This article was featured in Jus Mundi‘s 2024 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHORS:
Bilge Kağan Çevik, Senior Associate at Baysal & Demir
Elif Kapısız, LL.M. in International Dispute Settlement (MIDS)
Introduction
Throughout 2024, both commercial and investment arbitration remained one of the key areas of focus in Türkiye. On the investment arbitration front, the year witnessed significant developments, including the signing of a new Bilateral Investment Treaty (“BIT”) with Iraq. Additionally, Turkish investors were active in pursuing claims abroad, initiating arbitrations under treaties such as the Serbia-Turkey BIT (2001) and the Energy Charter Treaty (1994) (“ECT”). On the other side, new claims were also filed against the Republic of Türkiye, including the first publicly known arbitration under the Malta-Turkey BIT (2003). On the commercial arbitration side, Turkish courts delivered a record number of arbitration-related rulings. While most decisions reaffirmed previously established principles. We are pleased to share this review of 2024, highlighting the year’s key developments in both investment and commercial arbitration, and providing valuable insights into Türkiye’s evolving arbitration landscape.
Recent Developments in Investment Treaty Arbitration
Signature of a New Bilateral Investment Treaty
On 22 April 2024, the Agreement on the Reciprocal Promotion and Protection of Investments between Turkey and Iraq was signed.
Disputes
2024 has been a somewhat eventful year for both Türkiye and Turkish investors, marked by several significant developments in international investment arbitration.
The year saw the first publicly known arbitration case filed under the Malta-Turkey BIT. On 25 October 2024, ENCORE Investment Group Limited, a Maltese investor, initiated arbitration proceedings against Türkiye at the International Centre for Settlement of Investment Disputes (ICSID). The investor alleged multiple breaches of the treaty, including a claim of denial of justice.
Turning to Turkish investors’ activity abroad, the year began with three entities affiliated with Kentkart Global, a Turkish company, filing arbitration claims against Serbia. On 1 April 2024, the claimants initiated proceedings under the Serbia-Turkey BIT at the ICSID. The investors alleged breaches of the treaty’s provisions on expropriation, fair and equitable treatment, and the umbrella clause.
Subsequently, on 20 May 2024, Lotus Proje Akaryakıt Enerji Madencilik Telekominikasyon İnşaat Sanayi Taah. Ve Tic. A.Ş., a Turkish investor, initiated arbitration against Turkmenistan at ICSID. The claim was brought under the Energy Charter Treaty and reportedly stemmed from the dismissal of the earlier Lotus Holding v. Turkmenistan (1) arbitration, which had been filed by the claimant’s Turkish parent company. Unlike the prior case, which relied on both the ECT and the Türkiye-Turkmenistan BIT (1992), this newly filed arbitration exclusively invoked the ECT.
Awards
On 13 November 2024, a Paris-seated ICC tribunal ordered Georgia to pay Enka Renewables $383.2 million in damages for terminating a contract to construct the Namakhvani hydroelectric power plant in western Georgia. The arbitration arose from an April 2021 investment contract governing Enka’s $800 million project. Local protests over environmental and safety concerns led to a government moratorium in 2020, prompting Enka to terminate the contract in September 2021, citing force majeure and breach of terms. The award includes $270 million for the project’s fair market value, $52.4 million in tax gross-up, and other costs, with interest. While Georgia’s Prime Minister confirmed the award, he stated that the dispute remains ongoing. Enka filed for enforcement in the US on 16 January 2025, citing Georgia’s non-compliance.
Court Decisions
On 23 January 2024, the Paris Court of Appeal dismissed Libya’s partial set-aside request regarding a jurisdictional award in Ustay Yapi v. Libya. The court upheld the ICC tribunal’s jurisdiction under the Libya-Turkey BIT (2009), affirming that Turkey’s 2011 notification of the BIT’s ratification was valid and that the treaty was in force. Libya’s arguments concerning the Settlement Agreement’s validity were rejected, and the court confirmed the tribunal’s jurisdiction ratione temporis, as the dispute arose after the BIT’s entry into force. Additionally, the court dismissed Libya’s claims regarding the treaty’s legality requirement, the Salini Test, and the Most Favored Nation (“MFN”) clause, validating the tribunal’s decisions across all three construction projects.
On 9 October 2024, the French Cour de Cassation annulled a Paris Court of Appeal judgment that had enforced a 2019 treaty award in Etrak v. Libya. The cassation court identified contradictions in the appellate court’s jurisdictional analysis, particularly regarding whether a settlement agreement from a pre-2011 investment dispute qualified as directly related to earlier activities under the Libya-Turkey BIT. The court ruled that a new dispute arising after the BIT’s entry into force could not directly relate to earlier investments as required by the treaty, remanding the case for rehearing.
On 8 November 2024, the ICSID tribunal in Bayindir v. Pakistan (2) upheld its jurisdiction. The case, initiated in 2021 under the Pakistan-Turkey BIT (1995), concerns unresolved accounts following the termination of a 1997 motorway construction contract. The tribunal found that the actions of Pakistan’s National Highway Authority were attributable to the state under Article 8 of the ILC (International Law Commission) Draft Articles on Responsibility of States for Internationally Wrongful Acts. This decision contrasts with a 2009 ICSID ruling in Bayındır v. Pakistan (I), which dismissed Bayindir’s claims by finding the contract termination justified.
