Today, we observe that the Turkish investors operate and undertake various businesses / projects in foreign countries, in a variety of sectors.  Likewise, many foreign entrepreneurs engage in business activities in Turkey.  It is a common practice that both the Turkish investors who carry out projects abroad and the foreign entrepreneurs who engage in business activities in Turkey, provide various guarantees -especially bank letters of guarantee and counter-guarantees- to their counter-parties who reside in the other country.  In most cases where the transactions in question include a foreign element, the contracting parties agree to resolve any dispute among them through arbitration / international commercial arbitration (e.g. by ICC), rather than resorting to local courts.  In the scenario where the dispute will be resolved through international commercial arbitration, is it really possible to take interim injunction from Turkish courts on the guarantees (especially on the bank letters of guarantee and counter-guarantees) provided by the investor to his foreign counter-party?

One might assume that, in cases where the main contract (and the arbitration clause included in this contract) signed between parties grants jurisdiction to international commercial arbitration to settle any dispute under the contract, any interim measure to be obtained on the guarantees shall accordingly be demanded only through arbitration, i.e. from the arbitral tribunal.  This assumption is, however, not correct.  It is true that, in a number of commercial arbitration rules, the arbitrators have been granted with the authority to grant interim measures of protection.  In fact, UNCITRAL Model Law on International Commercial Arbitration dated 1985 (as amended in 2006), which constitutes the basis for international arbitration laws of many countries -including Turkey-, empowers arbitral tribunal to issue interim measures of protection unless otherwise is agreed by the parties (Article 17 of UNCITRAL Model Law).  These provisions, however, cannot be deemed to revoke the authority of Turkish courts to issue interim measures.  As a matter of fact, in Article 9 of the UNCITRAL Model Law, it is clearly regulated that either party can obtain an interim measures of protection from the local courts before or during the arbitration proceedings.  In Article 6 of the International Arbitration Law (“MTK”) of Turkey numbered 4686, which was adopted on the basis of the UNCITRAL Model Law, it is expressed that “If a party requests an interim injunction or precautionary attachment from the court before or during the arbitration proceeding and the court decides on such injunction or attachment, it does not constitute a contradiction of the arbitration agreement’’.  A similar provision is also contained in the 1961 European (Geneva) Convention on International Commercial Arbitration.  In that sense, in a dispute which will be resolved through international commercial arbitration, the investor who provided guarantee (for instance a bank letter of guarantee) may choose to obtain an interim injunction on such guarantee either from the arbitral tribunal or from the Turkish courts.

With regards to above, an investor who has provided a bank letter of guarantee and/or bank counter-guarantee to his counter-party may obtain an interim injunction on such guarantees from Turkish courts in order to prevent these guarantees to be converted into cash.  That being said, in the cases where the investor demands such interim injunction on the guarantees from the arbitral tribunal instead of the Turkish courts, this might cause various problems.  To begin with, the delays in the formation of the arbitral tribunal may cause the interim injunction, which is usually required to be taken as an 'urgent' measure, to be delayed as well.  In addition to that, the compulsory (direct) enforcement of the interim injunction decisions to be provided by the arbitral tribunal is not regulated in almost any legal system.  In that sense, unless the party against whom an interim injunction is provided by the arbitral tribunal complies with this measure on its own initiative, the local courts’ intervention will be required for the enforcement.  Due to such problems, it would be more senseful for investors to request the interim injunction from Turkish court on the guarantees which are eligible of being a subject of an interim measure decision of the Turkish court.

Another significant point in this regard is the question of whether the interim injunction provided by the Turkish court can easily be revoked or changed by the arbitral tribunal.  A doctrinal opinion argues that the arbitral tribunals should have the power to change and/or revoke interim measures provided by the local court.  However, according to the prevailing opinion in Turkish law, the interim measure provided by the Turkish court cannot be revoked by the arbitral tribunal.  As a matter of fact, the legal justification of Article 6 of the MTK includes the following statement "An interim injunction or a precautionary attachment provided by the court before or during the arbitration proceedings cannot be revoked by the decision of the arbitrator or the arbitral tribunal...".  Accordingly, the interim measures provided by the Turkish courts in disputes to be resolved by international commercial arbitration cannot be revoked by the arbitral tribunal.

Av. Çağrı Cem