ARBITRATION TYPES SERIES 1-INSTITUTIONAL ARBITRATION

Arbitration is a dispute resolution method that has existed for centuries and evolved over time. Its historical development has progressed in parallel with the development of trade and interstate relations. Arbitration initially emerged as a very simple and local resolution method, but over time it has become an international legal tool. Arbitration is a tradition dating back to ancient times in ancient civilizations, especially in regions where trade is intense.

In the 21st century, arbitration has become even more global and has been shaped by new developments such as online arbitration with digitalization.

There are many distinctions made regarding arbitration, which literally means the resolution of a dispute between the parties by arbitrators. In the most general terms, arbitration types are divided into the following groups in comparison;

• Institutional Arbitration – Ad Hoc Arbitration
• Voluntary Arbitration – Compulsory Arbitration
• National Arbitration – Foreign Arbitration
• Domestic (Local) Arbitration – International Arbitration
• Bilateral Arbitration – Multi-Party Arbitration
• Special Arbitration Types
• Investment Arbitration
• Energy Arbitration
• Sports Arbitration
• Labor Arbitration
• Insurance Arbitration
• Family Arbitration

I would like to address you with the introductory article of the “Arbitration Types Series” that I will write this week and in the coming weeks and which I think will be useful for everyone interested in this field. I wanted to devote the first part of this series of articles to the subject of “Institutional Arbitration”.

What is Institutional Arbitration and How Does It Work?

Institutional arbitration refers to a procedure provided by a specific arbitration institution to resolve the parties’ disputes. This type of arbitration is commonly used in international trade disputes, commercial contracts and investment disputes. In institutional arbitration, a specific institution (e.g. ICC, LCIA, ICDR) determines specific rules and procedures for resolving the parties’ disputes. Institutional arbitration determines in advance how the parties’ arbitration procedures will operate, how arbitrators will be selected, and other technical details.

Institutional arbitration is a widespread and reliable mechanism for resolving commercial disputes internationally. Institutions such as ICC, LCIA, ICDR provide important tools for parties seeking solutions in the global business world. Thanks to these institutions, disputes can be resolved quickly, effectively, and confidentially.

Institutional Arbitration has an important place in international trade and business in Turkey. The country has adopted an approach that encourages the use of institutional arbitration in resolving commercial disputes at both domestic and international levels. Institutional arbitration in Turkey is widely used both nationally and internationally, and there are a number of regulations regarding this type of arbitration.

Institutional Arbitration and its place in Turkish Law are regulated in the Turkish Civil Code and especially in the Turkish Commercial Code (TCC) adopted in 2016. In addition, the Arbitration Law No. 4686 dated 1988 constitutes the basic legal framework for arbitration in Turkey and this law provides regulations especially on international arbitration. This legal framework creates an environment where parties can resort to arbitration to resolve their commercial disputes, replacing Turkish courts.

However, when evaluated in terms of the Turkish Commercial Code and International Arbitration, the Turkish Commercial Code states that arbitration can be resorted to in resolving commercial disputes. In particular, institutional arbitration is a frequently preferred solution method in Turkey for international commercial disputes.

International agreements to which Turkey is a party, such as the New York Convention (1958), provide assurance to Turkey regarding the recognition and implementation of institutional arbitration.

How Does It Work?

This type of arbitration process takes place as follows:

• Arbitration Agreement: The parties sign a contract in which they agree to resort to arbitration in the event of a dispute. This contract determines the arbitration institution and the procedures to be followed in arbitration.
• Selection of the Arbitration Institution: The parties apply to an arbitration institution. For example, institutions such as the ICC (International Chamber of Commerce) or the LCIA (London Commercial Arbitration Court) manage arbitration proceedings.
• Application: When a party wants to apply for arbitration due to a dispute, they apply to the designated arbitration institution. The application provides information about the subject of the dispute, the claims and the parties.
• Appointments of the Arbitration Institution: The arbitration institution ensures that one or more arbitrators are appointed between the parties. The arbitrators are usually selected according to their areas of expertise. The institution monitors that the arbitrators are independent and impartial.
• Arbitration Procedure: In institutional arbitration, the arbitration institution usually determines a specific procedure schedule and rules. This process continues with the parties submitting their documents, making written statements and hearings.
• Decision: After the hearings and examination of the evidence, the arbitrators give a final decision to the parties. This decision is binding and must usually be legally implemented by the parties.
• Conclusion and Execution: The implementation of the arbitration decision can be ensured by obtaining assistance from local courts. If the parties have a disagreement in the event that the decision is not implemented, they may have the right to apply to the court.

