international commercial arbitration as an alternative dispute solving mechanism and its role in the

86 Pages·2006·0.29 MB·English

by  Sinan Oncel

INTERNATIONAL COMMERCIAL ARBITRATION AS AN
ALTERNATIVE DISPUTE SOLVING MECHANISM AND
ITS ROLE IN THE TURKISH JUDICIARY SYSTEM

The Institute of Economics and Social Sciences
of
Bilkent University

by

SİNAN ÖNCEL

In Partial Fulfilment of the Requirements for the Degree of
MASTER OF ARTS

in

THE DEPARTMENT OF
INTERNATIONAL RELATIONS
BİLKENT UNIVERSITY
ANKARA

September 2006
I certify that I have read this thesis and have found that it is fully adequate, in scope
and in quality, as a thesis for the degree of Master of Arts in International Relations.

………………………………………..
Assistant Professor Nur Bilge Criss
Supervisor

I certify that I have read this thesis and have found that it is fully adequate, in scope
and in quality, as a thesis for the degree of Master of Arts in International Relations.

………………………………………..
Assistant Professor Pınar İpek
Examining Committee Member

I certify that I have read this thesis and have found that it is fully adequate, in scope
and in quality, as a thesis for the degree of Master of Arts in International Relations.

………………………………………..
Assistant Professor Aylin Güney
Examining Committee Member

Approval of the Institute of Economics and Social Sciences

………………………………………..
Professor Erdal Erel
Director
ABSTRACT

INTERNATIONAL COMMERCIAL ARBITRATION AS AN
ALTERNATIVE DISPUTE SOLVING MECHANISM AND ITS ROLE IN
THE TURKISH JUDICIARY SYSTEM

ÖNCEL, Sinan

Department of International Relations

Supervisor: Asst. Prof. Nur Bilge Criss

September 2006

Globalization has been leading to enormous changes in the world order and
economy. Global market economy needs a legal system to define and protect the
rights of both national and international investors against unjust competition and
jurisdiction.As one of the main pillar of globalization, free movement of capital and
security of capital is vital for the international investors. Legal aspect of
securitization of capital is very significant especially when a dispute arise between
foreign investors and state due to mistrust to local courts and complexity of the legal
system. Hence, international commercial arbitration became an alternative dispute
settlement mechanism. In this study, after introducing milestones for the
development of international commercial arbitration in 20th century, main features
and international arbitration institutions and their rules are focused to demonstrate
international structure and arbitration models. On the basis of international
dimension of the issue, the role and function of international commercial arbitration
in Turkish Judiciary System is elaborated through focusing on Constitutional
amendments, laws and legal interpretations. While concentrating on Turkish legal
system, concession agreements will mainly stressed through some cases. In this
study, concept of public interest and debate on “foreign element” are also covered.

Key Words: Arbitration, Globalization, Legal Security of Capital, Turkish
Arbitration System

iii
ÖZET

UYUŞMAZLIKLARIN ÇÖZÜMÜNDE ALTERNATİF OLARAK
ULUSLARARASI TİCARİ TAHKİM VE TÜRK YARGI SİSTEMİNDEKİ
ROLÜ

ÖNCEL, Sinan

Uluslararası İlişkiler Yüksek Lisans

Tez Danışmanı: Yard. Doç. Dr. Nur Bilge Criss

Eylül 2006

Küreselleşme dünya düzeni ve ekonomisinde çok büyük değişikliklere öncülük
etmektedir. Küresel piyasa ekonomisi, hem ulusal hem uluslararasi yatırımcıların
adil olmayan rekabet ve yargılama karşısında haklarının belirli olduğu ve korunduğu
bir yasal sisteme ihtiyicaç duymaktadır. Sermayenin yasal açıdan korunması
özellikle yatırımcılar ve devlet arasında doğabilecek bir ithilaf durumunda yerel
mahkemlere güven duyulmaması ve yasal sistemin karmaşıklığı nedenleriyle önem
kazanmaktadır. Bundan dolayi uluslararası ticari tahkim ithilafların çözümü için
alternatif bir mekanizma olmuştur. Bu çalışmada, uluslararası ticari tahkimin 20.
yüzyildaki gelişimindeki kilomete taşlarının sunulmasından sonra uluslararası ticari
tahkimin özellikleri, uluslararası kurumlar ve bu kurumların kuralları üzerinde
uluslararası yapıyı göstermek için durulmaktadır. Konunun uluslararası boyutu esas
alınmak suretiyle, uluslararası ticari tahkimin Türk Yargı Sistemi’ndeki rolü, işlevi
de Anayasal değişiklikler, yasalar ve içtihat ile değerlendirilmektedir. Türk Yargı
Sistemi’ne konsantre olunurken, esas olarak bazı örneklerle imtiyaz sözleşmeleri
üzerinde durulmaktadır. Ayrıca bu çalışma kamu menfaati kavramını ve “yabancılık
unsuru” tarışmalarını kapsamaktadır.

ANAHTAR KELİMELER: Tahkim, Küreselleşme, Sermaye Güvenliği, Türk
Tahkim Sistemi

iv
AKNOWLEDGEMENTS

If this thesis could reappear after five years time, without a doubt, I owe to Assistant
Professor Nur Bilge Criss who encouraged me to finalize this study. Her goodwill
was the sole element to make this thesis a reality. Her incisive review of my study
contributed to improve the quality of this thesis. I sincerely express gratitude to her
for giving me energy and motivation to complete this study and for the opportunity
to study with her as her student after many years.

