1. Significant court decisions in the last trimester concerning arbitration
1.1 Decision of the 6th Civil Chamber of the Court of Cassation on the scope of the arbitration award1
The underlying dispute between the local administration ("Administration") and the contractor company ("Contractor") was in relation to an agreement for the renovation of the irrigation systems of a dam in Türkiye. The Contractor initiated arbitral proceedings against the Administration and succeeded in obtaining an award in its favor. The Administration then applied to the regional court of appeals to set aside the arbitral award in Türkiye claiming that the arbitral award was in breach of the public policy. The Administration claimed inter alia, that: (i) the arbitral tribunal had exceeded its authority by per se deciding on the past progress payments and how the Administration should pay the future progress payments in the absence of a request from the Contractor in this regard; (ii) the arbitral award had ambiguities; and (iii) the commencement date for the interests to be accrued was not specified.
In response, the Contractor contended that it had requested that the tribunal determine how the progress payments were to be made under the agreement and the tribunal rendered an award based on this claim. The Contractor further stated that since the Administration did not rely on any grounds to set-aside the arbitral award provided in the International Arbitration Law numbered 4686 ("Law no. 4686"), the Administration's case should be dismissed.
The regional court of appeals ruled that the tribunal's award on merits was rendered in accordance with the Plaintiff's requests, and there is no ground for set-aside under Law no. 4686. Moreover, the regional court of appeals stated that it could not review the Contractor's claims regarding the award on the payments as they were intricately related to the merits of the dispute. With respect to the Administration's claim on the interest, the regional court of appeals held that the arbitral tribunal awarded for interest although the Plaintiff had not claimed for interest. Therefore, the regional court of appeals determined that the award on interest was contrary to public order, and partially annulled the arbitral award. The Contractor appealed the decision of the regional court of appeals. The Court of Cassation adopted the same reasoning as the regional court of appeals and upheld its decision, thereby dismissing the Contractor's appeal.
1.2 Decision of the 9th Civil Chamber of the Adana Regional Court of Appeals on the local court's interim attachment decision before the initiation of the arbitration proceeding2
The dispute between the parties arose from contracts for the sale of sunflower oil. The supplier applied to the court of first instance for an interim attachment of the debtor's assets because the sale price of approximately USD 20 million had not been paid. The first instance court granted the interim attachment, finding that the supplier met the legal requirements to obtain it. The debtor appealed the first instance court's decision, arguing, inter alia, that the sale contracts contained an arbitration clause and that the dispute should therefore be resolved by arbitration. The first instance court rejected the debtor's objections.
The debtor appealed the first instance court's decision to the regional court of appeals, arguing, inter alia, that: (i) the dispute between the parties should be resolved by arbitration; and (ii) the supplier had not initiated the arbitration proceedings within 30 days of the issuance of the attachment decision and, therefore, the interim attachment was automatically revoked by law.
The regional court of appeals held that the first instance court has the authority to issue an interim attachment or interim injunction decision before or during the arbitral proceeding, as provided by Law no. 4686. The regional court of appeals, therefore, concluded that the supplier's application to the first instance court for interim attachment was not contrary to the arbitration agreement between the parties. Furthermore, regarding the debtor's claims that the interim attachment should have been automatically removed as the supplier had not commenced arbitral proceedings within the 30-day period, the regional court of appeals decided that the determination of whether the interim attachment resumes is not subject to the appellate review of the regional court of appeals. Instead, its examination must be requested from the first instance court that issued the interim attachment decision. Therefore, the regional court of appeals dismissed the debtor's appeal and upheld the decision of the court of first instance.
1.3 Turkish court has rejected the enforcement of an ICC award due to witness conviction
In a remarkable decision, a Turkish court of first instance has rejected the enforcement of an International Chamber of Commerce ("ICC") award surpassing USD 600 million, citing the conviction of a witness for providing false evidence.3 The judgement has already been enforced by courts in England and Wales, Hong Kong, Switzerland, New York, Texas and Florida. The judgement has also been upheld by the Paris Court of Appeal. In a statement made by the counsel for the party in favour of the judgement, it was stated that the judgement was a contrary judgement and could not be reconciled with Turkey's international obligations, including the New York Convention. The decision dismissed the enforcement application by a party against local entities and individuals. The court argued that enforcing the award would breach Turkish public order, emphasizing the arbitral tribunal's failure to address contradictions following a confession of false testimony. The decision, considered an outlier, deviates from Türkiye's international obligations under the New York Convention.
The arbitration involved a subsidiary's acquisition of mining companies, with the tribunal finding "willful deception" based on manipulated drilling results. Despite bribery allegations against a key witness, the Paris Court of Appeal upheld the award, rejecting claims.
The first instance court, noting the criminal conviction of a witness for forging evidence, ruled that enforcing the award would lead to disparate outcomes for the same facts, violating the right to a fair trial. The decision has been appealed.
1.4 UK Supreme Court has applied stay provisions for the first time4
The dispute brought before the UK Supreme Court ("Supreme Court") concerns supply contracts executed between Mozambique and an Abu Dhabi-based company ("Company"). Mozambique filed USD 2 billion lawsuit before English Courts against the Company by alleging that corrupt means were utilised in the procurement of supply contracts which include arbitration clauses. After conflictive decisions by the courts of lower degree, the UK Supreme Court unanimously ruled that Mozambique's said claims are not covered under the arbitration agreement.
Mozambique claimed that the Company had corruptly obtained the supply contracts concluded for the provision of ship and aircraft and related infrastructure services, which resulted in Mozambique having to undertake legal obligations amounting to USD 2.1 billion. Based on these allegations, Mozambique filed a lawsuit at the London Commercial Court in 2019, and in return, the Company and others initiated multiple arbitration proceedings against Mozambique under the ICC and Swiss Rules.
The Company requested the court proceedings to be stayed to allow the resumption of arbitral proceedings. The Commercial Court ruled that Mozambique's claims were only weakly related to the arbitration agreement. However, in 2021, the court of appeal overturned this decision, emphasizing the "artificiality of separating the question of the validity of contracts from the proceedings".
In its judgment, the Supreme Court assessed the approach of courts in various jurisdictions and found that an international consensus had emerged as to what constitutes a ground for a stay of proceedings in favor of arbitration. It stated that proceedings before state courts will only be stayed if such a ground is essential to the case before the court. The Supreme Court held that common sense would prevail in the application of such a test. Accordingly, the Supreme Court dismissed the aforementioned stay of proceedings as Mozambique's claims would not require an examination of the validity of the contracts underlying the arbitration agreement, and a defense that the contracts were valid would be irrelevant to the Company's liability
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