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The most frequently asked question about the Istanbul Arbitration Centre is "Are Parties able to determine the seat of the arbitration as somewhere other than Istanbul?" The answer to this question is very clear in the ISTAC Rules, Article 23 of which provides that Parties are free to determine the seat of the arbitration.
Therefore, once the Parties have decided that their dispute shall be settled under the ISTAC Arbitration Rules, they may choose any city as the seat of the arbitration. The Parties can thus benefit from the fast, efficient and inexpensive ISTAC procedure and determine anywhere they choose as the seat of the arbitration. For example, parties who reside in Ankara, Gaziantep or Kocaeli could agree that their dispute be settled under the ISTAC Rules in the city where they reside.

In practice, if the parties chose the city they live in as the seat of the arbitration, does this actually mean that they can go through with the proceedings and get an award without having to come to Istanbul even once? If parties have determined the seat of the arbitration outside of Istanbul, the ISTAC Rules allow the parties to commence the arbitration, communicate their statements and other documents, and to hold all hearings and other procedural activities in the place that is determined as the seat of the arbitration. Parties are thus able to hold the proceedings in a location that is best suited to them, which can subsequently save significant amounts of time and money.

Therefore, a Claimant does not have to come to Istanbul or to the ISTAC Building to commence arbitral proceedings. The claimant can easily commence the arbitration by submitting their Request for Arbitration and other relevant documents. The arbitration fees can be paid just as easily, via bank transfer from the city in which the claimant resides. Arbitration can also be commenced by completing the online form on the ISTAC website and payment can be made by credit card. Thus, arbitration proceedings can be commenced in the comfort of the Claimant's own home/office.

After the arbitration proceedings have commenced, the parties may send their statements, evidence and other documents to ISTAC via any courier service without actually having to come to ISTAC. The parties and arbitrators may even agree that all correspondence can be made via e-mail. If the Parties did not agree on the seat of the arbitration, the seat shall be Istanbul pursuant to the Rules.

Even if the seat of the arbitration has been determined as Istanbul or somewhere else, the Sole Arbitrator or the Arbitral Tribunal may, after consulting with the parties, decide to conduct the hearings and meetings at any location other than the seat of the arbitration. For example, in order to save time and/or costs, it may be agreed that a hearing will take place at the place of residence of one of the parties, their representatives, witnesses or experts. However, if this is the case, this does not change the seat of the arbitration. This only allows conducting the hearings or siting visits at a place other than the seat of the arbitration. Consequently, the seat of arbitration, which does not show only geographical place, has legal implications on the enforcement and annulment of the arbitral award.

It is also possible for parties to agree on a city that is outside of Turkey to be the seat of the arbitration. Parties who agree for their disputes to be settled under the ISTAC Rules may determine a city outside of Turkey as the seat of the arbitration. For example, when parties incorporate ISTAC arbitration clause to their contract, they may agree that the seat of the arbitration shall be London, Paris or Geneva. If one of the parties resides in Turkey and the other one resides in another country, these parties may prefer that the seat of the arbitration shall be a place other than Turkey. In such case, unless otherwise agreed by the parties, hearings may be held in the country determined as the seat of the arbitration.

Parties are also free to determine the language of the arbitration Whether the seat of the arbitration is in Turkey or not, parties are free to determine the language of the arbitration as they want As with the seat of the arbitration, the agreement of the parties is paramount in respect of the language of the arbitration. In international arbitration, choosing the language of the arbitration is very important for the parties in terms of monitoring the proceedings, legal representation and submitting documents without the requirement for translations. For this reason, parties may freely determine the language of the arbitration. However, in the absence of such agreement between the parties, the Sole Arbitrator ot Arbitral Tribunal shall determine the language of the arbitration considering all of the relevant circumstances. While determining the language of the arbitration, it will be advisable to take into account the language of the contract and correspondences. In certain cases, the language of the arbitration may be more than one language. Unless agreed otherwise, any document that’s in another language than the language of the arbitration is submitted in the language of the arbitration. However, if the arbitrators and the other party are able to understand the documents in their original languages without the need for a translation, it would save time and money not to require the documents to be submitted together with a translation. Even if there are no requirements set out by the ISTAC Rules regarding the authority to make a translation and its approval , this would save time and money.

