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The modifications of Turkish Constitution in respect to international commercial arbitration
Aksan Legal Research Services

Commercial arbitration is rapidly gaining more and more importance in the economical sphere. The need for the application of an international law system, which is necessary for the implementation of a new-world-order, has become particularly apparent with the liberalisation of foreign trade policies1. Gigantic investment companies, which are more powerful than even some states, have in the process of their internationalisation extending beyond the borders of their countries also internationalised their policies and principles. The underlying reason for this development was undoubtedly the fast-speed economical development and the need for new rules as a consequence of that development. If possible disagreements arising in the countries invested were expected to be settled according to the unfamiliar regulations of that specific country, it could bring about harmful results to the investing company and result in an unacceptable situation of increased risk and expense. As a consequent result of this development, in order to be free from the internal legal regulations of the countries invested, it became necessary to create international rules which would be accepted world-wide, and new institutions which would apply this rules. Today, the International Council for Commercial Arbitration, ICCA, and the United Nations Commission on Trade Law, UNICTRAL, have become the leading institutions in the settling of disagreements in international trade. This situation has even created a new type of arbitration tourism and a new profit sector on that basis.2 In the present economic situation, the way to obtain credits necessary for greater scale investments depends upon the acceptance of the conditions laid down by international credit institutions. Perhaps the main condition is the acceptance that possible disagreements will be settled by way of commercial arbitration.

It must be remarked that the institution of arbitration has, in principle, as its subject legal disagreements in civil law. By means of arbitration, authority to make a legal judgement within a legal system is handed over to non-official bodies in place of state courts.3 Thus, the institution of arbitration stands in place of courts, which are the normal, official institutions of judgement. If more than one person is elected for arbitration we speak of an institution of arbitration. We would like to state at this point, that the institution of arbitration, subject of excited discussions at present, is not a new thing. Indeed, there are about twenty statements in our private law, §516 on arbitration and the following clauses. Private persons or legal bodies can, on condition of not violating the public order, have recourse to arbitration in relations regarding private law.4

As is clear from the short explanation above, this way of arbitration was restricted to relations of private law, and until the recent modifications in the constitution there was not only no way of having recourse to international arbitration, but also no way to have recourse to national arbitration when it was about disagreements arising from legal contracts relating to public law, and especially to administrative law. Pressured by the reasons we have tried to describe further above the state of the Turkish Republic has inevitably accepted the institution of international arbitration and has began to make the necessary modifications to the constitution. The clauses regarding the subject prior to the modifications by the "Law no. 4446 from the 13.08.1999 regarding the Modification of some Clauses of the Constitution"5 contained the following judgements:

B. Having Recourse to the Judiciary

§ 125 - ... It is always possible to have recourse to the judiciary regarding all actions and processes of the administration. ...

§ 155 - ... The Council of State is responsible for processing cases, for expressing its opinion on draft law propositions from the president and the board of ministers, for examining proposals for statues governing organisations and the conditions and contracts of concessions, franchising and privileges, for settling administrative disagreements and conflicts and dealing with other matters specified by the law."

With §2 of the Law of Modification, the judgement "Disagreements and conflicts in matters of concessions, franchising and privileges regarding public services may be envisaged to be settled by way of national or international arbitration. Recourse to international arbitration may only be taken in case of disagreements involving foreign elements" was amended to §125. The second section of §155 was modified by §3 of the Law of Modification as "The Council of State is responsible for processing cases, for expressing its opinion on draft law propositions from the president and the board of ministers, for expressing its opinion on contracts of concessions, franchising and privileges regarding public services within two months, for examining proposals for statues governing organisations, for settling administrative disagreements and conflicts and for dealing with other matters specified by the law". Alongside this, it has been intended to designate the procedures and principles related to the privatisation of (public-service) enterprises and properties belonging to state-owned enterprises or to public legal bodies. It has also been accepted that it will be determined by law, which of the investments and services conducted by state- owned enterprises as well as by public legal bodies can be let to be conducted by real or legal bodies by contracts according to private law.

At this point we have to raise the question as to how these modifications to our positive law will be put into practise and whether their aims can be achieved:

With the amendment at the end of §125, it is envisaged that it is acceptable to settle disagreements arising from legal relations by way of national or international arbitration if specified thus in the contract documents for contracts and conditions of concessions regarding public services. This means that from now on, real or legal bodies making contracts of concessions6 with public associations and societies or public establishments or institutions can, may they be Turkish or foreigners, take recourse to national arbitration to settle possible disagreements arising from the contract if stated so in the contract and accepted by the public institution which is the other party in the contract. However, the modifications to the constitution, which regulate the recourse to national arbitration in this manner stipulates as a condition of recourse to international arbitration the condition that there be a foreign element7 involved. This means, if expressed briefly in the light of the aim of these modifications, that if a concession contract is made with a Turkish legal body, the contract will in no case contain the specification to have recourse to international arbitration but that of having recourse to national arbitration in the settling of disagreements arising from that contract, while on the other hand, it can be specified that for the settling of disagreements from the practise of legal relations involving a foreign element, recourse to international arbitration will be possible. In our opinion, this modification reveals that it is against the intent of those who originally accepted the procedure of arbitration: while accepting the institution of arbitration in this sphere, one has to accept the presence of a foreign element to be able to take recourse to international arbitration, i.e. the door to international arbitration is closed for settling those disagreements arising from contracts of concession with Turkish citizens, which means in effect according more possibilities to foreigners and denying these possibilities to the own citizens. In principle, this way of acceptance reminds of the term "capitulation" taught in history books for middle-schools. On the one hand, we are teaching our children proudly ñ and rightly so ñ that we have abolished capitulations, on the other, however, we are giving privileges to giant establishments whose basic aim is but to make profit, thereby invoking the ghost of capitulation. Thus, the validity of preoccupations of how we are to protect public interests becomes obvious. If we further consider the fact that among the cases of disagreement involving our public institutions which were settled by international arbitration, there is not a single case which was won, then the portion of truth in these preoccupations becomes more clear. Even if we were to overlook the fact ñ without in any way suggesting that these aspects should not be considered with importance ñ that foreign investment mainly targetting our natural resources, will inevitably turn the ecology of the environment up-side- down and plunder natural and cultural values, it is quite obvious that the mechanism of international arbitration, which plays the part of the judge, the prosecutor and that of the defending lawyer at the same time, will not play a positive role as regards the independence of our country. After this, we believe, the next thing to be targetted are our rights of cabotage.

However, we believe that the modifications by which it is intended to close the door to international arbitration for the settling of disagreements arising from concessions with Turkish citizens will never achieve their aim. Institutions that wish to have access to international arbitration will find a foreign partner thereby attaining the necessary foreign element and will consequently gain access to international arbitration.

As a result, the by-passing of the State Council and the settling of disagreements arising from concession contracts regarding public services, particularly from contracts of 'build-administrate-hand over', by arbitrators will accelerate the violation of public and environmental rights. The right of people prejudiced by such action, to have recourse to the independent judiciary continues to exist despite these modifications, but it must be admitted that this means is a rather weak one in the prevention of ecological disasters and the preservation of public interest. As TEMIRKAN rightly expressed, even if it seemed not right to expect significant help from the State Council as a whole, this institution had been nevertheless carrying out certain important functions.8

Further, that a judiciary institution becomes the guarantee for the country's interests in a coherent and lasting manner in the process of international arbitration is dependent on the condition that that institution is organised as a mechanism completely independent from administrative and political authorities. In other words, to be able to speak of such a guarantee, the terms sublimacy of the law and independence of judgement must penetrate all layers of the society in which this mechanism exists, whether its name be State Council or otherwise. In a country that has as its foundation contemporary democracy permitting all kinds of individual freedom, institutions may be founded and kept alive which have as their aim the defence of public interest and environmental values until the last instance. When the greedy desire of investment begins to plunder the natural wealth, a significant force capable of protecting nature and man, and perhaps most importantly of protecting the coming generations, can only be established under the conditions we have mentioned above. In this regard, one must not deny the fact that the question before us is, in principle, an economic and a political matter rather than a legal one.

1 Hacer TEMIRKAN, Tahkim Nereye (Where does Arbitration go?), Acik Sayfa (Open Page) July/August 1999, Nr. 28/29, p. 18.
2 TEMIRKAN, p. 18
3 Ergin NOMER, Devletler Hususi Hukuku (International Private Law) 6th reprint, Istanbul 1990, p. 481.
4 For further information on this subject see Baki KURU, Hukuk Muhakemeleri Usul¸ (Process of Legal Judgements), vol. 4, 4th reprint, Ankara 1984, p. 3963 a.o.
5 See Official Newspaper (of the Governm
ent), 14th August, 1999, no. 23786, p. 16. 6 On the term 'Concession Contract' see Metin GÜNDAY, Idare Hukuku (Administration Law), Ankara 1992, p.234 a.o.; Ilhan ÖZAY, Günisiginda Yönetim (Light on Administration), Istanbul 1996, p. 256 a.o.; Vahit POLATKAN, Yap, Islet, Devret (Build, Administrate, Hand Over), Ankara 1997, p. 5-6.
7 A foreign element (yabanci unsur, Auslandsberührung) may be true in a multitude of possibilities such as the nationality of the contracting partners, the place of the centre-branch, the place of the contracting or performance, the stores of the goods or the place of the services offered being abroad are all elements indicating the presence of a foreign element. For further information see Aysel CELIKEL, Uluslararasi Özel Hukuk (International Private Law), 5th reprint, Istanbul 1997, p. 7-8; Gölüren TEKINALP, Uluslararasi Özel Hukuk (International Private Law), 4th reprint, Istanbul 1992, p. 245.
8 TEMIRKAN, p. 19.

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