1- Introduction
Arbitration is an alternative dispute resolution
method in which disputes that have arisen or may arise between the parties are
resolved by independent and objective arbitrators instead of national courts.
The arbitrator resolves the dispute through judgement. In other words,
arbitration is a private judicial activity, but the arbitral proceedings are
supervised by the state. Arbitral awards are final judgements and enforced just
like court judgements.
Under the Turkish Law, domestic arbitration is set out
through the Articles 407-444 of the Code of Civil Procedure Nr. #6100
("CCP"). Arbitration is a judicial procedure that enables the parties
to resolve their dispute before objective arbitrators instead of the state
judiciary.
The jurisdiction of states is one of the inalienable
powers of states. However, it is possible for the parties to reach an agreement
to resolve their disputes through arbitration before independent arbitrators
instead of state courts. In this case, the jurisdiction belongs to the arbitral
tribunal as a result of the will of the parties, instead of the state courts.
In addition, there are two different types of arbitration; namely
voluntary and mandatory arbitration. In voluntary arbitration, the
parties may proceed to state jurisdiction or arbitration. In voluntary
arbitration, although this possibility is offered to the parties, it is left
entirely to the will of the parties. However, in mandatory arbitration,
the parties do not have the option to proceed with arbitration. There is
an obligation to resort to arbitration proceedings to resolve the dispute. However, it should be noted that in order to apply for arbitration
proceedings under the CCP procedure, there must be an arbitration agreement
between the parties.
However, the state has the power to impose rules that certain disputes may only be resolved before the courts by limiting the will of the parties, as arbitration is a different judicial process than state jurisdiction with public consequences.
2- Arbitrability
If the state, by exercising its right of limitation, decides that a
dispute may not be submitted to arbitration, it is said that the dispute is not
arbitrable. This situation is also referred to as non-arbitrability.
It is important to point out that even if the
arbitration agreement concluded between the parties is valid, if the subject
matter of the dispute is not arbitrable, the arbitration agreement will become
null and void and will not be effective.
Although some classifications have been made in the
doctrine on arbitrability, one of these classifications is subjective and
objective arbitrability.
Subjective arbitrability generally refers to the
authority to conclude an arbitration agreement and the capacity to be a party
to arbitration proceedings. Subjective arbitrability, on the other hand, is
related to the dispute itself rather than the status of the parties. It is
accepted that some disputes can only be resolved by state courts, as they touch
upon sensitive issues of public order. [2]
Subjective arbitrability is the examination of
arbitrability in terms of persons. As a matter of fact, some persons will not
be able to conclude an arbitration agreement. Subjective arbitrability applies
to minors and incompetent persons, bankrupt persons, and persons who do not
have the special authorization required for arbitration. [3]
Objective arbitrability, as briefly mentioned above,
is the condition that the subject matter of the contract is amenable to
arbitration. Since certain disputes concern public order, and considering that
public order must be ensured by the state, these disputes should only be heard
under the jurisdiction of the state.
Under the Code of Civil Procedure Nr. #6100,
arbitrability is set out as follows: "Disputes arising out of rights in
rem over immovable property, or disputes arising out of works that are not
subject to the will of the two parties are not arbitrable."
However, as stated above, the concept of arbitrability
is not limited to the cases as set out under the article.
Examples of disputes that are not arbitrable include divorce and paternity cases, bankruptcy, disputes where the judge's ex officio investigation principle applies, disputes regarding the establishment of foundations or associations, disputes arising from retainer agreements and other disputes concerning public order.
3- Legal Practitioners’ Service
In the first article of the Legal Practitioners Act Nr.
#4515, advocacy is described as a public service and an independent profession.
In the second article of the same law, the purpose of advocacy is set out as
follows; "to ensure regulation of legal relations, resolution of all
kinds of legal issues and disputes in accordance with justice and equity, and
full implementation of the rules of law before judicial bodies, arbitrators,
official and private persons, boards and institutions at all levels."
As can be seen, the Legal Practitioners Act states
that advocacy is a public service and serves the purpose of ensuring
application of the rules of law.
4- Evaluation of the Arbitrability of the Dispute
Arising from Retainer Agreements
As stated above, the advocacy service is a public
service, and the lawyer aims to ensure full implementation of the rules of law.
Considering that the service provided by lawyers is a public service, it is
possible to say that the legal service concerns public order.
In this context, just as matters relating to the real
property of immovable property may not be subject to arbitration due to public
order, and if an arbitration proceeding is initiated in this regard, the
appointed and/or selected arbitrator will be void; arbitration initiated in
relation to Retainer Agreements, which directly concerns public order, will
also be unfavorable.
"In practice, the system of the arbitrators
making awards in accordance with the applicable legal order is not adopted.
Arbitrators are not bound by the rules of procedural and substantive law in
resolving the dispute before them. Arbitrators are rather obliged to render
their awards in accordance with the principles of right and fairness. Since the
reversal of arbitrators' awards by the Court of Cassation is limited to the
four reasons as set out under the Article 533 of the Code of Procedure, it is
not possible to check whether the arbitral awards violate the mandatory rules
of the law, whether they exceed the limits imposed by public laws and whether
they are contrary to the same. Since the reasons under the aforementioned
article are procedural and procedural provisions, it is not possible to extend
them through jurisprudence and interpretation.
