The General Assembly of the Civil Chambers of Turkish Court of Cassation (“Court”) rendered a controversial decision on 21 December 2021 with No. K.2021/1710 (“Decision”)
The Decision provides that, notwithstanding a valid arbitration agreement, Turkish courts, not arbitrators, shall have jurisdiction to determine whether an alleged debtor, against whom a bankruptcy proceeding has been initiated, is indebted or not. This practically means that, when creditors initiate bankruptcy proceedings, they can circumvent the arbitral tribunal’s jurisdiction and facilitate Turkish courts to hear the merits of the dispute although the parties agreed to arbitrate and thus not to litigate.
This post first summarizes the Turkish enforcement and bankruptcy proceedings, and their interplay with arbitral tribunals’ jurisdiction. It then elaborates on the reasoning of the Decision and its potential practical impacts on the arbitration practice in Turkey.
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