“THE GRAVITY OF THE SEAT AND SEAT DESIGNATION IN INTERNATIONAL COMMERCIAL ARBITRATION WITH A FOCUS ON LONDON, SINGAPORE AND ISTANBUL LEGISLATION & PRACTICE”

Master’s Thesis

LL.M. International Business

Ali Tunçsav

ANR: 993209

Supervisor: Dr. Jing Li

Date of Defense: 12.06.2017

The Gravity of the Seat and Seat Designation in International Commercial Arbitration

ABSTRACT

The main purpose and the aimed achievement of this paper is to provide a practical guideline for practitioners on the evolving significance of the “seat of arbitration” with in debt legal analysis and practice-related investigations. The paper primarily lays down terminological resolutions to the often-misconceived conception of the seat and its derivatives, carries on with an evaluative analysis of the theoretical approaches associated with the seat and ultimately deals in detail with the key considerations to be regarded prior to a seat designation. It provides a multi-dimensional breakdown on the perception of the “seat”, accompanied by overall suggestions, to-be-favored choices and respective critiques. By comparing and contrasting London, Singapore and Istanbul all along the issues dealt, it simply serves as a directory guide on how practitioners -particularly the ones inclined to opt for the aforesaid seats- should define the seat, set the standpoint on theoretical approaches and apply the different features of the seat-influencing considerations to the dispute. After all, each seat reserves unique points of deliberation before designating.

KEYWORDS

International Commercial Arbitration, Seat of Arbitration, Place of Arbitration, Venue, Lex Arbitri, Arbitri, Procedural Rules, Seat Theory, Localization, Delocalization, Transnational View, Drafting the Arbitration Clause, Seat Designation, Mandatory Provisions, Requirements for Arbitrators, Arbitrator , Interference, Enforcement of Arbitral Awards, Challenging Arbitral Awards, Costs of Arbitration, Practical Considerations of Seat Designation, London, The London Court of International Arbitration (LCIA), Singapore, Singapore International Arbitration Centre (SIAC), Istanbul, Istanbul Arbitration Centre (ISTAC).

THESIS STRUCTURE

Since the paper is structured substantially as a guidebook, a legal professional should be able to search for a specific issue within a particular seat and extract the complete information about that topic in order to correctly implement it to the subject-matter of the dispute. For this purpose, directory tables, schemes and evaluative graphs, concerning the handling of a specific issue by London, Singapore and Istanbul, are created throughout the paper. While the mainly terminological and theoretical aspects are summarized through directory tables and schemes, clustered column charts where each seat is graded upon its performance on the (sub) consideration dealt, are developed for seat’s practice-related relevance.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

TABLE OF CONTENTS

LIST OF ABBREVIATIONS ...... 4 I. INTRODUCTION ...... 5 II. RESOLVING THE TERMINOLOGICAL MATRIX ...... 7 1. Interpretation of the “Seat” or “Place” of Arbitration: Simple Synonyms or Potential Ambiguity? ...... 7 2. Seat/Place vs. Venue/Forum: A Common Misconstruction ...... 8 3. Interconnection of the Seat, Lex (Loci) Arbitri & Procedural Rules: A Three-way Street ...... 11 4. Conclusion & Profound Drafting of the Arbitration Clause ...... 15 III. ASSESSMENT OF THEORETICAL APPROACHES TO “LEX ARBITRI” ...... 17 1. The Seat Theory/ Localization: An Outdated Dinosaur or a Major Building Block? ...... 17 2. Delocalization/ Transnational View: The Joint Product of Internationalization and Reality 19 3. Theory Implementations & Application to the Realities of Practice: No Big Predominance . 21 4. Conclusion ...... 23 IV. THE PRACTICE-RELATED IMPACTS OF THE SEAT & SEAT-INFLUENCING ASPECTS ...... 24 V. TACKLING THE KEY CONSIDERATIONS ...... 27 1. Mandatory Provisions of the National Arbitration Legislation: The level of clarity between mandatory and non-mandatory rules and the level of party autonomy granted...... 27 1.1 London ...... 27 1.2 Singapore ...... 28 1.3 Istanbul...... 29 1.4 Conclusion ...... 29 2. Professional Requirements for the Arbitral Tribunal: Eligibility of the arbitrators...... 30 2.1 London ...... 30 2.2 Singapore ...... 31 2.3 Istanbul...... 31 2.4 Conclusion ...... 32 3. Jurisdiction of the Arbitral Tribunal: Entitlement of the arbitral tribunal to rule on its own jurisdiction and court intervention to a challenge of arbitrator(s) jurisdiction...... 33 3.1 London ...... 34 3.2 Singapore ...... 34 3.3 Istanbul...... 35 3.4 Conclusion ...... 36 4. Court Interference to Arbitral Proceedings: Minimalized grounds of court interference, the risk of excessive court interference and the risk of party manipulation to delay the proceedings...... 37 4.1 London ...... 38 4.2 Singapore ...... 39

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

4.3 Istanbul...... 40 4.4 Conclusion ...... 40 5. Enforcement of the (foreign) Arbitral Awards: Limited grounds of enforcement, national ’ willingness on allowing enforcement and procedural simplicity of enforcement...... 41 5.1 London ...... 42 5.2 Singapore ...... 43 5.3 Istanbul...... 43 5.4 Conclusion ...... 44 6. Challenging the Arbitral Awards: Limited grounds of appeal, national courts’ willingness on granting a decision to set aside, procedural simplicity of the appeal and the estimated duration in which an award can be set aside...... 45 6.1 London ...... 46 6.2 Singapore ...... 47 6.3 Istanbul...... 48 6.4 Conclusion ...... 48 7. Monetary Concerns: Fair cost allocation, certainty on cost recoverability and cost- effectiveness...... 49 7.1 London ...... 50 7.2 Singapore ...... 50 7.3 Istanbul...... 51 7.4 Conclusion ...... 52 8. Practicality Considerations: Unique characteristic as a hub, locational convenience and facility availabilities...... 52 8.1. London ...... 53 8.2. Singapore ...... 53 8.3. Istanbul...... 54 8.4. Conclusion ...... 54 VI. FINAL CONCLUSION ...... 56 BIBLIOGRAPHY ...... 58