I also wish to thank Assistant Professor Pınar İpek and Assistant Professor Aylin
Güney for their warm reception and constructive comments in the Examining
Committee.

Lastly, I am grateful to Müge Keller, who has been supporting and helping me
personally and academically for almost ten years. Her patience and goodwill also
contributed to make this thesis a reality.

v
TABLE OF CONTENTS

ABSTRACT...................................................................................................... iii

ÖZET................................................................................................................ iv

ACKNOWLEDGMENTS................................................................................ v

TABLE OF CONTENTS................................................................................. vi

CHAPTER I INTRODUCTION............................................................................ 1

CHAPTER II..................................................................................................... 7

21 The Development of International Commercial Arbitration
in the 20th Century..................................................................... 11

CHAPTER III................................................................................................ 15

3.1 Features of International Commercial Arbitration.................... 15

3.2 Sovereign Immunity and International Arbitration ………….. 19

3.3 Major Models and Institutions in International Commercial
Arbitration……………………………………………………. 21

3.3.1 UNCITRAL as a Model Law………………….. 23

3.3.2 International Chamber of Commerce Arbitration 27

3.3.3 International Centre for Settlement of Investment
Disputes………………………………………... 29

CHAPTER IV……………………………………………………………….. 33

4.1 The Background of the International Commercial Arbitration
in the Turkish Judiciary System……………………………... 33

4.2 The Regulation of the Turkish Constitution………………… 42
vi
4.2.1 Public Interest and Order……………………… 55

4.3 Turkish Laws and Procedures of the International Commercial
Arbitration……………………………………………………. 59

4.3.1 The Statue on the International Private and
Procedural Law (MÖHUK)……………………. 60

4.3.2 The Law on the Procedures of Application of
International Arbitration in Administrative
Concession Contracts (Law No. 4501) 64

4.3.3 The International Arbitration Law……………. 65

CHAPTER V CONCLUSION…………………………………………… 70

SELECTED BIBLIOGRAPHY………………………………………….. 76

vii
CHAPTER I

INTRODUCTION

The role of economics in international relations is flourishing since the end
of the Cold War. The new markets, resources and geographies have been integrating
into the world system. Economic partnership and integration is at its peak at the end
of the bipolar system. In the last twenty years globalization has been leading to
enormous changes in the world order. Although there are many obstacles for the new
global order as well as for liberalization of capital, foreign investment and capital
have become the locomotives of globalization. Almost all states including the former
socialist ones have opened up their economies to foreign investors and capital. The
motives of the states are unemployment, insufficient national capital, minimizing the
role of the state in the economy and integrating their economies to the new global
order. On the other side, foreign investors have their own motives that are
intersecting with the states’ motives. There is no doubt that profit is the most
important motive of the capital owners.

Security of capital and liberal capital movements are also vital for the
international investors. There are multiple prerequisites for attracting foreign capital
and investments but in this study the regulatory structure is our primary concern.
1
The legal aspect is very important especially in cases of disputes which may arise
from the agreements between foreign investors and the state because of mistrust to
the national courts due to the unfair advantage of states1. In this respect, the
international commercial arbitration appeared as an alternative method for solving
disputes between states and foreign investors as part of securitization of the capital.

Arbitration is an ancient methodology for dispute solving especially in
commercial matters. In basic terms international commercial arbitration is the
settlement of a dispute based on the agreement of the parties of a contract by the
authority of arbitrators.2 International commercial arbitration is not only applicable
between private entities but also between private entity and sovereign states. When
private entities and foreign governments interact commercially, and dispute arises,
the predominant concern is that the state may claim immunity from private lawsuits
based on the principle of sovereign immunity.3 However the absolute understanding
of sovereign immunity has been changing along with globalization.

From the beginning of the industrial revolution, state capitalism emerged due
to the lack of capital for investments. In other words, states became the most

1 Hazel Fox, “ Sovereign Immunity and Arbitration” Contemporary Problems in International
Arbitration Julian D.M. Lew (Martinus NiJhoff Publishers 1987), 323

2Peter Behrens, “Arbitration as an Instrument of Conflict Resolution in International Trade: Its Basis
and Limits” Symposium on the Conflict Resolution in International Trade, (Baden-Baden: Nomos
Verlagsgesellscchaft Baden-Baden, 1993), 14
3 Daniel J. Michalchuk, “Filling a Legal Vacuum: The Form and Content of Russia’s Future State
Immunity Law Suggestions For Legislative Reform” Law and Policy in International Business Vol:
32 No: 3 (Spring 2001), 487

2
significant actors in the world economy. Through the mid-20th century, the role of
state in national economies has been diminishing. The trend of liberalization of the
national economies has been increasing since the end of the Cold War. Especially
the developing states, including the former socialist ones, have insufficient capital to
sustain their economic developments. Most of the East European former socialist
states became EU member states which integrated them into the liberal economic
order and western democracy.

As an emerging market with a liberal-based economy, Turkey has opened up
its economy to foreign investments with similar motives of the other open-market
economies in the last twenty years. However, the idea of international arbitration has
been considered as transferring the right of jurisdiction that is based on sovereignty
of the Turkish state, to another legal framework. Debates on the legal role of the
international commercial arbitration in the Turkish legal system continue. However,
the legislature amended the Constitution, which was disabling international
commercial arbitration especially in concession contracts between the state and
foreign investors. The Turkish Grand National Assembly also enacted laws that
recognize the role and effect of arbitration in case of disputes based on commercial
and concession contracts.

In the process of integrating Turkey into the new economic order and
attracting foreign capital, restrictions for the international commercial arbitration
3