The institutions that stand out in Institutional Arbitration in the world, as in Turkey, can be expressed as follows;

• ICC (International Chamber of Commerce):
• Establishment Year: 1923
• Center: Paris, France
• ICC is known as an institutional arbitration institution that plays an important role in regulating trade worldwide and is frequently preferred in resolving international disputes. ICC’s rules have a wide range for many different sectors and types of disputes.
• LCIA (London Court of International Arbitration):
• Establishment Year: 1892
• Center: London, United Kingdom
• LCIA is preferred especially in resolving commercial disputes in England and Europe. It adopts innovative rules and a flexible approach to provide a modern and effective arbitration process.
• ICDR (International Trade Dispute Resolution Center):
• Established Year: 1996
• Headquarters: New York, USA
• ICDR has a wide influence especially in North America and provides solutions for different sectoral needs. ICDR is one of the largest arbitration institutions in the USA.
• SCC (Stockholm Commercial Court):
• Established Year: 1903
• Headquarters: Stockholm, Sweden
• SCC plays an important role in resolving commercial disputes especially between Europe and Asia and is the institution of choice for many international disputes.
• SIAC (Singapore International Arbitration Center):
• Established Year: 1991
• Headquarters: Singapore
• SIAC is a major arbitration center for commercial disputes especially in the Asia-Pacific region and is a rapidly growing international arbitration institution.
• ISTAC (Istanbul Arbitration Center):
• Establishment: 2015
• Center: Istanbul stands out as the arbitration capital of Turkey.
• It has become the most important institutional arbitration center in Turkey. ISTAC is an institutional arbitration body located in Istanbul and provides an important platform especially in international trade disputes.
• ISTAC has similar rules to international arbitration institutions such as ICC and LCIA and is used by both domestic and foreign companies.
• ISTAC offers rules in accordance with Turkish law and adapts to the dynamics of international trade.

As in every application, Institutional Arbitration has its advantages and disadvantages.

When looking at its advantages;

• Fast Resolution: Using arbitration instead of courts ensures faster resolution of cases. Especially in an environment where trade operates rapidly, long litigation processes are avoided.
• Confidentiality: In arbitration, confidentiality is prioritized between the parties. This ensures the protection of trade secrets and allows the parties to continue their commercial relations.
• International Recognition: For example, since Turkey is a party to the New York Convention, arbitration decisions made in Turkey can be recognized and enforced worldwide.

When looking at the disadvantages;

• Awareness: Some local trade communities in Turkey or around the world may still not be familiar enough with institutional arbitration and may prefer court decisions.
• Bureaucracy and Implementation Problems: In some cases, there may be difficulties regarding the intervention of local courts in the implementation of arbitration decisions or the enforcement of decisions.

In conclusion; Arbitration is a dispute resolution method regulated by various legislations at both national and international levels. While the basic legislation in Turkey is the Arbitration Law No. 4686, regulations such as the New York Convention and the UNCITRAL Model Law at the international level have increased the effectiveness and prevalence of arbitration. In addition, institutional arbitration centers shape this process with their own special rules. These legislations ensure that arbitration is accepted as an impartial, fair and rapid resolution method.

In terms of “Institutional Arbitration”, a widely used type of arbitration in the world, Turkey has been rapidly progressing towards becoming an important center, just like international institutions. With the increase in trade at both national and international levels, institutional arbitration is becoming more preferred and a developing sector in Turkey. The existence of local and international arbitration institutions such as the Istanbul Arbitration Center (ISTAC) allows Turkey to gain a more important place in the global trade world. Turkey also stands out as a country with internationally recognized and enforceable arbitration decisions, as it is a party to international agreements.

Sources:

https://www.hkiac.org/arbitration/what-is-arbitration

https://www.international-arbitration-attorney.com/tr/arbitragem-institucional-ou-ad-hoc/

https://www.pinsentmasons.com/out-law/guides/institutional-vs-ad-hoc-arbitration

https://www.changing-perspectives.legal/arbitration/types-of-arbitration/other-types-of-arbitration/

https://iccwbo.org/dispute-resolution/dispute-resolution-services/arbitration/

https://www.wipo.int/amc/en/arbitration/what-is-arb.html

https://www.law.cornell.edu/wex/arbitration

https://www.pon.harvard.edu/daily/conflict-resolution/what-is-an-arbitration-agreement/

Ebru, KARADEMİR; “Milletlerarası Kurumsal Tahkim Merkezlerinin Bir Karşılaştırması”, Public and Private International Law Bulletin, Cilt: 32, Sayı: 2, s. 73-104