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

LIST OF ABBREVIATIONS

CIArb Chartered Institute of Arbitrators, a UK registered non-profit charity. EAA English Arbitration Act, as entered in force on 17th June 1996. GFCI Global Financial Centres Index, as published by Z/Yen Group. IAA International Arbitration Act, as a statute of the Republic of Singapore, revised edition 2002 with latest amendments. IBA International Bar Association. ICA International Commercial Arbitration. ICC International Chamber of Commerce. IDCR International Centre for Dispute Resolution. ISTAC Istanbul Arbitration Centre. LCIA The London Court of International Arbitration. Model Law UNCITRAL Arbitration Rules, with amendments as adopted on 2013. NYC The “New York Convention” or Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as signed 10th June 1958. SIAC Singapore International Arbitration Centre. TCC Turkish Commercial Code, Law No. 6102, as issued on 13th January 2011. TCCP Turkish Code of Civil Procedure, Law No. 6100, as issued on 12th January 2011. TIAA Turkish International Arbitration Act, Law No. 4686, as issued on 5th July 2001. TIPPL Turkish International Private and Procedural Law, Law No. 5718, as enacted on 27th November 2007. UNCITRAL United Nations Commission on International Trade Law.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

I. INTRODUCTION

Following the expansion of the delocalized view and the global manifestation of harmonized rules of international arbitration, the pursuit of catching such trend broke out on the international level as a rush to boost internal arbitration-friendliness1. Thereby, the already fundamental emphasis on the “seat of arbitration” freshened and escalated in dimension. Put figuratively, the ancient perception of the seat has revived to be recognized in terms of its gravity on the legislation and practice of international commercial arbitration.

Before seizing the true weight of the seat, various matters of attention are vital to be stressed upon. Above all entailment, the conception of the “seat” must completely be terminologically grasped and differentiated from its derivatives2. The pre-requisite to a terminological resolution of the seat derives from the survival of its long-standing universally accepted equivalents, misconceptions and notions which are highly associated with it. With an eye to forestall further uncertainties arising this way in practice, the arbitration clause requires profound drafting. Fully embracing the true meaning behind the understanding of the seat paves the way for an unproblematic arbitration clause, which then sets the arbitral groundwork and provides the kick-off to a smooth arbitral proceeding.

Next in order, scrutinizing the diverse and rather domestic theoretical approaches and adoptions of the seat (and the seat-influenced lex arbitri) is critical on the point of seizing both the national legislative realities and the direction of the universal drift3. A seat determination is not purely practice-related, but also theoretical. Thus, the particular and rather local approach to the concept of the “seat” is another major aspect to be considered in advance. Nevertheless, both of the mainly stressed upon theories -the transnational approach and the localization standpoint- reserves different weaknesses and brings along distinct upsides4. Yet, the theoretical approach to be adopted is ultimately dependent on the rules of the system of law governing the arbitration, thereby, on the choice of seat.

Beyond doubt, the practice-related importance of the seat is the final and the most essential point of concentration. Besides seat’s theoretical and terminological meaning to the matter dealt, it has its most relevance on the legal practice itself. A result-oriented arbitration

1 Habib S, “Delocalized Arbitration myth or reality? Analyzing the interplay of the delocalization theory in different legal systems.” (dissertation2013) 48. 2 See Chapter II, “Resolving the Terminological Matrix”. 3 Masood A, “The Influence of the Delocalisation and Seat Theories upon Judicial Attitudes towards International Commercial Arbitration” (2011) 77 The journal of the Chartered Institute of Arbitrators 409. 4 See Chapter III “Assessment of Theoretical Approaches to Lex Arbitri”.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation practitioner’s actual interest, after all, is in connection with seat’s practical relevance. Thus, to counterbalance such interest, the most material decisive considerations, simply standing as the core to a proper choice of seat, has been studied5. Considerations hereby are the key to a conscious seat appointment which are to be primarily investigated and kept at sight prior to the formulization of an arbitration clause and engaging in a seat determination accordingly. Depending on the unique needs, attention points and the subject-matter of the dispute to be arbitrated, the emphasis on a specific factor can be brought to the fore and initially regarded by the practitioner. Therefore, if the specifies of a case requires more attention or a certain requisite within a particular consideration, the analysis herein also eases a localized investigation as such. The combination of the technical aspects and the practicality, all in all, is highly crucial for a comprehensive analysis of the seat and its designation in order to fully meet the needs of a practicing arbitration professional.

The rationale behind why the seats of London, Singapore and Istanbul are chosen and studied with regard to their distinctive arbitration legislation and practice, is well-rounded. With its long-established arbitration infrastructure and enduring culture, London is the current “champion” to the competition on becoming the most arbitration-friendly6. Despite its analogically freshly set arbitral framework, the UNCITRAL inspired Singapore also succeeded to shine out as the “rising star” on the international level, within quite a short time7. Istanbul, on the other hand, could be imagined as the “rookie” with a new arbitration legislation, currently in process of integrating its arbitral framework by building up on the arbitration consciousness8. Therefore, the emphasis of such comparison between those seats is not only at the point of the time of legislative formation or the arbitration culture achieved, but also mainly on the legal dissimilarities and on the practice-related discrepancies. All in all, the legislative and practice-related variance of London, Singapore and Istanbul, which are diversely placed throughout the globe, unifies perfectly to a comprehensive comparison serving to display the true gravity of the seat designation.

5 See Chapter V “Tackling the Key Considerations”. 6 Friedland P and Mistelis L, “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration” (White & Case, Queen Mary University of London School of Arbitration) 12. According to the survey, London had an arbitral seat preference rate of %45 in the year 2015. 7 Friedland P and Mistelis L, “2010 International Arbitration Survey: Choice in International Arbitration” (White & Case, Queen Mary University of London School of Arbitration) 19 & Supra Note 6. Comparing both surveys, Singapore escalated from %7 arbitral seat preferability rate in 2010, to %19 in 2015. 8 Erdoğan E and Vural Çelenk B, “The Culture of Dispute Resolution in Turkey and The Istanbul Arbitration Centre” (2016) 7 Law & Justice Review 169.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

II. RESOLVING THE TERMINOLOGICAL MATRIX

The short-cut to a conscious choice of seat implying true intent is taken by drafting the arbitration clause in a manner of predicting and clouding potential discrete ambiguities in advance. Therefore, a comprehensive conceptual understanding is first and foremost, since it sets up the infrastructure and forms the basis for the arbitral proceeding.

