ARBITRATION, LITIGATION, AND DISPUTE RESOLUTION IN TURKEY FOR FOREIGNERS
Turkey has become an attractive centre for foreign investors thanks to its geopolitical position, rapidly growing economy, and increasing volume of international trade. However, international trade and investment often bring legal disputes. Turkey offers a range of legal mechanisms to effectively address disputes for foreign investors and companies. In this article, we explore the main methods of dispute resolution in Turkey, including litigation, arbitration, and mediation, highlighting their advantages and disadvantages.
Dispute Resolution Mechanisms in Turkey
Being well-integrated into international trade and dispute resolution systems, Turkey provides various options for dispute resolution. These mechanisms include litigation, arbitration, mediation, and conciliation, each tailored to meet different needs.
Litigation: Court System in Turkey
Similar to major jurisdictions, litigation is the default dispute resolution mechanism in Turkey. Unless the parties agree otherwise, disputes are resolved through the state courts. Turkey’s legal system ensures justice is delivered through specialised courts, such as commercial, administrative, criminal, and civil courts. However, the court system is often criticised for lengthy processes and challenges such as language barriers, which can make it less appealing for foreign parties. Particularly in complex commercial disputes, alternatives to litigation may offer better solutions in terms of time and cost.
Arbitration in Turkey
Arbitration is a preferred method for resolving disputes without resorting to court. Conducted by neutral arbitrators, arbitration offers confidentiality, faster resolutions, and enforceable decisions that are recognised internationally. Turkey is a ‘pro-arbitration’ jurisdiction, with courts that actively support arbitration agreements and proceedings. This makes arbitration in Turkey a reliable choice for resolving international disputes efficiently.
Mediation in Turkey
Mediation enables parties to resolve disputes amicably under the guidance of a neutral mediator. In some types of commercial disputes, mediation is mandatory before filing a lawsuit in Turkey. Beyond mandatory mediation, parties can voluntarily opt for this method to resolve their issues without the formalities of litigation. Mediation is fast, cost-effective, and preserves relationships between parties.
Conciliation in Turkey
Conciliation involves parties negotiating directly to reach a mutual agreement. This approach provides time and cost advantages for those looking to avoid formal processes. However, since it is not legally binding, it relies heavily on the good faith of the parties involved.
Advantages and Disadvantages of Dispute Resolution Systems in Turkey
Litigation: Court System
Advantages:
- – Binding judgments are issued in accordance with the law.
- – Specialised courts handle complex legal disputes.
- – Decisions can be appealed, ensuring an additional layer of control.
Disadvantages:
- – Lengthy and costly processes.
- – Language barriers and procedural complexities for foreign parties.
Arbitration
Advantages:
- – Fast and flexible processes.
- – Ensures confidentiality, protecting commercial reputations.
- – Parties can select arbitrators.
- – Decisions are enforceable internationally under the New York Convention.
Disadvantages:
- – Potentially high costs, especially in international arbitration.
- – Limited grounds for challenging arbitral awards.
Mediation
Advantages:
- – Cost-effective and quick resolution process.
- – Facilitates amicable solutions between parties.
- – Serves as a mandatory pre-litigation step in certain disputes, streamlining court preparation.
- – Can be opted for voluntarily to avoid litigation altogether.
Disadvantages:
- – Non-binding outcomes require mutual agreement from the parties.
- – May be ineffective in cases of significant disagreement.
Conciliation
Advantages:
- – Allows disputes to be resolved informally, without entering formal processes.
- – Saves time and costs.
- – Maintains commercial relationships between parties.
Disadvantages:
- – Lacks official binding authority.
- – Heavily dependent on the goodwill and cooperation of the parties.
Conclusion: Effective Dispute Resolution in Turkey for Foreign Investors
For foreign investors and companies operating in Turkey, understanding the available dispute resolution mechanisms is crucial for effectively addressing legal challenges. Arbitration stands out as a fast, impartial, and internationally recognised solution, while litigation, mediation, and conciliation offer alternative pathways tailored to specific needs. Expert guidance ensures a seamless resolution process, safeguarding the interests of all parties involved.
If you require professional assistance with arbitration in Turkey, litigation in Turkey, or other dispute resolution methods, contact our expert lawyers for tailored solutions that protect your investments and business interests.