerin Tayini Usulü ve Ücreti, (Tahkim IV. Ticaret ve Banka Hukuk Haftası), Ankara 1965, p TAŞKIN Alim, Hakem Sözleşmesi, Ankara 2000, p Abbr. ÖZSUNAY Ergun, Medeni Hukukumuzda Tüzel Kişiler, Tüzel Kişilerin Genel Teorisi Dernekler, Vakıflar, 5. Bası, İstanbul 1982, p. 61; ZEVKLİLER Aydın, Medeni Hukuka Giriş ve Başlangıç Hükümleri Kişiler Hukuku, Aile Hukuku, 3. Bası, Ankara 1992, p RG / KURU Baki/ARSLAN Ramazan/YILMAZ Ejder, Medeni Usul Hukuku Ders Kitabı, Ankara 2000, p KURU Baki, Hukuk Muhakemeleri Usulü, İstanbul 1991, p Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 7

8 f) State Parties of Geneva Convention 28 Germany Czech republic Kazakhstan Romania Austria Denmark Cuba Russian Federation Belarus Finland Luxembourg Slovenia Belgium France Hungary Slovakia Bosnia and Herzegovina Croatia Macedonia Turkey Bulgaria Spain Moldova Ukraine Burkina Faso Italy Polan Yugoslavia C. AUTHORITIES OF ARBITRATORS IN ARBITRATION It is mentioned that Geneva Convention is an convention regulating general framework of arbitration process, and the procedures and merits of the arbitration process is determined by parties. 29 Based on this rule, we will examine the authorities of the arbitrators in International Arbitration. 30 It is necessary to state that, subjects and rules of arbitration process are determined by parties and because of that arbitrators have authority within the limits of arbitration agreement. International Arbitration Law has nineteen articles and a provisional clause, but none of them listing the authorities of arbitrator. It must be examined article by article and topic by topic for making a list for authorities of arbitrators. 1. AUTHORITIES OF ARBITRATORS a) Interim Measures of Protection and Interim Attachments If a dispute, which is the subject of an arbitration agreement, occurs, before the arbitration process, one of the parties cannot request from arbitral tribunal an interim measure of protection or an interim attachment. 28 ( ) 29 Abbr. Geneva Convention Art. IV/1-a-iii 30 RG /24453 Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 8

9 Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order an interim measure of protection or an interim attachment during arbitral proceedings. The arbitral tribunal may require any party to provide appropriate security in connection with such measure or attachment. The arbitral tribunal shall not grant interim measures or interim attachments [a] that are required to be enforced through execution offices or to be executed through other official authorities or [b] that bind third parties. 31 If a party does not comply with the interim measure or attachment, the other party may request the assistance of the competent court for taking an interim measure of protection or an interim attachment. The competent court, if necessary, may hear [the case in question] through a substitute court. 32 b) Determination of Arbitrators Unless otherwise agreed by the parties 33 or in arbitration with three arbitrators, each party shall appoint one arbitrator and the two arbitrators thus appointed have authority appoint the third arbitrator. 34 In an arbitration with more than three arbitrators, however, the number shall be odd 35, the arbitrators who will appoint the last arbitrator shall be appointed by the parties in equal numbers in accordance with the procedure set forth in the above paragraph. 36 c) Challenging an Arbitrator A party who challenged one or more arbitrators before the arbitral tribunal shall provide its request and reasoning [for that purpose]. Arbitral tribune has authority to accept or reject of this request. A party who becomes aware that the challenge is not successful may, within thirty days after having received notice of the decision rejecting the challenge, apply to the civil court of first instance for lifting such decision and removal of the arbitrator or the arbitrators. 37 d) Withdraw of Arbitrator If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, and if the parties not agree on the termination, arbitrator has authority to withdraw from his office. 38 When an arbitrator withdraws, his duty finishes for the arbitration agreement. 31 International Arbitration Law, Article Art. 6/3 33 Art. 7/A 34 Art. 7/B-3 35 Art. 7/A 36 Art. 7/B-4 37 Art. 7/D 38 Art. 7/F Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 9

10 e) Invalidity of Agreement The arbitral tribunal has authority to rule on any objections with respect to the existence or validity of the arbitration agreement and contract. For that purpose, an arbitration agreement, which forms part of a contract, shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 39 f) Lack of Venue and Exceeding the Scope of Authority A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defense. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified and has the authority to accept delayed plea. The arbitral tribunal shall rule on an objection as to its jurisdiction as a preliminary question and has the authority to acceptance or rejection of the objection. If the arbitral tribunal considers itself competent then it shall proceed with arbitration and shall render its decision. A plea that the arbitral tribunal is exceeding the scope of its authority shall not be valid if it is not raised without undue delay. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified and has the authority to accept delayed plea. g) Arbitration Place The parties or an arbitration institution chosen by the parties are free to determine the place of arbitration. Failing such agreement or determination, arbitral tribunal has the authority to determine the place of arbitration having regard to the circumstances of the case. The arbitral tribunal may meet upon notification in advance to the parties at any place where the circumstances of the arbitration so require. 42 h) Language of Arbitration The parties are free to agree on the language or languages to be used in the arbitral proceedings. Failing such agreement, arbitral tribunal has the authority to determine the language or languages. The agreement or determination, unless otherwise specified 39 Art. 7/H 40 Art. 7/H 41 Geneva Convention Art. V/1 42 Art. 9 Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 10