1. Interpretation of the “Seat” or “Place” of Arbitration: Simple Synonyms or Potential Ambiguity?

For the sake of proper commencement and smooth progress of the international arbitration proceedings, concept of the “seat” or “place”9 of the arbitration is principally a fundamental factor, if not the leading.

Seat is a rather legal notion referring to the nation where the international arbitration has its legal or juridical home10. Seat, standing as a crucial element of the arbitration clause, has been explained as “A concept of central importance to the international arbitral process is that of the arbitral seat. . . . The location of the arbitral seat is fundamental to defining the legal framework for international arbitral proceedings and can have profound legal and practical consequences in an international arbitration”11.

An expression on the arbitration clause providing “Arbitration in London”, or more formally “The arbitration shall have its place in London” generally refers to the place or the seat of arbitration.

It is also quite typical for the terms seat and place to be introduced as synonyms, a substitute to one another. However, the added value of adopting the term “seat” shines out since it is more sufficient to comfort the conceptual distinction between the physical place of arbitration and its chosen seat, thus precluding potential ambiguities arising accordingly. On the other hand, the “place” might -not necessarily- bear a rather confusing meaning since it may as well imply the place of the hearings, the place where the arbitration procedure actually takes place.

Although the EAA refers to the term “seat”12, LCIA uses the term to define a juridical center for arbitration, and confusingly, uses “place” to describe the physical location of hearings13. In

9 The “seat” and the “place” of arbitration used herein are within the same meaning. Yet, the preferred word of use throughout this paper is seat. 10 Born G, International Commercial Arbitration (2nd Ed, Kluwer Law International 2014) 1537. 11 Born G, International Arbitration: Law and Practice (2nd Ed, Kluwer Law International 2012) 105. 12 English Arbitration Act (1996), Section 3. 13 LCIA Arbitration Rules (2014), Article 16.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

UNCITRAL inspired Singapore, while the statutes adopted “place”14, SIAC opted for the usage of “seat”15. Likewise, TIAA chose to refer to the concept as “place”16, but ISTAC Rules opted for the term “seat” while referring to a judicial center and “place” as the physical location of the hearings17. (See Table 1).

(Table 1) London Singapore Istanbul EAA LCIA UNCITRAL SIAC TIAA ISTAC

Usage of Seat ⦁ ⦁ ⦁ ⦁

Usage of Place ⦁ Synonymous Usage of ⦁ Seat and Place Place as the Physical ⦁ ⦁ ⦁ Location of the Hearings

To conclude, a major lack of consistency on the terminology of the “seat” and “place” is not only a puzzle of interpretation within inter-jurisdictional cases, but also an issue within the same national jurisdiction. Therefore, in order to reach to a level of objectively satisfactory uniformity and avoid ambiguities deriving from poor or inconsistent drafting of the arbitration clause, the explicit equivalent of the “place” and “seat” should be clarified by the legislators and the contract drafters in each case. As a personal view, while acknowledging they are indeed synonyms, using “seat” instead of “place” is more precise and unproblematic.

2. Seat/Place vs. Venue/Forum: A Common Misconstruction

The field of international arbitration has been all along requiring a terminological separation of the seat of arbitration and the actual place where the hearings take place, usually referred as the “venue” or “forum” of arbitration. Yet, the adoption of “forum” in the field of arbitration is only applicable to a certain extent and usage of “venue” is preferable since the term “forum” is actually a conception closely connected to and associated with national courts. On the other hand, “venue” directly points towards a locality, involving, including but not limited to, the place where oral hearings are held, the place where the evidence is examined, the place where a witness is interrogated, etc. It simply carries a geographical sense to the core. Yet, some legal practitioners are still not elaborate enough to draw the exact line among those concepts. Thereby, the seat of arbitration does not necessarily have to correspond to the venue, the

14 UNCITRAL Arbitration Rules (2013), Article 18. 15 SIAC Rules (2016), Rule 21. 16 Turkish International Arbitration Act (2001), Article 9. 17 ISTAC Arbitration Rules (2015), Article 23,26 and 30.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration physical location where the arbitration procedure(s) takes place. As a matter of fact, a good deal of arbitration is particular for the fact that seat of arbitration is rather imaginary from a geographical perspective. The hearings usually take place in a different country, might as well proceed even in the territory of more than one country18. It is also possible in principle that even some aspects complementary to the term “venue” may take place on many different locations. For instance, while the hearings are initiated in a specific region, deliberations or examination of evidence might take place elsewhere disengaged19. The reasoning behind such in-homogeneousness usually varies from different among practitioners, transportational complexities and facility availabilities to monetary concerns as cost efficiency.

Even in some cases, parties to the arbitration agreement or the tribunal with the consent of the parties, may decide to hold meetings, hearings and deliberations in an entirely different place than the seat, to a certain degree that the national legislation allows. This however, does not change the fact that the law of the chosen seat is still the law to be applied into the hardcore of arbitration. The seat, in this case, still refers to “the place of arbitration in the legal sense (i.e., the place which, from a legal point of view, will be deemed relevant in order to establish a link between the arbitration and a given legal system)”20. Assuming there is not any physically on-going arbitral proceedings within the boundaries of the chosen seat, the seat would entirely be fictional if it didn’t serve as a nexus and unify the whole arbitration procedure. While the seat is the territorial link between the arbitration itself and the law of the place in which that arbitration is legally situated, the “venue” is the factual connecting factor between the chosen seat’s arbitration law and the arbitration proper. It is a nexus of contractual and procedural rights and obligations between the parties and arbitrators21.

