THE END OF DIRECT EXECUTION OF ICSID ARBITRAL AWARDS IN TURKEY?
The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘the ICSID Convention’) provides one of the most well-known and prominent protection mechanisms for the foreign investors. The ICSID Convention has entered into force in 1966 with 20 contracting states and as of today, a total of 155 States are party to the ICSID Convention whereas 9 States are still signatories.
One of the most remarkable features of the ICSID Convention which makes it favourable to foreign investors is its strong enforcement mechanism. An arbitral tribunal award rendered under the Rules of Procedure for Arbitration Proceedings of ICSID is directly enforceable in the Member States. That means there is no need for an enforcement decision from a domestic court in order for an award to be executed in the member State.
However, in a recent Court of Cassation decision dated April 28, 2021, the 12nd Chamber decided that although the ICSID Convention provides that each Contracting State shall enforce the pecuniary obligations imposed by an arbitral award within its territories as if it were a final judgment of a court in that State, each Contracting State must also designate a competent court or other authority for the purpose of this enforcement. For the reason that Turkey hasn’t yet designated such authority or court, the arbitral award is not subject to direct execution through the execution offices.
This decision of the Court of Cassation will clearly worry foreign investors and may have negative impact on Turkey’s attractiveness to the foreign investment.