In conclusion, the Istanbul Arbitration Centre is not just for arbitrations held in Istanbul, parties may freely determine the seat of the arbitration at any city other than Istanbul. The ISTAC Rules allow parties to commence and complete the arbitration without having to come to Istanbul. Parties may even agree that the seat of the arbitration shall be in a foreign country.

 

In Istanbul Arbitration Centre Arbitration Rules (hereinafter called “the Rules”), certain types of pleadings that were not defined in the Turkish Civil Procedure Code to commence the arbitration proceedings are defined. The first one of which is called The Request For Arbitration. According to the Article 3, subparagraph (d) of the Rules, which defines the types of pleadings, The Request for Arbitration is the pleading that starts the arbitral proceedings, of which the contents are described in The Rules.

Contents of a Request for Arbitration is listed under the article 7 of the Rules. It is apparent from the Article 7 that a claimant who files a request for arbitration doesn’t have to present all of its arguments, evidence and legal grounds for all of its claims. The scope of the request for arbitration should be wide enough to briefly inform the respondent on what the case is about. For an arbitrator, the scope of the Request For Arbitration must be wide enough to prepare a Terms of Reference. As for the Board of Arbitration, a Request for Arbitration should allow the Board to designate arbitrator(s) that are compatible with the characteristics of the dispute at hand in the cases of the Board, appointing the arbitrator(s). It is safe to say that the scope of the Request for Arbitration is limited to these goals mentioned above.

Answer to a Request for Arbitration should be made in 30 days, beginning from the date that the respondent is notified of the Request for Arbitration. The Answer to the Request for Arbitration is defined under Article 3(e) of the Rules; while the contents of an Answer to the Request for Arbitration is listed under Article 8. When analysed, it appears that the contents of a Request for Arbitration is the same as the contents for an Answer to the Request of Arbitration. The scope of an Answer to the Request for Arbitration can be limited to the Request itself, since it’s an “answer” to the request.

In principal, it is anticipated in the Rules that the proceedings commence with the Request and proceeds with the Answer. However the claimant may also commence the arbitration by submitting its Statement of Claim. There are special provisions for this issue in the Articles 7 (7) and (8) of the Rules. If the claimant commence the arbitration by submitting a Statement of Claim, the respondent has the right to choose under the Rules. The respondent may submit either its Answer to the Request for Arbitration or its Statement of Defense in 30 days, beginning from the date of the notification of the Statement of Claim. What is important here is that, both the Statement of Claim and the Statement of Defense include the content described in the article 7 and 8 of the Rules. In these statements, parties must present all of their claims, defenses, arguments and evidence.

An explanation should be made as to why the Rules distinguish the Request for Arbitration/Answer to the Request for Arbitration and the Statement of Claim/Statement of Defense.
Primarily, the advantages of commencing an arbitration by submitting a Request for Arbitration should be pointed out. The scope of a Request for Arbitration/Answer to the Request for Arbitration is rather narrow as the parties do not have to include all of their evidence and their finalised relief sought in detail. The parties will present as much of their claims and defenses in their Statement of Claim and Statement of Defense as needed for the sole arbitrator/arbitral tribunal to decide. The limited content of a Request for Arbitration allows the proceedings to commence in a short amount of time. In return, an Answer to the Request for Arbitration can also be prepared quickly. Thus, an arbitration proceeding can be started in just one day in the event of the statute of limitations running out.

Especially in complicated disputes which have a broad scope, expert opinions and witness statements might be needed. It might take months for the claimant to gather all the relevant information and documentation. Even the counsels of the parties might take a while to grasp the characteristics of the dispute at hand. In the case of an arbitration being commenced by a Request for Arbitration, there is no need to wait for the aforementioned preparations. Therefore, it is possible to save time and money by commencing the arbitration by submitting a Request for Arbitration.
By seeing each other’s Request for Arbitration or Answer to the Request for Arbitration, the parties get to know each other’s claims and defenses roughly and the possibility of a settlement increases. Then, the parties are able to make more realistic risk assessments. Any problems in regards to the jurisdiction and arbitration agreement will come up and this will  allow the arbitrator(s) to solve such problems before the parties submit their actual Statement of Claim/Statement of Defense (See Article 9 of the Rules, Art.9). Consequently, this will allow parties to save time and money.

