Recognition of Partial Arbitral Awards in Light of the Court of Cassation’s Decision Dated 11 June 2019

The Dispute

In the present case, both a preliminary agreement and a share purchase agreement concluded between the parties contained separate arbitration clauses. Relying on the arbitration clause in the preliminary agreement, the respondent initiated arbitration proceedings before the International Chamber of Commerce (“ICC”). The arbitral tribunal, however, not only addressed claims under the preliminary agreement but also rendered an award on claims arising out of the share purchase agreement and ordered the claimant to pay damages. Subsequently, the claimant commenced a second arbitration under the arbitration clause of the share purchase agreement. In its decision dated 12 May 2014, the ICC arbitral tribunal held that exclusive jurisdiction with respect to disputes arising from the share purchase agreement rested with the second tribunal. The claimant sought recognition of this ICC decision in Turkey, invoking the risk that the earlier award rendered in favor of the respondent under the preliminary agreement could at any time be subject to enforcement proceedings in Türkiye.

The respondent objected, contending that the decision whose recognition was sought concerned solely the tribunal’s jurisdiction, was therefore of an interim character, did not address the merits of the dispute, and thus could not produce res judicata or evidentiary effect. On this basis, the respondent maintained that the decision could not be recognized and that the claimant lacked legal interest.

The court of first instance concluded that the arbitral award did not constitute a final determination on the merits but was rather an interim ruling on jurisdiction. Holding that interim rulings are not susceptible to recognition, it dismissed the action for lack of legal interest.

On appeal, the Regional Court of Appeal emphasized that pursuant to Article 60 of PILPL, recognition and enforcement of arbitral awards presupposes that the award is either final or binding upon the parties. Since the decision at issue did not bear a finality endorsement and was not enforceable, and given its interim nature, the appellate court held that it could not be recognized, and rejected the appeal on the merits.

The Court of Cassation’s Assessment

The Court of Cassation framed the central issue as whether the arbitral award dated 12 May 2014, rendered in the second arbitration, was of a nature susceptible to recognition. Diverging from the first instance court and the Regional Court of Appeal, which had regarded the decision as merely an interim ruling not eligible for recognition, the Court of Cassation drew a distinction between interim measures and partial awards. It observed that interim decisions are rendered during arbitral proceedings in respect of procedural matters or provisional measures and do not resolve the substance of the dispute. By contrast, partial awards definitively determine an independent and severable part of the dispute.

In this context, the Court held that the ICC tribunal’s ruling conclusively resolved the jurisdictional controversy between the parties and therefore constituted a final determination on an independent aspect of the dispute. The continuation of arbitral proceedings does not detract from the enforceability of such a partial award; what is decisive is that the award definitively resolves a particular aspect of the dispute.

The Court of Cassation further addressed the standard governing recognition and enforcement. Referring to Article V(1)(e) of the New York Convention in conjunction with the relevant provisions of PILPL, the Court emphasized that the Convention requires arbitral awards to be “binding” on the parties, rather than “final” in the sense of domestic res judicata. According to the Court, the finality requirement historically applied in Turkish practice must, subsequent to Turkey’s accession to the New York Convention, be interpreted in accordance with the criterion of binding effect. In the case at hand, the ICC Arbitration Rules provided that arbitral awards are binding upon the parties, and this was corroborated by a written confirmation from the ICC. The award in question was therefore binding from the moment of its issuance.

Finally, the Court rejected the finding of the court of first instance and the Regional Court of Appeal that the claimant lacked legal interest. It held that legal interest in recognition proceedings must be interpreted broadly. Recognition of the partial award in Turkey would afford the claimant protection in prospective enforcement proceedings and permit reliance on the award’s res judicata and evidentiary effects. For these reasons, the Court of Cassation held that the partial arbitral award was susceptible to recognition, that the claimant possessed legal interest in seeking recognition, and accordingly quashed the judgments of the lower courts.

Conclusion

The decision of the Court of Cassation dated 11 June 2019 constitutes a precedent in Turkish law on the recognition of partial arbitral awards. The Court drew a clear demarcation between interim decisions and partial awards, affirming that partial awards are capable of recognition insofar as they conclusively determine an independent portion of the dispute. By privileging the criterion of binding effect under the New York Convention over the domestic requirement of finality, the Court adopted a modern and arbitration-friendly interpretation. Moreover, by adopting a broad construction of legal interest, the Court acknowledged the practical importance of recognizing partial awards to avert future disputes and enhance legal certainty.