Akıncı Arbitration Newsletter - October 2023

Dismissal of the Request for Setting of an Investment Arbitration Award Leads to an ECHR Application

An arbitral tribunal refused a $240 million investment treaty claim against Venezuela on jurisdiction. Following Dutch courts’ refusal to set aside the award, the matter came before the European Court of Human Rights ("ECHR").

Spanish-Venezuelan claimants had initiated ad hoc arbitration proceedings under the UNCITRAL Rules, claiming breach of the Spain-Venezuela bilateral investment treaty due to alleged unlawful expropriation. The arbitral tribunal had ruled that it lacked jurisdiction on the grounds that the claimants were predominantly Venezuelan citizens and did not meet the "investor" criteria under the bilateral investment treaty. Upon the request for the setting aside of the arbitral award, the Dutch court of appeal determined that, in accordance with the procedural law, arbitral awards in which tribunals dismiss the case on jurisdiction could not be subject to setting aside proceedings. Thus, the court rejected the motion for setting aside.

The claimants brought the matter to ECHR, arguing that their right to access to justice was restricted due to the denial of the right to request the setting aside of the arbitral award.

ECHR previously ruled in 2022 in the case of BTS Holding, A.S. v. Slovakia regarding the domestic court decisions on the enforcement/annulment of arbitral awards. In that decision, the ECHR found that the Slovakian courts wrongly dismissed the enforcement of the arbitral award, and this constituted a violation of the right to property.

Court of Cassation Decided that Objections to the Validity of Arbitration Agreements which was not Raised in the Arbitration Proceedings Cannot be Heard in the Enforcement Proceedings

The 6th Civil Chamber of the Court of Cassation, with its decision dated 19 June 2023 and numbered 2023/1902 E. and 2023/2401 K., upheld the decisions of the court of first instance and the court of appeal which granted the enforcement of the arbitral award.

In the proceedings, the claimant requested the enforcement of the arbitral award, while the respondent claimed that the arbitration clause was invalid because it was signed without the approval of the board of directors, that the power of attorney of the counsel representing them during the arbitration proceedings was signed without the approval of the board of directors.

The respondent also argued that the arbitral award was not binding.

In its decision, the court of first instance granted the claim for the enforcement of the arbitral award. The court found that the objection to the validity of the arbitration clause and the power of attorney were not raised during the arbitration proceedings, thus, raising these arguments at the enforcement stage was contrary to the principle of good faith.

Upon appeal, the court of appeal determined that the parties had duly appointed their arbitrators, filed their written submissions, participated in the hearing, whereas the respondent did not raise any objection to capacity of the parties or validity of the arbitration agreement. Accordingly, the court rejected respondent objections, finding that raising these objections in the enforcement proceedings was contrary to good faith. Regarding the respondent’s plea that the award is not binding, the court stated that the award is final and enforceable. For these reasons, the court upheld the decision of the court of first instance.

Upon further appeal of the decision, the Court of Cassation upheld the decisions of the first instance and the Court of Appeal.

What Happened in Turkish Arbitration in September 2023?

ISTAC organized a conference titled "Compensation Claims Arising from Competition Law Violations and Arbitration" on 26 September 2023. In the first session of the seminar moderated by Dr. Ismail Esin, Prof. Dr. Kerem Cem Şanlı and Mr. Buğra Kesici discussed the proof of causation and calculation of damages in disputes arising from competition law violations.

The second session, titled "A Comparison of State Court and Arbitration Proceedings in Compensation Disputes Arising from Competition Law Violations," was moderated by Celal Savaş, and Prof. Dr. Ziya Akıncı, the founding partner of our office, discussed the arbitrability of competition law disputes. Mr. İlmutluhan Selçuk and Mr. Hakan Özgökçen examined the court practices in these disputes, the problems encountered in the process and precedents.