Istanbul bids for leadership in international arbitration

ANKARA - Anadolu Agency

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Istanbul is making a bid to become a regional leader in the trillion-dollar business of legal arbitration, used for major corporate litigation or disputes between sovereign states.

Arbitration provides an alternative to years of expensive litigation in courts.

“There is definitely a great chance for an international arbitration center in Istanbul to be successful, but it will take time,” said London-based international arbitration expert Gaetan Verhoosel.

The stakes are high. The total value of global arbitration claims and counterclaims hit $1.7 trillion in 2014, according to The Global Arbitration Review. The review sees claims growing larger and increasing in volume.

But there are concerns in the arbitration field about whether Istanbul can create an arbitration center that will compete with the current regional leaders in Singapore and Dubai.

Provisions for binding arbitration as an option in disputes are now employed in virtually every type of contract, as well as in international treaties between sovereign nations, said Thomas J. Stipanowich, a professor of law at Pepperdine University in California.

On Nov. 20, Parliament passed a law laying the legal framework for the center; there is to be one forum for domestic disputes and another for international arbitration. Parliament also adopted a law allowing arbitration in a wide variety of legal disputes. Funding for the center will be provided by the Prime Ministry for two years.

There are some challenges in Istanbul’s ability to attract arbitration proceedings. “It is essential that the arbitration center demonstrates its independence,” said Verhoosel. “It must build up its credentials in terms of international capability and independence.”

The choice of arbiters is also crucial to the success of an arbitration center, adds Turkish arbitration expert Leyla Orak Çelikboya in a note published in July 2014.

The ability for the legal system, in which the arbitration center is based, to enforce its decisions is also an important factor, Çelikboya added.

The biggest problem is bandwidth, says Karl Hopkins of the international law-firm Dentons.
“The number of lawyers who are up to the task is relatively small,” he added.

There are currently some really good Turkish firms, Hopkins says, but a successful international arbitration center must bring together a wide array of talent.

“The autonomous character of an institution, the appointment of impartial and independent arbiters, as well as the arbitration-friendliness of the applicable legislation and the general practice of the courts play an important role,” Çelikboya added.

The success of such a center could have an impact on Turkish businesses. As the publication Legal 500 points out in a recent assessment of the Turkish judicial system, the workload of the courts is strained.
 
Arbitration would provide an opportunity for corporations to deal with their issues away from the courts, and to resolve them faster.

Still another advantage of arbitration for business: It is not subject to appeal. So proceedings cannot drag on for many years through a lengthy appellate process.