Many national legislations and organizational rules acknowledged the urgency and materiality of the need for an expansion to the strict which limit the actual arbitration process to the boundaries of a single country. Both ICC22, UNCITRAL23, and TIAA24 suggest there is no necessary connection between the “seat” and the “venue”, allowing for hearings and meetings to be held on a different place than the designated place of the “seat”. However,

18 Bělohlávek AJ, “Seat of Arbitration and Supporting and Supervising Function of Courts” [2015] Czech (& Central European) Yearbook of Arbitration 27. 19 See i.e. Naviera Amazonica Peruana SA v Company International de Seguros del Peru, 1987 (Court of Appeal). 20 Ly FD, “The Place of Arbitration in the of International Commercial Arbitration: An Exercise in Arbitration Planning” (1991) 12 Northwestern Journal of International Law & Business 54. 21 Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th Oxford University Press) 171. 22 ICC Arbitration Rules (2017), Article 18. 23 UNCITRAL Arbitration Rules (2013), Article 18(2). 24 Turkish International Arbitration Act (2001), Article 9(2).

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation parties choosing ad-hoc arbitration do not have a possibility of opting for a venue, because under ad-hoc arbitration, the seat is simply determined by the applied arbitration law. Likewise, both LCIA25, SIAC26 and ISTAC27 paves the way for a venue selection providing an approval of the arbitral tribunal or any location the arbitral tribunal considers convenient.

For instance, as the scheme below demonstrates (See Scheme 1), an ICC arbitration with its seat in London and its designated venue as Singapore can pursue deliberations in Istanbul, while the hearings of the case take place in New York, upon tribunal decision sitting in London with regard to the convenience of parties. In this case, Istanbul and New York are nothing but physical locations and hold no legal effects on the arbitration hereby. Then, any future setting aside proceedings would be seen before the national courts of London since the of the award would still be considered as English even though not a single arbitration procedure physically took place in London.

Clause Designations/ Pre-Arbitration Post-Arbitration Arbitral Institution ICC Nationality Contractually Designated Seat London London, English of the Award Contractually Designated Venue Singapore Istanbul & Actual Venues Location of Deliberations Istanbul New York Location of Hearings New York (Scheme 1)

Some arbitration proceedings, nevertheless, are obliged to be handled by court resolutions. In the precedent of PT Garuda Indonesia v Birgen Air28 the arbitration agreement concluded the seat of arbitration as Indonesia. Subsequently, it was held by the tribunal that hearings were to be conducted in Singapore since a representative of the ICC is to provide legal support for the case. Upon objection by one party arguing that the seat has been changed to Singapore, Singapore Court of Appeal referred to the distinction between the seat and the ‘venue’, decided that the initially agreed seat shall not be affected by the venue and the arbitration shall still be subject to Indonesian law.

25 LCIA Arbitration Rules (2014), Article 16(3). 26 SIAC Rules (2016), Rule 21(2). 27 ISTAC Arbitration Rules (2015), Article 23(2). 28 PT Garuda Indonesia v Birgen Air, 2002 (Singapore Court of Appeal).

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

3. Interconnection of the Seat, Lex (Loci) Arbitri & Procedural Rules: A Three-way Street

Since there can be no “floating procedure”29, just as every litigation process’ necessity of being subjected to a certain system of law, each arbitration case arises with a specific set of rules designated to it. Lex arbitri, the system of law governing the arbitration, is the national legislation applicable to the arbitration proceedings. It is a body of rules setting the standard external to the arbitration agreement for the conduct of arbitration.30 This is the so-called external lex arbitri, the law regulating the external conduct of arbitration by resorting to international procedural rules such as the arbitral tribunal’s relationship with national courts on validity, recognition and enforcement of the awards, granting of interim measures, challenge of arbitrators, etc.

The inherent dependence of the lex arbitri to the seat bursts from lex arbitri being purely influenced by the seat, so that “the choice of the seat is nothing but the applicable to arbitration”31. It is not only a reference to the seat (i.e. “the arbitration shall have its place in London”) that is perceived as a direct administration of lex arbitri to the dispute. The designation of lex arbitri, a choice of law governing the arbitration (i.e. “arbitration according to LCIA”), also suffices to imply an indication to the seat and thus, a certain legal body of rules.32 However, because of the neutrality rule -meaning that none of the parties to the arbitration can have a place of business or a residence in the selected country of the seat- long-standing international commercial arbitration practice prefers a direct indication to the seat, and the lex arbitri is originated from such referral. “Typically, the parties do not make a direct choice of the laws applicable to their arbitration. Rather, they make a conscious choice of seat and the applicable lex arbitri flows from that”33. In such cases, lex arbitri equals lex loci arbitri, which is the law of the seat of arbitration. Since modification of lex arbitri is possible by choosing a foreign procedural law, those terms don’t technically carry identical meanings. Although, in most arbitration cases, they are simply equivalents. After all, even in case of a choice of foreign procedural law different than the seat, such procedural rules are applicable

29 Harisankar KS, “International Commercial Arbitration in Asia and the Choice of Law Determination” (2013) 30 Journal of International Arbitration 631. 30 Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th Oxford University Press) 175. 31 Poudret J-FCA and Besson S, Comparative Law of International Arbitration (2nd edn2007) 99. 32 Poudret J-FCA and Besson S, Comparative Law of International Arbitration (2nd edn2007) 133. 33 Henderson A, “Lex Arbitri, Procedural Law and the Seat of Arbitration” (2014) 26 Singapore Academy of Law Journal 891.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation to the extent that the mandatory rules of lex arbitri allows it. The mandatory provisions of the law of the seat would still be binding, if not superior, to the chosen procedural rules.

A considerable number of national legislations identify lex arbitri, much the same as procedural law (“curial law”, as accepted in England). Yet, from a personal point of view, what is referred as the “procedural rules” are only a portion of a certain part of legal norms applicable to the process of arbitration. Lex arbitri is substantially the “procedural law”, but what is literally meant by “procedural law” here is the overall set of procedural ordinances applied to the case, doesn’t matter within the lex arbitri or under another foreign legislation. Therefore, the true meaning of a procedural law is a subset of lex arbitri focusing on internal matters of the arbitral procedure. A good deal of national laws contain a default set of procedural rules within lex arbitri, available to be adopted for the purposes of assisting the due process of arbitration when needed34. Hence, if the parties to the agreement did not decide on the application of a foreign procedural law, the procedural law simply serves as a supportive safe harbor facilitating further assistance to the parties.

