Legal Framework
Under Turkish law, the enforcement of foreign arbitral awards is regulated by Articles 60 to 62 of the International Private and Procedural Law (the "IPPL"). The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (the "New York Convention"), to which the Republic of Türkiye is a contracting state, also applies directly to the enforcement of foreign arbitral awards in Türkiye, because Article 90/V of the Constitution gives duly ratified international treaties the force of law. The law ratifying the New York Convention was published in the Official Gazette dated 21 May 1991 and numbered 20877. These two sources therefore govern the enforcement of foreign arbitral awards in disputes where enforcement is sought in Türkiye.
Where a foreign arbitral award falls outside the scope of the New York Convention in terms of place, time or subject matter, enforcement is governed by the IPPL. Where the award was rendered in a contracting state and concerns commercial matters, the New York Convention applies. In addition, under Article VII/1 of the New York Convention, the Convention does not affect the validity of bilateral agreements concluded by contracting states or the more favourable provisions of the country where enforcement is sought. Even in disputes within the scope of the New York Convention, the parties may therefore rely on the more favourable provisions of any applicable bilateral treaty or local law. In current practice, however, the provisions of the New York Convention tend to be applied, given the large number of contracting states and the more flexible conditions the Convention offers.
Bindingness Under the New York Convention
Under Article V/1(e) of the New York Convention, one of the grounds for refusing enforcement of a foreign arbitral award is that the award has not yet become binding on the parties. In other words, absent any other ground for refusal, a foreign arbitral award will be enforced unless the party resisting enforcement proves that the award has not yet become binding on the parties. The New York Convention does not, however, define the term "binding", and the conditions under which an award is regarded as binding have been interpreted differently across contracting states, which has led to extensive debate. Some courts have read bindingness as the finalization of the award before the courts of the seat of arbitration, while others have taken it to mean that the remedies available against the award under the arbitration rules agreed by the parties have been exhausted.
Under the Convention on the Execution of Foreign Arbitral Awards of 26 September 1927 (the "Geneva Convention"), the predecessor of the New York Convention, a party seeking an enforcement judgment had to show that the foreign arbitral award had become final in the country where it was rendered. To prove finality, the practice developed of the enforcing party first submitting the award to the courts of the seat of arbitration, before applying to the enforcement courts, so as to make the award final. This practice inevitably gave rise to the problem of double exequatur, which increased costs for the parties, prolonged proceedings and prevented, or at least delayed, enforcement. All of this attracted criticism from scholars. To avoid the difficulties caused by the heavily criticised finality requirement, the drafters of the New York Convention replaced it with a requirement of bindingness. Likewise, Article IV of the New York Convention, which lists the documents the enforcing party must submit, does not require any annotation or certificate showing that the award is final or binding. The drafters of the New York Convention therefore appear to have made a deliberate choice to avoid the problems associated with double exequatur.
Bindingness Under the IPPL
Article 60/1 of the IPPL provides that arbitral awards that have become final and enforceable, or binding on the parties, may be enforced. In line with this, Article 61/1(b) of the IPPL, which lists the documents to be submitted to the enforcement court, refers to the original or a duly certified copy of the award that has become final and enforceable or binding on the parties. As this shows, under the IPPL it is sufficient for a foreign arbitral award to be binding in order to be enforced, without meeting a finality requirement.
The repealed Law No. 2675 on Private International Law and Procedural Law ("Law No. 2675") confirms this reading. Under Article 43/1 of Law No. 2675, only final and enforceable arbitral awards could be enforced, and Article 44/1(b) required the submission of the original and a certified copy of the arbitral award, which had to be final and enforceable. With the entry into force of the IPPL, however, it was expressly provided that awards binding on the parties may also be enforced as an alternative to final and enforceable awards. Unlike under Law No. 2675, foreign arbitral awards with binding effect can therefore be enforced under the IPPL even if they have not yet become final. Ultimately, the change introduced by the IPPL brought Turkish legislation into line with the New York Convention.
The Courts' Practice of Requiring a Finalization Certificate
In summary, under both the New York Convention and the IPPL it is sufficient for a foreign arbitral award to be binding on the parties in order to be enforced in Türkiye, and finality is not required. Neither the New York Convention nor the IPPL requires a document certifying the finality of the award to be submitted with an enforcement request. Even so, Turkish courts have recently developed the misguided practice of giving claimants a deadline to submit a finalization certificate for the foreign arbitral award. This practice is not only inconsistent with the New York Convention and the IPPL. Unlike in the case of court judgments, it is also impossible to obtain a finalization certificate for an arbitral award from the courts of the seat of arbitration. Moreover, the rules of some arbitral institutions expressly provide that arbitral awards are binding, for example Article 35 of the ICC Rules of Arbitration, Article 26.8 of the LCIA Arbitration Rules and Article 34.2 of the Swiss Rules of International Arbitration of the Swiss Arbitration Centre. There is therefore no legal basis for courts to require the enforcing party to submit a finalization certificate for the arbitral award.
The current court practice of asking claimants to submit a finalization certificate for arbitral awards should be abandoned. Until then, parties and their counsel affected by this misguided practice may consider obtaining a certificate from the courts of the seat of arbitration confirming that no set-aside or appeal proceedings have been brought against the award whose enforcement is sought. This approach is reflected in the judgment of the 43rd Civil Chamber of the Istanbul Regional Court of Appeal dated 22 April 2021 (Docket No. 2020/291, Decision No. 2021/528).