If the Statement of Claim and the Statement of Defense is submitted after the formation of the Tribunal, the parties will be able to draft their statements knowing what kind of culture of law the arbitrator(s) originate(s) from. Also, the procedural rules will be set, therefore the parties will know what procedural rules the arbitrators are going to apply.

Commencement of an arbitration by submitting a Request for Arbitration will cause the span of the arbitration to be longer. In such arbitration proceedings, first the Request for an Arbitration will be submitted; following by an Answer to the Request, then the tribunal will be formed and the terms of reference and the procedural timetable will be drafted and after that, the parties will submit their statements of claim/defence with their actual claims, defences and arguments. Then, the second statements will be submitted. In a proceeding like this, it can be argued that the time spent on waiting for the Answer to the Request for Arbitration is a total loss.

In conclusion, if the benefits mentioned above are not present in the case at hand, commencing an arbitration by submitting a Request for an Arbitration instead of a Statement of Claim might only cause the parties to waste time. Especially, if the case at hand does not require a long preperation time, it is much more time efficient to commence an arbitration by submitting directly a Statement of Claim.

Parties, who have agreed to resolve disputes through arbitration, can, if the need should so arise, be granted legal protection from local courts until the constitution of the arbitral tribunal. Before the Institutional Arbitration Centers established emergency arbitrator rules, parties who required interim measures to be put in place before the arbitral tribunal was constituted, had to seek such measures from the local courts. However, once emergency arbitrator rules were established, parties were given an alternative option.

The Istanbul Arbitration Center (ISTAC) is an Institutional Arbitration Centre which has released it’s “Emergency Arbitrator Rules”. (Rules Annex-1) An Emergency arbitrator is a temporary legal protection mechanism which can be used by parties who so require it under the ISTAC Rules. Article 31 of the ISTAC rules stipulates that unless parties agree otherwise, in the event that there is a need for temporary legal protection before the arbitrator/arbitrators are appointed, they can request an Emergency Arbitrator. Therefore, unless the parties have agreed in their arbitration clause or arbitration agreement that they cannot use an emergency arbitrator, the parties are entitled to seek temporary legal protection and request an emergency arbitrator. Again, as part of the rules, parties may, should they wish to do so, include an “emergency arbitrator provisions shall not apply” provision into their arbitration clause/agreement. Consequently, parties who do not wish for the Emergency Arbitrator provisions to be applied to their dispute, should clearly state this in their arbitration clause.

The parties’ use of an Emergency Arbitrator shall not prevent any party from seeking temporary legal protection from a local court pursuant to Article 1.3 of the ISTAC Emergency Arbitrator Rules. Therefore, parties may apply to any competent judicial authority at any time prior to the making of an application for such measures, and thereafter.  Furthermore, if the parties have applied to a court for interim measures, this shall not subsequently mean that the parties have renounced their right to use the Emergency Arbitrator provisions.

A party wishing to have recourse to an emergency arbitrator shall submit its request, in the language stipulated as the language of the arbitration (in the absence of any such agreement, in the language of the arbitration agreement), to the Secretariat and pay the application fee pursuant to the provisions set forth in Article 2 of the ISTAC rules. The ISTAC President shall then appoint an emergency arbitrator within two working days from the Secretariat’s receipt of the Application. (art.3)

Unless otherwise agreed by parties, an emergency arbitrator shall not act as an arbitrator in any arbitration proceedings which relate to the dispute that gave rise to the Emergency Arbitrator Application. (art. 3) The emergency arbitrator shall act fairly and impartially. Any party that wishes to challenge an emergency arbitrator must do so within three days from the date of receipt of the appointment of the emergency arbitrator.

The seat of the arbitration shall be the place of the temporary legal protection proceedings; in the absence of such place, it shall take place in Istanbul pursuant to Article 6 of the ISTAC Rules. The decision on the Application shall be made within seven working days from the date on which emergency arbitrator received the file.

