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Sponsored briefing: Istanbul Arbitration Centre (Istac) and some key numbers

Today if you travel to east from Europe on board a plane, it is most likely that you will make a transit connection in Istanbul Airport, which is now a hub. As Istanbul is located in a unique geography and joins two continents, it is very likely that Istanbul will be similarly a hub in the field of law, with a particular focus on arbitration.

Backed by its modern international Arbitration Act, Turkey has also had a modern arbitration centre since 2015. Founded and launched in 2015, the Istanbul Arbitration Centre (ISTAC) has made great advances to turn Istanbul into a significant arbitration centre that unites East and West.

Turkey has attracted investors for years, thanks to its large and young population and its geographical location. However, it is unfortunate that it has so far failed to create the kind of secure legal environment that investors seek. This may change, however, if ISTAC starts to shine in the near future; but why should a European law firm give consent to ISTAC arbitration instead of ICC in a contract it signs with a Turkish entity?

Before anything else, it should be noted that the ISTAC international Board is composed of well-known arbitration experts; namely, Prof. Ziya Akıncı (President), Prof. Jan Paulsson, Dr. Hamid Gharavi, Prof. Bernard Hanotiau, and Att. Yasin Ekmen. These internationally recognised names are second to none in terms of their knowledge and experience in arbitration, and they represent an outstanding benchmark for ISTAC’s credibility.

Furthermore in our article, we will try to disclose some key numbers pertaining to ISTAC to lay out its credibility. Here are some:

The number of cases increases yearly. Below is a table showing the increase in the number of cases handled by ISTAC over the years, and this shows the increased trust that the practice has in ISTAC:

2018 2019 2020 2021
14 21 52 94

It is evident that the number of cases has nearly doubled every year, they reached 94 cases in 2021 with a total value of nearly US$1bn.

If we look at the types of disputes in 2021, the first four categories consist of information technologies (24%), and sales contracts (18%) and energy (13%) and construction (12%).

International Practice: Likewise, 70% of the disputes in 2021 are domestic ones while 30% are international. 70% of the parties are Turkish companies only to be followed by Italian and Hong-Kong-based firms.

Specialised arbitrators: The majority of lawyers who serve as the sole arbitrator/umpire in ISTAC arbitration cases are lecturers, mostly specialised in commercial law, law of obligations and similar disciplines, nearly 40% of whom are women.

It is obvious that this generally ensures a high-quality trial process. As a matter of fact, cases filed with a view to overturn an ISTAC arbitration award are very rare, and parties generally comply with ISTAC awards. The table below shows the percentage of cases filed with a view to overturn an ISTAC award (by year):

2018 2019 2020 2021
15% 20% 10% 9%

It should be noted at this point that, so far, no ISTAC award has been overturned by the Turkish courts. Turkish courts have overturned all cancellation lawsuits brought against ISTAC awards. This is another benchmark that showcases the high quality of ISTAC awards.

An ISTAC trial is less costly compared to its peers. The cost of an arbitration case with a value of US$1m is around US$140,000 in arbitration cases with three arbitrators at the ICC (including arbitrator fees). This figure is only about US$40,000 in ISTAC trials. This particularly encourages Turkish parties to prefer ISTAC arbitration.

Recently, a Dubai-based multinational asked us why Turkish companies insisted on demanding that ICC arbitration should not be incorporated into contracts. We told them that they were actually avoiding high arbitration costs. An ISTAC arbitration case is 80% less costly, and both Turkish companies and their foreign counterparts can enjoy high-quality trial procedures (as described above), at the end of which they may reach settlement.

It should be additionally noted that ISTAC is not merely an arbitration centre; it also allows mediation pursuant to MED-Arb rules. As a matter of fact, there are disputes settled by means of mediation, launched pursuant to ISTAC’s Med-Arb rules.

Lastly, it should be emphasised that ISTAC also has fast-track arbitration trial rules to ensure a quick trial (the use of fast-track arbitration rules is 43% as of 2021). It also boasts an urgent arbitration institution that can render quick awards for temporary injunctions, etc within a few days. Moreover it is highly significant that extension is very rarely demanded in ISTAC trials.

Considering the fact that Turkey is also a party to the New York Convention, it can be seen that these awards may also be enforced in other jurisdictions as well.

To sum up, as our figures above also corroborate, ISTAC arbitration is more affordable compared to its peers, with high practice confidence and a high percentage of specialised people in sole arbitrator/umpire positions. Its awards are rarely reversed and are enforceable globally. This is the answer to the question we asked above: Why should a European law firm incorporate an ISTAC arbitration clause into an agreement?

We hope that disputes can be settled in Istanbul, with a fantastic view of the Bosporus and a fair and high-quality trial procedure.

For more information, please contact:

Att. Mehmet Selim Yavuz
Attorney-at-law and founding partner

Yavuz & Uyanık Law Firm,
Etiler Mahallesi Tepecik Yolu No:82 Dalmaz Konut Apt. K:3 D:5 34337 Etiler, Beşiktaş

T: +90 212 351 30 50