11 therein, shall apply to any written statement by a party, any hearing and any award, decision or other communication by the arbitral tribunal. 43 i) Amendments and Supplements Unless otherwise agreed by the parties, either party may amend or supplement his claim or defense during the course of the arbitral proceedings. But arbitral tribune has authority to determine that it inappropriate to allow such amendment having regard to the delay in making it or to whether or not it creates an unjust difficulty for the other party or to other circumstances and reject it. 44 j) Hearing- Expert Appointment - Viewing The arbitral tribunal has authority to decide whether to hold oral hearings for presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of the case file. 45 The arbitral tribunal also has authority to appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, require a party to give the expert any relevant information or to produce or to provide access to, any relevant information or documents, rule on inspection of goods or other property. if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in a hearing. 46 k) Substantive Law If the parties do not decide the applicable substantive law, the arbitral tribunal has authority to decide the substantive law of a State, which has the closest connection with the dispute. 47 l) Decision Making Certain issues concerning procedure may be decided by a presiding arbitrator, if so authorized by the parties or the members of the arbitral tribunal. For having this authority, it is necessary to acceptance of the members of the arbitral tribunal. 48 m) Correction of Award If a party may request the arbitral tribunal to correct in the award any material errors in computation, any clerical or typographical errors or any errors of similar nature, the arbitral tribunal considers that, following the receipt of the other party's opinion, the 43 Art. 10/C 44 Art. 10/D 45 Art. 11/A 46 Art. 12/A 47 Art. 12/C 48 Art. 13/A Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 11

12 request is justified, it shall make the correction of the material error or give the interpretation within thirty days of receipt of the request. The arbitral tribunal has authority to correct any material error on its own initiative within thirty days from the date of the award. 49 D. CONCLUSION Arbitration is different from courts, because it base on the intentions of the parties. Therefore, it can be defined as special adjudication which is totally decided by parties, and they create their own adjudication procedures. Whole process from the number of arbitrators, to deciding how awards will be written, is decided by parties. As a result of that, arbitrator s authority is in the field of undecided areas by the parties. In other words, arbitrators have authority to fill the gaps of arbitration process, for which elements are not decided by the parties. Most important reason of preferring arbitration in international commercial relationships is that, Geneva Convention and other domestic laws about International Commercial Arbitration are just a framework rules, which are identifying the largest limits of arbitration, and parties have almost limitless authority to decide how to settle the disputes, including delimiting authorities of arbitrators, between them and other merchant. * * * 49 Art. 14/B Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 12

13 BIBLIOGRAPHY KURU Baki, Hukuk Muhakemeleri Usulü, C. VI, 6 th Edition, İstanbul 2001 NOMER Ergin, Devletler Hususi Hukuku, 20 th Edition, İstanbul 2013 NOMER Ergin / EKŞİ Nuray / ÖZTEKİN GELGEL Günseli, Milletlerarası Tahkim Hukuku, C. I, 4 th Edition, İstanbul 2013 Yrd. Doç. Dr. TAŞKIN Alim, Hakem Sözleşmesi, Ankara 2000 LEW Julian D.M./MISTELIS Laukas A./KRÖLL Stefan M., Comparative International Commercial Arbitration, Kluwer Law International 2003, Eğilmez A. Mahfi, IMF Dünya Bankası ve Türkiye, İstanbul 1997 ÇELİK Cemil, Yargıtay Dergisi, Temmuz 2003 SCHMITTHOFF M. Clive, Schmitthoff s Export Trade The Law & Practice of International Trade, 9 th Edition., London 1990 KAPLAN Yavuz, Milletlerarası Tahkimde Usule Aykırılık, Ankara 2002 YILMAZ Ejder, Milletlerarası Ticari Tahkime Dair Avrupa (Cenevre) Sözleşmesi ve Türk Tahkim Hukuku Hakkında Bazı Düşünceler Bir Yorum Avrupa-Cenevre/New York Sözleşmeleri ve Türk Tahkim Hukuku Sempozyumu, Ankara 1991 POSTACIOĞLU İlhan, Medeni Usul Hukuku Dersleri, Ankara 1975 ÇENBERCİ Mustafa, Hakemlerin Tayini Usulü ve Ücreti, (Tahkim IV. Ticaret ve Banka Hukuk Haftası), Ankara 1965 ÖZSUNAY Ergun, Medeni Hukukumuzda Tüzel Kişiler, Tüzel Kişilerin Genel Teorisi Dernekler, Vakıflar, 5 th Edition, İstanbul 1982 ZEVKLİLER Aydın, Medeni Hukuka Giriş ve Başlangıç Hükümleri Kişiler Hukuku, Aile Hukuku, 3 rd Edition, Ankara 1992 TAŞKIN Alim, Hakem Sözleşmesi, Ankara 2000 KURU Baki/ARSLAN Ramazan/YILMAZ Ejder, Medeni Usul Hukuku Ders Kitabı, Ankara 2000 KURU Baki, Hukuk Muhakemeleri Usulü, İstanbul Geneva Convention T.C. BAŞBAKANLIK RESMİ GAZETE International Arbitration Law - Turkey Januray 2015 Legal Intern - Namık Çağrı GÜNDOĞDU 13

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