REWIEW OF THE JOINT CHAMBERS OF CIVIL COURT OF CASSATION’S DECISION HOLDING THAT THE ARBITRAL AWARDS ISSUED AFTER THE ENFORCEMENT DATE (01.10.2011) OF THE CIVIL PROCEDURAL CODE NO. 6100 WITHIN THE DOMESTIC ARBITRAL PROCEEDINGS INITIATED BEFORE THIS ENFORCEMENT DATE SHALL BE SUBJECT TO THE ANNULMENT PROCEDURE UNDER THE CCP NO. 6100

Turgut Aycan Özcan, Senior Associate, Lexist

Introduction

The Joint Chambers of Civil Court of Cassation with its majority decision dated 13.04.2018 published in the Official Gazette dated 18.09.2018 and numbered 30539 ruled that the arbitral awards issued after 01.10.2011 (the enforcement date of the Civil Procedural Code No. 6100 (“the New CCP”)) in relation with the domestic arbitral proceedings which were initiated before the enactment of the New CCP shall be subject to the annulment procedure prescribed under Article 439 of the New CCP instead of the appeal procedure which was regulated under the old legislation namely the CCP No. 1086 (“the Old CCP”).

The View Supporting that the Application of the Appeal Procedure Under the Old CCP Should be Applied

The 15th and the 23rd Chambers of Civil Court of Cassation have considered the legal nature of the arbitration agreements executed at the time when the Old CCP was in force as an agency contract under the Code of Obligations and ruled that the existence and validity of these agreements are subject to the rules of substantive law.

The 15th and 23rd Chambers of Civil Court of Cassation are in the opinion that the arbitration agreements are the instrument of the substantive law and determined that the application of Article 448 (1) of the New CCP (provision regarding the implementation of the New CCP in terms of timing)preventing the appeal process and therefore subjecting the arbitral awards only to the annulment procedure under Article 439 of the New CCP shall be contrary to the intention of the parties, who signed the arbitration agreements with the purpose of appropriate application of substantive and procedural law by the arbitrators, on which the arbitral awards in question are based, at the time before the New CCP entered into force and it shall also violate the principle of acquired rights. Therefore, these Chambers of Court of Cassation decided that the awards based on the domestic arbitration proceedings which were commenced before the New CCP entered into force shall be subject to the appeal process prescribed under the Old CCP.

(Decisions of 15thChamber – dated 09.01.2014 and numbered 2013/2388 E., 2014/113 K., dated 26.02.2015 and numbered 2014/5988 E. and 2015/1011 K., dated 23.05.2013 and numbered 2013/160 E., 2013/3346 K., 23rd Chamber – dated 07.03.2014 and numbered 2013/4664 E., 2014/1720 K.)

The View Supporting that the Annulment Procedure under the New CCP Should be Applied

The 11thand 13th Chambers of Civil Court of Cassation stated that the arbitration agreements are the instrument of the procedural law and determined that   since the provisions of the New CCP regarding the domestic arbitral proceedings have been entered into force in accordance with Article 448 of the New CCP stating that “the provisions of this law shall be immediately applied on the condition that the application of this law shall not affect the completed procedures” and with Article 451 (enforcement provision) of the New CCP, the arbitral awards rendered within the scope of domestic arbitral proceedings initiated before the enactment of the New CCP shall only be subject to the annulment procedure under Article 439 of the New CCP.

(Decisions of 11th Chamber, dated 28.11.2013 and numbered 2012/7084 E., 2013/21572 K and 13th Chamber – dated 11.12.2014 and numbered 2014/13805 E., 2014/39497 K., dated 13.11.2012 and numbered 2011/19737 E., 2012/25406 K.)

Decision of the Joint Chambers of Civil Court of Cassation

As to the different views on the issue in question, the Joint Chambers of Civil Court of Cassation firstly considered the “legal nature” of the arbitration agreements.

The Joint Chambers of Civil Court of Cassation, after mentioning the academic views on the contracts which are the instruments of the substantive law and the procedural law in its decision in detail, determined that, although the arbitration agreement is subject to the substantive law in terms of its establishment, form and the authority of the parties to conclude this agreement, in fact, the arbitration agreement mainly takes place in the field of civil procedure law and causes results in this field of law.  Considering this feature, the arbitration agreement should not be deemed as a substantive law creature. It shall also not be correct to consider the arbitral award as an agreement. The Joint Chambers of Court of Cassation also held that the arbitration agreement has a binding effect not because of the agreement of the parties in this respect but due to the relevant regulations under the national law where the arbitration takes place.

In view of the foregoing, the Joint Chambers of Civil Court of Cassation determined that the arbitration agreements are in fact an instrument of procedural law and these agreements should directly be subject to the legislation on the civil procedure.

On the other hand, as to the application of the law in terms of timing, the Joint Chambers of Court of Cassation stated that the amendments made in the civil procedure law shall be subject to the rule of “immediate application”.  In principle, the expectations of the individuals regarding stability of the procedural rules are not protected. Accordingly, each procedural action should comply with the procedural laws which are in force at the time of such action. For instance, in a pending case, there is no need to repeat the procedural actions which were already performed in accordance with the old legislation, due to the amendment in the relevant legislation. Therefore, each procedural action in the proceedings should be considered separately and the new amendments in the procedural law should not be applied to the procedural actions which were already taken / completed. Hence, here it is not possible to talk about the violation of acquired rights.

In view of these assessments, the Joint Chambers of Civil Court of Cassation ruled that the arbitral awards issued after the enforcement date of the New CCP (01.10.2011) but rendered within the domestic arbitral proceedings initiated before the New CCP has entered into force shall not be subject to the appeal process under Article 553 of the Old CCP but to the annulment process prescribed under Article 439 of the New CCP.