In today’s cross-border transactions, including an investment arbitration clause in your Turkish commercial contract is critical to safeguarding your interests. For foreign companies entering the Turkish market, arbitration offers an efficient and enforceable alternative to local litigation. With the support of a qualified Turkish Law Firm and an English Speaking Turkish Lawyer, these clauses can be strategically drafted to ensure legal protection. This guide, authored by the Best Lawyer in Turkey, explains the purpose, drafting, and enforcement of investment arbitration clauses in Turkish contracts.
What Is an Investment Arbitration Clause?
An arbitration clause is a provision in a contract that requires the parties to resolve disputes through arbitration rather than litigation. When used in contracts involving foreign investors or cross-border elements, it is referred to as an “investment arbitration clause.”
Why Choose Arbitration in Turkish Commercial Contracts?
- Neutral and impartial dispute resolution
- Faster than court proceedings
- Confidentiality of disputes
- Recognition and enforcement of awards under the New York Convention
- Customizable rules and procedures
Legal Basis for Arbitration in Turkey
- International Arbitration Law No. 4686
- Turkish Code of Civil Procedure (for domestic arbitration)
- New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Common Arbitration Institutions for Turkish Contracts
- ICC (International Chamber of Commerce)
- ISTAC (Istanbul Arbitration Center)
- ICSID (for BIT-based investor-state disputes)
- LCIA and UNCITRAL Rules (when applicable)
Key Elements of a Well-Drafted Arbitration Clause
- Seat of arbitration (e.g., Istanbul, London, Geneva)
- Governing law (Turkish law or other)
- Arbitration rules and administering body
- Number and method of appointment of arbitrators
- Language of proceedings (usually English)
Sample Arbitration Clause for Turkish Contracts
"Any dispute arising out of or in connection with this contract shall be finally settled under the Rules of Arbitration of the Istanbul Arbitration Center (ISTAC) by one or more arbitrators appointed in accordance with the said Rules."
Best Practices When Using Arbitration Clauses in Turkey
- Ensure the clause is mutual and unambiguous
- Avoid vague references to “amicable settlement” or “good faith negotiations” unless defined
- Confirm enforceability under Turkish and foreign law
- Avoid pathological clauses with conflicting terms
Enforceability of Arbitration Awards in Turkey
Turkey is a signatory to the New York Convention. This means foreign arbitration awards are generally enforceable, provided they meet procedural criteria and do not conflict with Turkish public policy.
Investment Treaty Arbitration vs. Contract-Based Arbitration
Foreign investors may also benefit from arbitration rights under Bilateral Investment Treaties (BITs). However, contract-based arbitration clauses provide a more direct and predictable forum for commercial disputes.
Why Work with ER&GUN&ER Turkish Law Firm?
- Drafting arbitration clauses tailored to your business model
- Representation in ISTAC, ICC, and ad hoc arbitration proceedings
- Risk assessment and contract negotiation support
- Enforcement of foreign arbitral awards in Turkish courts
- Strategic dispute avoidance through contract clarity
Related Services
- Resolving Commercial Disputes in Turkey
- International Arbitration in Turkey
- Commercial Contracts in Turkey
Frequently Asked Questions (FAQs)
- Is arbitration enforceable in Turkey? Yes, under the New York Convention and Turkish International Arbitration Law.
- Can I use foreign arbitration rules? Yes, ICC, LCIA, or UNCITRAL rules may be used depending on the contract.
- Should the arbitration clause be bilingual? It’s advisable for Turkish–foreign partnerships.
- Is arbitration better than Turkish courts? For international parties, it offers neutrality and confidentiality.
- Can an arbitration clause override a local court? Yes, if validly drafted, courts will decline jurisdiction.
- Can I enforce a Turkish arbitration award abroad? Yes, in other New York Convention countries.
- What happens if the clause is vague? It may be deemed invalid or unenforceable by Turkish courts.
- Are mediation clauses required? Not mandatory, but may be contractually agreed upon.
- What’s the cost of arbitration in Turkey? Typically lower than in Europe, but depends on institution and dispute value.
- Why choose ER&GUN&ER? Our English Speaking Turkish Lawyers draft enforceable arbitration clauses and handle complex international disputes.
Conclusion: Protect Your Investments Through Arbitration
Investment arbitration clauses are essential tools for managing legal risk and protecting cross-border investments. With the right strategy and legal team, you can ensure enforceability, efficiency, and fairness. Partner with the Best Lawyer in Turkey from our experienced Turkish Law Firm and get support from English Speaking Turkish Lawyers to draft powerful, customized arbitration clauses. Contact us today.