The Istanbul Arbitration Centre and the ISTAC Rules

Publication September 2016

Turkey aspires to be a major regional hub for arbitration

The Istanbul Arbitration Centre and the ISTAC Arbitration Rules were introduced in October 2015, with the aim of Istanbul becoming a major regional hub for international arbitration. We give an overview of ISTAC and its rules and ask whether, in light of national and regional instability, Istanbul can fulfil its promise as an arbitration centre.

Over the last decade, Turkey has developed into a major regional political and economic power, notwithstanding recent political instability. As Turkish and regional business and trade has grown, so has the number of cross-border disputes. Many of these are resolved by international arbitration, most commonly under the ICC Rules of Arbitration and seated outside of Turkey. The Turkish government hopes that this may change with the establishment in 2015 of the Istanbul Arbitration Centre (ISTAC). ISTAC is looking to find a definitive role in a region that currently lacks an established international arbitration centre.

ISTAC is an independent, autonomous arbitral institution. It aspires to become a major regional hub for the resolution of commercial disputes between European, Asian and Middle Eastern parties. ISTAC’s Arbitration Rules are broadly comparable with rules of other major institutions.

ISTAC’s launch has been welcomed by regional practitioners. ISTAC seems to be off to a promising start, as it recently announced that in the short time since its launch, two substantial Turkish public infrastructure contracts have incorporated ISTAC arbitration clauses and at least two arbitration cases under ISTAC Rules are pending. In due course, legislative amendments to modernise Turkey’s international arbitration law could follow.

The Istanbul Arbitration Centre

ISTAC comprises a General Assembly, Board and Secretariat. The General Assembly has 25 members who are elected as representatives by various business, legal and governmental institutions in Turkey. The Board (elected by the General Assembly) consists of eight leading domestic and international arbitration practitioners whose role is to assist with the administration of disputes. The Secretariat (elected by the Board) assists the Board with its work and takes questions from parties, their legal advisors and tribunals.

ISTAC Arbitration Rules

ISTAC’s Arbitration Rules (summarised below) came into force on 26 October 2015. Although these rules are most heavily influenced by the ICC Rules of Arbitration, there are areas where ISTAC has taken a different approach. For example, the ISTAC Rules contain fast track arbitration rules for small claims. The current ICC Rules do not contain any similar provisions, though in July this year the ICC announced its decision to incorporate a set of expedited rules for small claims when its rules are next revised. Also, the ISTAC Rules do not contain a waiver of the parties’ rights to recourse against awards to the extent permissible by law. Under Turkey’s international arbitration law, only non-domestic parties may waive their rights of appeal. This is a factor to consider if drafting an agreement to arbitrate under the ISTAC Rules.

Key provisions of the ISTAC Rules include:
Seat
Istanbul is the default seat of arbitration, unless the parties agree otherwise.
Terms of Reference
Terms of Reference are drawn up by the tribunal and signed by parties at the outset of proceedings.
Advance on Costs
Parties pay an advance based on the value of the dispute at an early stage in proceedings to cover the fees and expenses of the tribunal and ISTAC.
Time limit
The tribunal must render its final award within six months, subject to the parties’ agreement or the Board granting an extension.
Emergency Arbitrator rules
A party can apply for provisional appointment of an emergency arbitrator to grant interim measures before the tribunal has been constituted.
Fast Track Arbitration rules
Fast Track Arbitration rules apply to claims below TRY300,000 (approximately US$100,000), under which a sole arbitrator must render its final award within three months from receipt of the file and within one month from the last statement or last hearing, whichever occurs later.

Impact of regional political events

ISTAC has enormous potential. The ISTAC Rules are of a high standard and the institution will be administered by credible and knowledgeable experts. More remains to be done if Turkey is to emerge as a genuine regional player. Turkey’s statutory regime for international arbitration needs to be updated. Most importantly, both domestic and foreign parties will also need to be convinced that there is a commitment to ensure that the judiciary, who will be charged with supervisory jurisdiction over arbitrations seated in Istanbul, have the independence necessary to be inured from the political upheaval in the region.


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