Theoretical discrepancy between lex arbitri and procedural rules are not only by scope, but also by nature and virtue. While lex arbitri always points to a precise system of national legislation, the procedural rules are exclusively decided by parties to the agreement or by the arbitral tribunal. The practice of ICA between practitioners from different legal backgrounds favors the adoption of a pre-existing set of procedural rules (i.e. IBA Rules on Taking of Evidence) to support the lex arbitri. Additionally, it is also advisable that the procedural rules are to be integrated and selected in a hierarchical order so that even if the primary procedural set of rules are not satisfactory on governing a particular issue, the subordinates hold a chance to compensate for such deficiency.

To clarify this triplex interaction, a scheme has been built (See Scheme 2)35. Range 1 constitutes the reality in practice, where there has been no other choice of an external procedural rules different than the lex arbitri, so that the law of the seat entirely meets and corresponds the law applied to the hardcore of the arbitration. Range 2, simply, shows the chosen procedural rules were already within the law of the seat of arbitration, precluding potential conflicts of laws. Range 3, however, is the situation where parties or the tribunal

34 Henderson A, “Lex Arbitri, Procedural Law and the Seat of Arbitration” (2014) 26 Singapore Academy of Law Journal 888. 35 The scheme is abstracted from: Chen W-J, “Determining "Appropriate" Procedural Rules of International Commercial Arbitration and Its Relationship with the Law Governing Arbitral Procedure: In the Perspective of Enforcement Under The New York Convention” [2009] Contemp. Asia Arbitration 167.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration opted for a choice of external procedural rules, different than the ones lex arbitri covers. Their set of intersection, shaded in black, displays that the “procedural rules and lex arbitri are decided by parties or tribunal, and the arbitral proceedings are simultaneously governed by the lex loci arbitri”36. This small area constitutes the favorable playfield of any arbitration practitioner. It also reflects the reality in practice since the maximum spectrum of applicable rules of law are reached within this range.

(Scheme 2)

UNCITRAL rules adopted in 2006 authorized the parties, or the tribunal in absence of choice by the parties, to agree on a pre-determined procedural set of rules on matters like granting interim measures, evidence taking and hearings37. Yet, by not providing further regulation upon such matters, it only drew the framework to operate on and lacked detailed execution. Additionally, it did not expressively set out to limit the freedom of choice on procedural rules as to the extent of the mandatory provisions of lex arbitri, to get ahead possible conflict of laws. Model Law amended in 2010, however, modernized the regulation on procedural rules with newly added exclusive provisions on above procedural matters38. It also removed the symbolic procedure on the determination of procedural rules, leaving the matter solely to the discretion of lex arbitri, metaphorically putting the plane on “auto-pilot” while precluding any sorts of potential conflict of rules caused by the mandatory provisions of lex arbitri. ICC, on the other hand, took a quite different route and concluded whenever its institutional rules are silent, the subsequently chosen procedural rules -as fallback norms- will apply39. The choice of a (foreign) procedural law, by all means, is possible under ICC arbitration.

36 Supra Note 35. 37 UNCITRAL Arbitration Rules (2006), Article 19. 38 UNCITRAL Arbitration Rules (2010), Article 26,27,28 and 29. 39 ICC Arbitration Rules (2017), Article 19.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

While LCIA refers to the adoption of necessary procedural rules for the fair and efficient conduct of arbitration40, EAA refers to the freedom of choice on lex arbitri and procedural laws, to the extent that the applied procedure is not designated by any mandatory provision of the EAA41. ISTAC rules and TIAA both have substantially similar statutes, allowing a foreign choice of procedural rules or a lex arbitri to be determined as to the degree that their mandatory provisions permit. Singapore laws, on the other hand, entails the judgement of foreign chosen procedural laws in terms of compatibility over its rules42. Therefore, it is theoretically possible to choose a compatible foreign procedural rules seated in Singapore or apply laws of Singapore to an arbitration seated elsewhere. Yet, it is not at all advantageous for the parties since there is no clear regulation on proceedings seated outside Singapore, so that a primary judgement from the national court would be held right down the line.

Nevertheless, a choice of foreign procedural law could be absolutely baffling and a highly redundant complication of the arbitration process. For instance, parties of arbitration having its seat in Istanbul may opt for the application of English procedural rules to the case, yet since the English and Turkish procedural laws of arbitration do not show a direct uniformity, parties would still be bound by the mandatory provisions of Turkish law. Later on, a great deal and variety of troubling issues are likely to follow, such as which country’s court would have jurisdiction on a potential challenge to an arbitrator. Thus, it is highly advisable to just locate the proceedings to that specific seat instead of forcing the proceedings in order to enjoy the foreign procedural law as a side dish.

A valid example of such situation is the case of Union of India vs. McDonnell Douglas43, where the parties opted for Indian procedural law but chose London as the seat. The court held that even if there was an express choice of foreign procedural law by the parties, applicable procedural law is English law and Indian Law shall only be applied to the extent it’s consistent and not in contradictory with English mandatory rules. Even though this formal point of view might not be a progressive one possibly neglecting over the purpose and spirit of the freedom of choice rules, namely the party autonomy, the actual cause of such situation is poor drafting. If the parties concluded the seat as India while providing for the application of English procedural laws, the procedural law applied to the core of arbitration would be Indian Law

40 LCIA Arbitration Rules (2014), Article 14.4(ii). 41 English Arbitration Act (1996), Section 4. 42 SIAC Rules (2016), Rule 19. 43 See Union of India V Mcdonnell Douglas Corporation, 1993 (Queen’s Bench Division, Commercial Court).

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration and they would still have the opportunity to run the process in London, since as it is mentioned before, “venue” and “seat” may be differentiated location-wise.