As with local courts, Emergency Arbitrators may set a security deposit as a form of emergency relief. The most noteworthy aspect for the party making a request for an emergency arbitrator is that within fifteen days after the application, either the Request for Arbitration or the Claimant’s Memorial must be submitted to the Secretariat. If this is not complied with, the President shall relieve the emergency arbitrator of their duties. (art.2.5) The Turkish Code of Civil Procedure (no. 6100) also includes a similar provision. (Code of Civil Procedure art.397).

1.Introduction

The Istanbul Arbitration Centre (ISTAC) introduced its long-awaited arbitration rules (ISTAC Rules) in 2015 and the Rules have received good comments for its innovative nature. Among many other welcomed provisions, the duty to act in good faith is included as a general principle to be abided by during the arbitral proceedings conducted under the ISTAC Rules. This duty is stipulated in Article 22 (2) of the Rules as “[a]ll participants in the arbitral proceedings must act in good faith.”
Although this principle is interpreted and understood differently in many jurisdictions, it can be generally defined as “the duty to employ honest, loyal and fair behaviour and that that behaviour should be absent of malice or any intention to deceive.”[1] The broad definition of good faith encompasses both substantive and procedural good faith. The substantive good faith is to be followed when the parties are exercising their rights arising from the applicable substantive law. On the other hand, the procedural good faith deals with the acts of the participants in relation specifically to the proceedings.
In this article, procedural good faith will be discussed within the context of the ISTAC Rules. After elaborating on the inclusion of such duty in arbitration rules, examples that may be classified as breaches to the duty of good faith will be analysed. In the last chapter, the consequences of the violations to the said duty will be reviewed.

2.The brief review of the institutional arbitration rules regarding the good faith principle

Most institutional arbitration rules remain silent about the duty to act in good faith. Apart from the ISTAC Rules, only two include explicit references to the good faith principle. These are the Swiss Rules of International Arbitration (Swiss Rules) and the London Court of International Arbitration Rules (LCIA Rules).
In the Swiss Rules, the duty to act in good faith is included under the general provisions applicable to the arbitration proceedings, stating that "[a]ll participants in the arbitral proceedings shall act in good faith […]"[2]
In the LCIA Rules, there are two references to the good faith principle compared to Article 22 (2) of the ISTAC Rules, one in Article 14 (5) and the second one in Article 32 (2). In contrast to the Swiss Rules and the ISTAC Rules, the LCIA Rules list the participants that are bound to act in good faith in the proceedings rather than introducing a general duty applicable to all participants. As per the relevant articles of the LCIA Rules, the participants to the proceedings who are under the duty to act in good faith are the parties, the LCIA Court, the LCIA, its Registrar and the arbitral tribunal. As a result, the LCIA Rules have a more restrictive scope regarding the good faith principle, whereas the Swiss Rules and the ISTAC Rules cover all participants in an arbitral proceeding.

3.The characteristics of the duty to act in good faith

3.1. Which participants are under the duty to act in good faith?

The outstanding feature of the ISTAC Rules is that all participants, without giving any specific list, are under the duty to act in accordance with the good faith principle.
The wording of "all participants" as stated in Article 22 (2) of the ISTAC Rules reflects an essential characteristic of this duty. The only provision of the ISTAC Rules that uses the term "all participants" is Article 22 (2), in relation to the duty to act in good faith. It goes without saying that the parties, their counsel and the arbitral tribunal are the main participants to the proceedings thus they are bound with the good faith principle. In addition to those and in accordance with the usage of the word "all participants", the duty to act in good faith can be extended to other participants in the proceedings, i.e. expert witnesses, fact witnesses and, for instance, even the court reporter during the evidentiary hearing.
Nevertheless, the inclusion of this duty does not aim to create a legal binding duty over the participants that are not substantively dealing with the subject matter of the case but rather to introduce a general duty that provides the arbitrators with a specific reference point to rely on, especially in cases of behaviour of the parties or their legal representatives that would appear to be in violation of good faith. The same aim is also acknowledged in the Swiss Rules as reinforcement to point out that "the authority of the arbitral tribunal to remind the parties that not everything is admissible on the arbitral battlefield."[3] Thus, what should be understood by the good faith principle as portrayed in the ISTAC Rules is that it creates a framework for the arbitral proceedings rather than a source of liability.
As mentioned above, arbitral tribunals also fall under the scope of this duty. Their duty to act in good faith is closely linked to their general duty to ensure equal treatment of the Parties and to guarantee their right to be heard, and to avoid contradictory behaviour. Thus the arbitral tribunals are to act in compliance with the good faith principle, regardless of an explicit rule establishing such duty under the applicable arbitration rules.