Contrary to these legal facts, if it is accepted that
arbitrators may decide to resolve disputes regarding retainer fees, it must be
accepted in advance that arbitrators, who are not bound by the rules of
procedural and substantive law while resolving the dispute, will be enabled to
make decisions contrary to the mandatory rules of public order and therefore
contrary to public order and its protection. In such a case, since the Court of
Cassation will not be able to carry out its supervision as required by law
(Art. 533 of the Code of Civil Procedure), the mandatory and restrictive
provisions introduced by public order will be pushed aside and rendered
ineffective.
No legal opinion that places the will of individuals
above the order of acceptance has been put forward and accepted. In the
face of all the legal drawbacks mentioned above, it should be accepted that
disputes regarding retainer fees may not be resolved by arbitration." [4].
As stated under the decision of the Court of
Cassation; it is not possible for the dispute regarding Retainer Agreements to
be arbitrable since it is closely related to public order.
The decision, dated 15.04.1987, and bearing the Basis
number 1987/325 and the Decision number 1987/325, of the Assembly of Civil Chambers
of the Court of Cassation reads as follows;
"Article 164 of the Legal Practitioners’ Act Nr. #1136 stipulates that the retainer agreement should cover a certain amount as a rule, and in paragraph 2 (without prejudice to the provision of the third paragraph), a certain percentage of the value of the thing sued or to be judged, varying according to the success shown in the case and not exceeding twenty-five per cent, may be agreed as a retainer fee. It is undoubted that the legislator has introduced these regulations for the purpose of public order and benefit, and that agreements to the contrary are invalid. In fact, it is not overlooked that the Retainer Agreement itself is a matter of public order. Again, matters of public order may not be referred to arbitration, as in the determination of real estate rents." [5]
5- Some Problems Arising in the Event of
Non-Arbitrability
The CCP sets out that the arbitrator in arbitration
proceedings to decide on his/her own jurisdiction. Article 422 of the CCP reads
as follows;
"The arbitrator or arbitral tribunal may decide
on its own judicial power, including challenges to the existence or validity of
the arbitration agreement. In making this decision, the arbitration clause in a
contract shall be considered independently of the other provisions of the
contract. The decision of the arbitrator or the arbitral tribunal on the
invalidity of the main contract shall not result in automatic invalidity of the
arbitration agreement."
The arbitrator's decision on his/her own authority may
lead to unfair results in some cases. First of all, the fact that the
arbitrator may decide on his/her own judicial power raises questions about
impartiality. Indeed, in arbitration proceedings, the arbitrator will be
entitled to a fee upon conclusion of the dispute. For this reason, it is
possible to say that the arbitrator, who has a financial interest in the
arbitration proceedings, may violate the right to a fair trial if he decides on
his own judicial power.
As a matter of fact, in the event of an erroneous review of the arbitrator's judicial power, the award to be rendered as a result of the arbitration proceedings is enforceable. In the event that the subject matter of the dispute is of a large amount, as a result of an erroneous decision made by the arbitrator, the party who has obtained an unfavorable and unlawful award in the proceedings is obliged to provide security for the stay of execution. The party who has already suffered a loss of rights as a result of an unfair and unlawful award will also be obliged to provide security for the stay of execution.
6- Conclusion
Arbitration is an alternative dispute resolution
method in which disputes that have arisen or may arise between the parties are
resolved by independent and objective arbitrators instead of national courts.
The arbitrator resolves the dispute through judgement. In other words,
arbitration is a private judicial activity, but the arbitral proceedings are
supervised by the state. Arbitral awards are final judgements and are enforced
just like court judgements. The parties may determine arbitration as a dispute
resolution method by concluding an arbitration agreement or by incorporating an
arbitration clause into their contract. An arbitration agreement may be
concluded only in arbitrable matters. Arbitrability can be classified as
subjective and objective. Objective arbitrability means that the subject matter
of the dispute is not arbitrable.
Based on the public service nature of the advocacy service, the advocacy service is closely related to public order. Accordingly, it is possible to say that disputes arising from Retainer Agreements are not arbitrable.
Umut Alperen Öztürk, Legal Intern
References:
1. Bernard
Hanotiau, "What Law Governs the Issue of Arbitrability?" Arbitration
International, Vol. 12(4), 1996, p. 391; Nevhis Deren Yıldırım, “Tahkim ve
Objektif Açıdan Tahkime Elverişlilik” Prof. Dr. Yavuz Alangoya İçin Armağan (pp. 47-61), Istanbul, Beta Publishing House,
2007, p. 52.
2. Lew,
Mistelis, et al: Comparative International Commercial Arbitration, p. 187.
3.
PEKCANITEZ/YEŞİLIRMAK, p.2636.
4. The decision, dated 25.12.1995, and bearing the Basis number 1995/10533 and the Decision number 1995/11673, of the 13th Civil Chamber of the Court of Cassation.