4. Conclusion & Profound Drafting of the Arbitration Clause

The straight-out key to a well-structured arbitral proceeding is a well-established arbitration clause not evoking any sort of hidden conceptual uncertainties. With this purpose in mind, the transnationally divergent and interchangeable employment of “seat” and “place”, the semantic and highly decisive differential between “seat/place” and “venue/forum” and the cross relation between “Seat”, “Lex (Loci) Arbitri” & “Procedural Rules” are the main points of attention.

In the light of above-mentioned terminological resolution, several generic remarks about wisely drafting an arbitration clause are put together. After all, the clause is the cornerstone of setting the correct infrastructure for the proceedings.

In general, poorly drafted arbitration clauses are usually customized by counsels without adequate expertise in the field of arbitration, almost always lacking preliminary investigation and due diligence. Fallacious wording, terminological inconsistency and imprecision may lead to an involuntary and unwitting choice of seat and/or lex arbitri, contrary to parties’ initial intent. Also because due to its conventional order in the contracts, they are usually “midnight clauses”44 drafted late at night -after all the commercial points have been dealt- without sufficient deliberation or negotiation, so that the final compromise is generally not overstressed enough. Thus, such sloppy wording resulting to “pathological clauses”45 are then left to the resolution of case law and the plausible explanation of courts, whose decisions always bear the inevitable risk of not corresponding with parties’ actual intent.

Although not functioning sine qua non -as an absolute must- a profound arbitration clause is customized around a few decisive points; namely the type, seat and the language of the arbitration, along with the number of arbitrators. However, while the others are in the supporting role, the seat of arbitration is the principal point of attention directly affecting the applicable law to the dispute. Therefore, the key to surpass ambiguities and watch out for the potential pitfalls of the chosen lex arbitri in a standardized boiler-plate clause, is drawing the distinct line between the “seat” and the “venue” while concurrently clearly indicating the chosen countries. Likewise, if there is a foreign choice of lex arbitri and/or a designation of a

44 Hill J, “Determining the Seat of An International Arbitration: Party Autonomy and The Interpretation of Arbitration Agreements” (2014) 63 International and Comparative Law Quarterly 533. 45 Supra Note 44.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation certain procedural set of rules, getting clear on chosen and pinpointing the adopted body of rules would be the preferred practice.

Apart from a properly designated seat, there are several overall tips to be conceived while drafting. The ground rule is that one should not overburden the arbitration agreement with a complex formulae by overly regulating the simple issues and incorporating unnecessary adjustments. Trying to come up with a work of art at this point would be nothing but a quite redundant effort in pursuance of re-inventing the wheel. Therefore, acknowledging “less is more”, the drafter should govern as much as necessary and as little as possible. Further editing is only vital if there is further need to cover left-out issues parallel to clients’ necessities. A detailed structure may not only be dangerous when an unforeseen future event happens, but it is also risky since the clause could be self-contradictory and involve discrepancies. It also restricts the judicial discretion of the arbitrator(s). Indeed, the institutional model clauses tend to be simple, leaving the rest of the process to the so-called “auto-pilot” 46. Additionally, tampering with model institutional clauses and/or intermingling different institutions standard arbitration clauses, would not be a wise set-up since it will definitely result in vagueness in terms of which rules to apply.

Undoubtfully, if both parties show a mutual consent for choosing institutional arbitration, the selected institution’s standard arbitration clause(s) should be strictly inserted into the agreement as it is. If not, the arbitration clause provided below is a practicable sample47.

All disputes arising out of or in connection with the present contract shall be resolved by arbitration in accordance with the “Insert desired seat’s arbitration center” Rules by “Insert desired (odd) number of arbitrator(s)” appointed arbitrator(s). The arbitral proceedings shall be conducted in “Insert desired venue”. The language to be used in the arbitral proceedings shall be “Insert desired language”.

Final crucial aspect when emphasizing the seat while drafting, is the standpoint. While designating it, the law governing the arbitration agreement must always be viewed from a specific point of view. For instance, assume that the buyer having its place of business in Istanbul and the seller having its place of business in Singapore opted for the seat in London and the buyer sued the seller in Turkey. At this point, the parties should make sure that the arbitration agreement in between is valid not only within the jurisdiction of Turkey, but also before English law since the situation is actually being viewed from English law.

46 See i.e. ICC and UNCITRAL Model Clauses. 47 The clause provided is formed through excerptions amongst ICC, SCAI & SCC model clauses.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

III. ASSESSMENT OF THEORETICAL APPROACHES TO “LEX ARBITRI”

As explained in detail, lex arbitri is a seat influenced factor and undoubtedly the most crucially decisive feature when it comes to choosing a proper seat. Hence, grasping its various theoretical aspects and position in practice plays an important role in such determination.

Alongside other theories48, the crucial debate is between the “seat theory” and “delocalization”.

1. The Seat Theory/ Localization: An Outdated Dinosaur or a Major Building Block?

Seat theory/Localization/ Traditional approach is the doctrine which equates the lex arbitri and lex loci arbitri. With the assumption of a rigid bond between the law governing the arbitration and the law of the seat governing the arbitration, it imposes that the arbitration shall be governed by the law of the seat of arbitration in all cases, leaving no room for a choice of law to the parties or the tribunal49.

The reasoning behind such traditional approach is not quite simplificative. By supporting scholars, it is believed that the economic and rather legal significance of the seat derives naturally from creating a point of connection between the jurisdiction of a seat and the arbitration itself. As argued in addition, by assembling a tribunal, thus establishing a pre- existing private jurisdiction located in a particular region, parties implicitly agree that the authority to govern all the proceedings taking place within that territory must be allocated solely to the local sovereign. State, herein, having the closest connection to the arbitration, should provide a legal body for the proper conduct of the proceedings. Its courts hold the exclusive right to determine the legal effect of the acts within those borders50. To exemplify, an award ultimately needs to be strictly allotted to a jurisdiction for its enforcement. Considering each right or legal power of an individual exclusively flows from a certain system of national law (), arbitration should not be isolated from that principle as an exception. Hence, with the lex loci arbitri standing as the primary field for the execution of such rights, the proceedings should be subject to it.