3.2. Which acts are deemed to be violations of the duty to act in good faith?

Actions that give rise to violations of the duty to act in good faith are mostly triggered by the behaviour of counsel in the arbitration proceedings. It is frequently experienced in practice that a counsel uses delay tactics, for example, by requesting an extension without any justifications and objective grounds. Another example is when a party does not participate in the beginning of the proceedings but decides to get involved in a later stage, again without any justification and with an aim to delay the proceedings. One can also argue that a counsel is not acting in good faith, if a challenge to an arbitrator is made in the later stage of the proceedings although they were aware of the reasons to challenge in an earlier stage. Other examples are the constant procedural objections that serve no real purpose or, worse, challenging the arbitrators with non-realistic reasons. These acts, among many others, that aim to obstruct an efficient and fair arbitral proceeding do fall under the scope of the duty to act in good faith.
Arbitral tribunals must also refrain from enacting contradictory behaviours to a party's detriment as these acts may violate the parties' right to be heard as well as their explicit duty to act in good faith as per the ISTAC Rules. For example, if the arbitral tribunal gives an extension to one party, however does not grant extension to the other party which bases its request on the similar grounds may constitute the violation of the good faith principle. One example of contradictory behaviour taken from Swiss case law is where the arbitral tribunal renders an award on the merits including a ruling on costs without waiting for the parties' submissions on costs, although the arbitral tribunal had previously indicated that it would not issue any ruling on the costs without further briefing from the parties. The Swiss Federal Tribunal explicitly found such behaviour to violate the arbitral tribunal's duty to act in good faith.[4]
An expert witness can also obstruct the conduct of the proceedings in a fair and efficient way. For example, an expert witness who deliberately follows the counsel's instructions in his/her report without giving any scientific or objective grounds can be deemed to be acting in violation of the good faith principle.

3.3. What are the consequences of violations of the duty to act in good faith?

There are two consequences of a violation of the duty to act in good faith: allocation of costs and the setting aside of the award.
As per Article 41 (4) of the ISTAC Rules, the arbitral tribunal is free to take into consideration all relevant facts and circumstances, including the parties' efforts to conduct the arbitration in an expeditious and cost effective manner. In accordance with this rule, the arbitral tribunal is entitled to allocate the costs of the arbitration proceedings consistent with the parties' acts, including the acts of their expert witnesses and fact witnesses.
For instance, if a party repeatedly requested interim measures with an aim to delay the proceedings and without any justifiable grounds, this act is deemed to be in violation of the duty to act in good faith. While allocating the costs of the proceedings, the arbitral tribunal may take this behaviour into consideration even if, for example, the same party prevailed on most of its claims on the merits. With regard to the acts of expert witnesses, their failure to act in good faith will also be taken into account by the arbitral tribunal while allocating the costs against the party having filed the evidence of the relevant expert.
The most severe consequence of a violation of the duty to act in good faith is the setting aside of the arbitral award. The International Arbitration Act of Turkey numbered 4686 (MTK) states that an arbitral award shall be set aside if the equal treatment of the parties is not respected during the proceedings or the award is against the public policy.[5] Pursuant to MTK, the grounds for setting aside an award are listed exhaustively and violation of the duty to act in good faith is not listed therein.
Acts that are described as the violations to the equal treatment or public policy can also fall under the violation to act in good faith. However only the acts that reach to the degree of violation to equal treatment of parties or public policy will lead to the setting aside of the award.

4.Conclusion

The duty to act in good faith is a fundamental principle to be respected both in litigation and arbitration. In contrast to litigation, the lack of any explicit rules on the good faith principle in arbitration rules is striking. The ISTAC Rules fill this void by introducing a general duty to be respected throughout the arbitral proceedings. Although it is accepted in practice that the participants are bound with this duty regardless of an explicit rule, Article 22 (2) of the ISTAC Rules is a useful tool for the arbitral tribunal to rely on in cases where it faces such violations.