Commercial Arbitration – Court Judgements
This year was relatively silent in terms of judicial developments in commercial arbitration. While the number of arbitration-related cases reached a record high in Turkish courts, the majority of the decisions largely reaffirmed previously established judicial positions, offering limited innovation or substantive change. However, two notable judgments merit attention are summarised below.
Arbitration Agreements in Expired Contracts
The General Assembly of Civil Chambers of the Court of Cassation, in its decision numbered 2023/103, 2023/1185, in Alerta v. LG addressed whether arbitration clauses in expired agreements can apply to ongoing relationships resumed de facto. The Court of Cassation held that the continuation of a contractual relationship in practice after the expiration of an agreement does not extend the arbitration clause unless the parties explicitly manifest their consent to arbitrate.
The dispute arose out of a distributorship agreement signed between a supplier and a distributor. The distributor filed a claim before the Istanbul 18th Commercial Court of First Instance (“First Instance Court”), asserting that the distributorship agreement had been rightfully terminated due to the supplier’s breach and sought portfolio compensation. The supplier argued that the parties had signed three distributorship agreements, all containing arbitration clauses referring disputes to the Korean Commercial Arbitration Board (KCAB) under Korean law. It further claimed that after the expiration of the last agreement, the parties continued their relationship under the same terms, including the arbitration clause. Based on this, the supplier raised a preliminary objection, asserting that the First Instance Court lacked jurisdiction.
The First Instance Court agreed, finding that the parties had effectively transformed the distributorship agreement into an indefinite-term agreement by continuing their relationship after the contract’s expiration. The court concluded that the arbitration clause remained valid and declined jurisdiction. The distributor’s appeals were initially dismissed by the Regional Court of Appeals.
Upon further appeal, the 11th Civil Chamber of the Court of Cassation examined whether the arbitration clause in the expired agreement was applicable. The Court of Cassation noted that the last agreement, dated 1 January 2008, had been explicitly limited to a two-year term, terminating unless renewed by mutual agreement 30 days before expiration. It found no evidence of such renewal or explicit consent to extend the arbitration clause. While the parties continued their distributorship relationship until 2017 without executing a new agreement, the Court concluded that this de facto continuation did not imply acceptance of all terms in the expired agreement, particularly the arbitration clause.
The Court emphasized the principle of separability, stating that an arbitration clause is independent of the underlying contract. For an arbitration agreement to be valid, the parties must express clear and unequivocal consent to arbitrate. It held that the absence of explicit agreement to renew the distributorship contract or its arbitration clause rendered the arbitration agreement inapplicable to the ongoing relationship.
The First Instance Court resisted the revocation decision upon remand, maintaining its prior ruling. However, the General Assembly of the Court of Cassation ultimately overruled this decision, affirming that the continuation of the distributorship relationship without a new written agreement did not extend the arbitration clause.
Interim Injunctions in Arbitrations Seated Outside of Türkiye
The Istanbul Regional Court recently addressed the role of Turkish courts in granting and overseeing interim injunctions in arbitrations with foreign elements.
The dispute arose from a contract for work, where a subcontractor (claimant) provided bank guarantee letters to the contractor. Claiming that the contractor failed to make payments and attempted to liquidate the guarantees despite owing millions of euros, the plaintiff sought an interim injunction from the Istanbul First Instance Court. The plaintiff argued that the contractor had been declared bankrupt, had no valid address in Türkiye, and continued efforts to liquidate the guarantees. Istanbul First Instance Court granted the injunction, citing Article 6 of the International Arbitration Law (“IAL”), which permits Turkish courts to issue interim measures in international arbitration cases.
The contractor objected, arguing that the subcontractor failed to complete the work, the guarantees were validly triggered, and the IAL did not apply as it was not chosen by the parties. The Istanbul First Instance Court held that objections to the injunction should be resolved by the arbitral tribunal, as the plaintiff had initiated arbitration proceedings before the Vienna International Arbitration Centre (VIAC).
On appeal, the Istanbul Regional Court clarified that the IAL applies to arbitrations with foreign elements only if:
- The seat of arbitration is in Türkiye or;
- The parties choose the IAL.
However, Articles 5 and 6 of the IAL, which govern interim measures, are exceptions and apply regardless of these conditions. The Court emphasized that interim injunctions are provisional and cannot be enforced in Türkiye if granted by foreign tribunals. Therefore, Turkish courts retain jurisdiction to grant and hear objections to interim measures, even in arbitrations seated outside of Türkiye.
This decision reaffirms the pivotal role of Turkish courts in safeguarding parties’ rights in international arbitration, particularly regarding assets located in Türkiye.
ABOUT THE AUTHORS
Bilge Kağan Çevik is a senior associate at Baysal & Demir with experience of high-value cross-border disputes, many of which involve multiple parties and jurisdictions. He advises and represents clients in international commercial arbitrations across various sectors, including construction, insurance, and financial services. He has experience of acting under major arbitration institutions under different applicable laws, including English, Swiss, German, and Turkish law. He has experience of representing clients in the recognition and enforcement of foreign arbitral awards in Turkey.
Elif Kapısız is a Turkish-qualified lawyer and a recent graduate of the LL.M. in International Dispute Settlement (MIDS). She obtained her LL.B. in Istanbul, graduating from Galatasaray University Law School. Additionally, she pursued an LL.M. degree in private law at the same institution, with her thesis focusing on international investment arbitration. Her professional focus encompasses international commercial arbitration, investment arbitration, and commercial litigation. She provides legal counsel to major local and international companies regarding construction, infrastructure, shipping, manufacturing, and banking sectors, offering comprehensive assistance on a diverse array of legal matters.
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