48 Other theories are the jurisdictional theory, contractual theory, hybrid theory and the autonomous theory. Yet, the main academic argument progressed around the seat theory and delocalization. 49 Bělohlávek AJ, “Seat of Arbitration and Supporting and Supervising Function of Courts” [2015] Czech (& Central European) Yearbook of Arbitration 26. 50 Goode R, “The Role of the Lex Loci Arbitri in International Commercial Arbitration” (2001) 17 Arbitration International 23.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

After interpreting the foundations behind localization, its adoption brings about objectively valid upsides. Above all, as firmly mentioned, for the sake of fair and efficient judgement of the dispute and forestalling undue delay by a foreign authority unfamiliar with the law applicable, the most “competent and effective” jurisdiction over the tribunal belongs to the courts of the seat51. No matter ad-hoc or institutional, the law of the seat of arbitration would stand as the most connected with the arbitration. Secondly, the seat theory completely abolishes the risk of failure on enforcing and setting aside the award by granting a nationality to it. Grounds for recognition and enforcement of the awards dealt under NYC refers to the law of the country either where the award was made or where the arbitration took place52. That way, NYC expressively adopted a regional connection between the seat and the lex arbitri, employing the localized point of view. Therefore, departing from the lex loci arbitri and deciding on a foreign “forum-shopped” seat -i.e. a non-signatory of NYC- carries within the danger of its courts not deeming the award valid, thereby, creating a major block on enforcement. Also, the award could easily be set aside where the award is made, since the setting aside proceedings are initially sought before the courts operating under the nationality of the award. Last but not least, fair credit to the cost-saving nature of the seat theory has to be given. From an economical perspective, factors as accommodation, logistics and usage of local facilities are undoubtedly more consolidative, uncomplicated and cost- effective instead of holding deliberations and meetings in a foreign territory.

However, the localization line of vision unlocks a great deal of pertinent disadvantages. Most importantly, an exaggerated assumption on the firm attachment of the arbitration and the seat leaves absolutely no discretion for the parties to compromise on a desired neutral seat, resulting in full deactivation of party autonomy, one of the most fundamental constituents of international arbitration. In some cases, among other reasons, the sole existence of freedom of choice on the applicable law -party autonomy- is the primary reason for parties opting for arbitration instead of litigation in the first place. Therefore, not only a possible choice of a neutral seat is stonewalled, but also considerations in the process of determination (validity, enforcement and setting aside proceedings of the award, arbitrator eligibility, cost-efficiency, taking of the evidence, etc.) is completely out of the picture. Another flaw of such conventional view emerges from the terminological misconception between the “seat” and the “venue”, the place where the arbitration physically takes place. As indicated above, arbitration

51 Chen W-J, “Determining "Appropriate" Procedural Rules of International Commercial Arbitration and Its Relationship with the Law Governing Arbitral Procedure: In the Perspective of Enforcement Under The New York Convention” [2009] Contemp. Asia Arbitration 158. 52 New York Convention (1958), Article 5.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration proceedings of today usually take place in more than one location, sometimes even outside the designated seat. Yet, seat theory assumes a single country gathering the entire procedure under its roof, without giving regard to parties’ initial intent. Finally, by over-simplifying the handling of the dispute, localization perspective completely ignores the individuality of the cases and also, does not reflect the reality of today’s practice. In a time period as such when different seats all over the world are competing in pursuance of being the most “arbitration- friendly”, thereby the most preferred, recently ratified codes are usually of an international, liberal and practical characteristic. The seat theory, however, limits such freedom by embracing too much local color of intervention from the domestic courts, contrary to recent developments in arbitration law53.

2. Delocalization/ Transnational View: The Joint Product of Internationalization and Reality

Just as international commercial law matured, an urgency to meet the current conditions arose. The ultimate result was the quest of forming a transnational legal order and stateless arbitration rules. According to the delocalization theory, parties have the full autonomy to submit their disputes to “procedural principles of public international or transnational law without any connection to domestic arbitration law”54, detaching the proceedings from the law of the seat, so that the award does not belong to any legal system. This two-tier system suggests that due to the recent transnational harmonization in the legislation, international commercial arbitration is sufficiently regulated by its own rules and the only point of control to be applied is when the awards are recognized and enforced by national courts55. The courts’ role, therefore, are reduced to minimum and they only may interfere with the arbitration process in exceptional circumstances. Therefore, the transnationalist conception is that there is no engagement between the arbitration proceedings and a pre-determined seat whatsoever and the arbitration is solely based on the exclusive agreement of the parties, failing such agreement, to the tribunal.

The premise behind suchlike transnational ideology is multifaceted. While resting on the conception of a cross-border lex arbitri, a supranational approach liberates the parties and the arbitrators to study the individuality of a particular set of arbitration rules. The “level

53 Supra Note 50. 54 Olefirenko K, “Applicable Procedural Law in International Commercial Arbitration” [2010] CEU eTD Collection 12. 55 Bělohlávek AJ, “Seat of Arbitration and Supporting and Supervising Function of Courts” [2015] Czech (& Central European) Yearbook of Arbitration 29.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation playing field”56 constituted thusly would partially sweep the necessity of detailed investigation about the presence of unique and potentially adverse provisions. Therefore, a “floating arbitration resulting in a floating award”57 pays off not only by saving an appreciable time and cutting extra expenses, but also by obviating peculiarities. To continue, since “Kompetenz-Kompetenz” principal58 is recognized within most jurisdictions59, there is no substantial necessity -at least not a vital one- to connect the proceedings to a certain jurisdiction. Hence, the proposition of courts not intervening the proceedings unless supervisorial, is already (by degrees) globally accepted. Moreover, the pre-determined set of procedural rules (i.e. IBA Rules on Taking of Evidence) being almost universally recognized and also, rules about the cancellation of awards being almost identically codified throughout the world, are supportive factors of delocalization.

