Istanbul Arbitration Center Opens its Doors

The long-awaited Arbitration Rules (the “Rules”) of Istanbul Arbitration Center (“ISTAC”), established in 2015, were published and ISTAC has been fully operational since January 1, 2016. It is hoped that the establishment of ISTAC will make Istanbul an arbitration hub in the MENA and CEE regions.

According to its Rules, ISTAC will provide dispute resolution services, including for disputes involving a “foreign element.” Unless otherwise selected by the contracting parties, the seat of arbitration under ISTAC rules is Istanbul. The language for arbitration may be freely determined by the parties.

Parties are also free to determine the number of the arbitrators, from one (sole arbitrator) to any number they wish (arbitral tribunal), provided that the designated number of arbitrators is odd.

The sole arbitrator or tribunal will render awards within six months of the date of execution of terms of reference[1], or the approval of the terms of reference by the ISTAC board.[2]

The sole arbitrator or tribunal may decide on the principles of fairness and equity if explicitly authorized to do so by the parties.

If the parties have not otherwise agreed, the Rules also include provisions enabling fast-track arbitration for disputes involving a claim (and a counter-claim, if any) of 300,000 Turkish Lira (approximately US$84,000) or less. Parties may also elect to proceed in accordance with “fast-track” arbitration rules for disputes exceeding the above amount. Fast-track arbitration enables the issuance of an award within three months by a single arbitrator. Awards issued within the scope of fast-track arbitration are not subject to appeal and may be executed immediately.

The Rules also introduce the “emergency arbitrator” concept. Accordingly, a party needing urgent interim measures that cannot await the arbitrator(s) to take office may request the appointment of an emergency arbitrator. Parties may proceed with the emergency arbitrator procedure provided that the arbitration agreement does not prohibit this procedure. According to the applicable Rules, the emergency arbitrator will be appointed by the President of the Board of Arbitration of ISTAC within two business days of receipt by the ISTAC secretariat of the parties’ request. The appointed emergency arbitrator will issue the award within seven business days following appointment. As with the fast-track arbitration process, awards issued within the scope of emergency arbitrator rules are not subject to appeal and may be executed immediately.

As to costs of arbitration, ISTAC applies a fixed registration fee of 300 Turkish Lira (approximately US$84) for any dispute. Administrative costs range from 0.1% to 1.5% depending on the amount in dispute, the lowest percentage applying to disputes of exceeding 50,000,000 Turkish Lira and over (approximately US$14,000,000). Arbitrator fees depend on the number of arbitrators and are calculated based on the amount in dispute.

On November 19, 2016, the Prime Ministry of Turkey issued a communiqué urging public institutions to select ISTAC arbitration in their agreements regardless of whether those agreements are executed with foreign parties. For instance, the project agreement for the third airport of Istanbul includes ISTAC arbitration as a dispute resolution mechanism.

Practitioners and scholars have stated that ISTAC Rules are comparable to internationally-accepted arbitration rules such as the ICC and LCIA rules and that ISTAC has the potential to be a successful regional arbitration center. One area where this may be especially important is in relation to the improvement of business relations in the region. Currently, most parties are still unwilling to submit to each other’s arbitration or courts and ISTAC may emerge as a mutually agreeable and preferred arbitral institution.

1. The terms of reference is a document setting out the scope of the arbitral proceedings and duties of arbitrator and signed by the parties and the sole arbitrator/tribunal.
2. The terms of reference are submitted for approval in case a party does not sign it.