Orçun Çetinkaya Speaks to Financier Worldwide About Turkish Litigation and Alternative Dispute Resolution

November 10, 2015

Interview first published in Financier Worldwide Magazine’s 2015 Annual Review of litigation and Alternative Dispute Resolution.  

Are you seeing any recurring themes in commercial disputes in your region? Do any particular industries or sectors seem to be playing host to a significant number of disputes?

Orçun Çetinkaya: The Turkish economy has fallen on hard times due to political uncertainty, with the US dollar and euro increasing against the Turkish lira, as well as wider regional unrest among the country’s neighbours. As a result, Turkish corporations have faced payment difficulties and are sometimes forced to downsize. Accordingly, the main recurring themes for commercial disputes in Turkey are dissipation of assets, suspension of bankruptcy and re-employment lawsuits. Enforcement of injunctions is also becoming more difficult. The textile industry is one of the leading sectors in this respect, with a significant number of commercial disputes.

What is your advice to companies on implementing an effective dispute resolution strategy to deal with conflict, taking in the pros and cons of mediation, arbitration, litigation and other methods?

Orçun Çetinkaya: We first recommend our clients keep their records properly, accurately and in a timely manner in order to obtain the best result from a possible dispute. We have received much feedback from our clients about the benefits of good recordkeeping as a tool to prove their claims or defences in various sectors, from construction to pharmaceuticals. Securing receivables or interests by a guarantee instrument – such as a bank letter – at the beginning of an agreement or a commercial relation is always advisable to prevent disputes arising at a later date.

In your experience, are companies in your region more likely to explore alternative dispute resolution (ADR) options before engaging in litigation? Are there any legal or procedural obstacles to a successful ADR process? 

Orçun Çetinkaya: ADR methods are not widely used in Turkey to resolve domestic commercial disputes. Domestic ADR methods were not well-determined up until the last five years. In addition, given that domestic commercial disputes generally do not involve significant amounts, ADR is not considered to be a cost-efficient method. However, Turkish tradesmen and companies prefer and are accustomed to taking recourse to international arbitration as a relief mechanism for international disputes.

How would you describe arbitration facilities and processes in your particular region of focus? To what extent is arbitration becoming the dominant method of resolving international disputes?

Orçun Çetinkaya: The first arbitration centre established in Turkey is part of the Istanbul Chamber of Commerce. Although the Istanbul Chamber of Commerce Arbitration Center was established in 1979, it has not become widely used and even domestic parties refer their dispute to international arbitration institutions. In this respect, since Turkey aims to become a regional financial hub and given that increased cross-border transactions in the Middle East will require international arbitration, Turkey recently established the Istanbul Arbitration Center (ISTAC). The new forum is intended to provide the necessary expertise, impartiality and independency to all parties. However, ISTAC’s impartiality, independency and autonomous character have been questioned from the early stages of its conception. Within this context, an annulment lawsuit was initiated before the Turkish Constitutional Court. The lawsuit claimed that the method for composing ISTAC’s general assembly damages its independence and impartiality. The lawsuit was ultimately dismissed. Only time will tell whether ISTAC will be widely used for all types of arbitration, regardless of whether a dispute is domestic or international. 

In your experience, what steps should companies take at the outset of a commercial agreement to manage disputes that may arise in the future? Is enough attention paid to dispute resolution clauses in commercial agreements, for example?

Orçun Çetinkaya: Parties should stipulate clear negotiation and mediation procedures as a precondition to engaging in litigation, should a dispute arise under their commercial agreement. Establishment of dispute adjudication or review boards can also assist parties to reach fair and acceptable settlements if conflict arises. However, parties must show all necessary attention and diligence not to miss a substantial matter. Obtaining external support is beneficial when drafting such a dispute resolution clause, particularly to assist with structuring and explaining the mechanism’s formation and procedural aspects. Nevertheless, well-drafted dispute resolution clauses in commercial agreements will not be sufficient in some circumstances. In such cases, qualification of mediator or members of dispute review boards play critical roles. Such persons must be vested with experience in the specific field, legal knowledge and language fluency.

To what extent can companies avoid disputes by being more diligent in their dealings with potential business partners?

Orçun Çetinkaya: To avoid disputes, companies should make careful investigations and know who they are dealing with. If possible, they should check references for any potential business partner. Accordingly, they should request relevant securities at the beginning of the commercial relationship. In addition, they should regularly communicate with their business partner and check the contract to determine whether the partner is meeting its obligations. Since standing dispute review boards are aware of all developments which occur during the commercial relationship, they can also be beneficial for companies to force business partners to respect contractual provisions and obligations.

How important are external advisers to help companies navigate their way through a commercial conflict?

Orçun Çetinkaya: Outsourcing settlement of commercial disputes to external legal counsels is of critical importance to companies. External legal counsels can be more objective about a dispute than in-house lawyers. Thus, companies can be more aware of the cost and legal risks involved. Since external advisers review the conflict from an objective perspective, their evaluation of the potential outcome of the dispute can be more direct and accurate. Moreover, given that an external adviser will likely be more experienced in the particular area, companies receive expert or specialist legal advice by obtaining services of an external legal adviser.