Dispute Resolution Clause
"How should dispute resolution clauses be drafted for Turkish contracts?"
Quick Answer
Effective dispute resolution clauses clearly choose (i) court jurisdiction or arbitration, (ii) governing law, (iii) seat/place of arbitration (if arbitration), (iv) rules/institution (e.g., ISTAC Rules), (v) number of arbitrators, (vi) language, and (vii) service/notice mechanics. Istanbul Arbitration Centre (ISTAC) is a commonly used institutional option for Turkey-related commercial disputes.
Dispute Resolution in Turkey
A dispute resolution clause is the contract term that determines how disputes will be resolved—typically through Turkish courts, arbitration (institutional or ad hoc), and/or a pre-step such as negotiation/mediation. A well-drafted clause reduces uncertainty about forum, timing, cost, and enforceability.
Key Points to Remember
- Mandatory mediation may be a pre-condition for filing a lawsuit in Türkiye for certain types of disputes (commonly many commercial receivables/compensation claims). The scope depends on the claim type and venue.
- Commercial disputes are generally handled by specialised commercial courts (or designated commercial benches), depending on the subject matter and location.
- Arbitration agreements are recognised under Turkish law, and arbitral awards may be enforceable subject to applicable enforcement/recognition rules and public policy review.
- Türkiye is a party to the New York Convention, which supports cross-border recognition and enforcement of foreign arbitral awards (subject to conditions/exceptions).
Sample Clause (Illustrative)
"Any dispute, controversy or claim arising out of or relating to this contract, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration in accordance with the Istanbul Arbitration Centre (ISTAC) Arbitration Rules. The place of arbitration shall be [Seat, e.g., Istanbul, Turkey]. The language to be used in the arbitrational proceedings shall be [Language, e.g., English]. The arbitral tribunal shall consist of [Number, e.g., one or three] arbitrators. The governing law of the contract shall be the substantive law of [Jurisdiction]."
Choosing the Right Approach
Choosing litigation vs arbitration depends on enforceability needs, confidentiality, speed, interim measures, and cost. Avoid “pathological” or unclear hybrid clauses (e.g., mixing exclusive court jurisdiction with mandatory arbitration) and clearly define any escalation steps (negotiation → mediation → arbitration/court) with time limits.
In practice, include a checklist: (1) governing law, (2) forum (court or arbitration), (3) seat/place (for arbitration), (4) institution/rules, (5) number of arbitrators and appointment method, (6) language, (7) interim relief, (8) service/notice addresses, and (9) allocation of costs/fees.
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