A quite straightforward viewpoint is that parties, after all, intentionally exercised their right of choice by their own will, with focusing on their individual interests. However, contrary to a conscious choice by the parties, the law of the seat of arbitration always bears the risk of not corresponding with parties’ true intent. Since a good deal of local set of arbitration rules are not structured to correspond to the nature of international commercial arbitration, a mandatory application of lex loci arbitri would simply mean extra efforts and time consumed. Next in order, since lex arbitri is already efficient on the points of covering any nullity in the process, imposing its nationality to the award and having force of law concerning the orders of the tribunal (i.e. freezing of assets), there is no crucial need to refer to a certain system of law. In that sense, the only control mechanism performed by the supervisory courts is at the final stage of arbitration (if not challenged), the enforcement. Even so, a foreign court entitled to enforce the award has no obligation to approve the enforcement or setting aside the decision of the court where the arbitration is actually held. Additionally, an unexpected intervention by the courts is surely another item of expense.

Nevertheless, the delocalization theory reserves several points of objection. Firstly, a choice of foreign law is capable of creating major problems. There are some components of proceedings demanding court intervention and assistance which are directly related to the recourse against an award, i.e. the appointment of arbitrators. In this case, due to the

56 Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th Oxford University Press) 188. 57 Lew JM, “Achieving the Dream: Autonomous Arbitration” (2006) 22 Arbitration International 178. 58 The term is further explained in the paper. See Chapter V, 3. Entitlement of the arbitral tribunal to rule on its own jurisdiction. 59 Even though the adoption of “Kompetenz-Kompetenz” is universally widespread, there are some exceptional jurisdictions which does not substantially embrace the principle, i.e. Venezuela, Mexico etc.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration departure from the lex loci arbitri, the courts of the seat would completely be disqualified and only resorted for insignificant assistance, causing harm on the practicality and the efficiency of the arbitral proceedings. Secondly, practice-related necessities of utilizing the lex loci arbitri is not to be overlooked. As a matter of fact, particular aspects of arbitration -such as granting interim measures, taking of the evidence, enforcing the awards etc.- requires local court’s assistance at the end of the day. Thus, “the parochial judicial oversight and review would become relevant only when a party resorts to a national court to enforce…”60. Therefore, the presumption that a foreign procedural law will be able to regulate every single dispute- related matter, can be considered quite utopic. Also, again from a realistic point of view, choice of a foreign lex arbitri is ultimately only possible to the extent that the mandatory rules of the seat of arbitration permits.

3. Theory Implementations & Application to the Realities of Practice: No Big Predominance

A remarkable amount of institutions and nationalities ratified the seat theory over their legislation. Just as NYC61, Model Law also recognizes the seat theory. Under UNCITRAL rules, the territorial link amongst the seat and the applicable law is implied by stating its provisions shall only apply if the seat of arbitration is in the territory of that state. Likewise, by putting the emphasis on the “juridical” when defining the seat of arbitration and partially limiting the scope of application to the England, Wales or Northern Ireland seated arbitration (effectual only for specific parts of the act)62, EAA accepted the seat theory. Still, despite such enactment, none of those body of laws actually prevent the freedom of choice of law by the parties -the exclusive autonomy of the parties- by any means63.

UNCITRAL inspired Singapore statutes is not clear on the point of selecting a single approach. However, discussions by Singapore Ministry of State for Law64 and Appeal Court’s precedent65 shows that the territorial connection projected in UNCITRAL is consequently adopted and the delocalized view would not be recognized. Therefore, Singapore purports to embrace the localized point of view implication. On the other hand, the Turkish arbitration legislation, without indicating a clear choice, acknowledges both theories by providing TIAA shall be

60 Henderson A, “Lex Arbitri, Procedural Law and the Seat of Arbitration” (2014) 26 Singapore Academy of Law Journal 894. 61 The link between lex arbitri and “place of arbitration” is put forward through New York Convention (1958), Article 5.1 (a), (d), (e). 62 English Arbitration Act (1996), Section 2. 63 LCIA Arbitration Rules (2014), Article 16(4). 64 Singapore Parliamentary Debates, Official Report (5 October 2001), vol. 73 col 2215. 65 PT Garuda Indonesia v Birgen Air, 2002 (Singapore Court of Appeal).

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation applicable both when the seat is determined to be Turkey and where TIAA is chosen as the governing law of arbitration66. (See Table 2).

(Table 2) NYC UNCITRAL London Singapore Istanbul Direct Adoption of Seat Theory ⦁ Implied Adoption of Seat Theory ⦁ ⦁ Adoption of Seat Theory through ⦁ Judiciary and Case Law Adoption of both Seat Theory and ⦁ Delocalization

It is no secret that the seat theory brings along practice-related benefits. In the field of international commercial arbitration, parties to the agreement are almost always commercial private entities. Therefore, corporate executives have a duty to wisely allocate the risks of operations and add a certain level of predictability. Hence, the seat theory works better in these terms since proceedings held by the law of the seat of arbitration and the interventions of the courts of the seat will be more foreseeable. Secondly, the reality still reflects that the lex loci arbitri, after all, will determine whether or not the party autonomy on choosing a foreign lex arbitri is executable. The parties and the tribunal have no choice but to comply with the law of the seat’s mandatory provisions eventually. Another practice-related rationale is about the enforcement of the award. The exclusive competence on enforcing the awards are still with the local courts. Thus, without a competent court to enforce the award before, there is no reason for the arbitral proceedings to be held in the first place, the dispute in hand simply would not be sorted out to a solution. Last but not least, it would be an oversight to rule out the political factors. Since each state has different priorities and interests to protect, the legislations concerning arbitration are ratified accordingly. In this regard, compliance on a true universal lex arbitri might be very utopic.

However, the transnational line of thinking does not fall short on perks from a realistic perspective. As the movement of legislative liberalization and equalization unfolds, the race over becoming the best seat of arbitration -the center of attention- broke out. In consequence, more and more states embraced the principle of party autonomy to larger extents. Hence, with the localization theory becoming the less favored approach, the focus on proper legislation canalized into the delocalization theory and the lex loci arbitri started failing to

66 Turkish International Arbitration Act (2001), Article 1(2).

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration proceed in a fully desired manner. Apart from that, above all, a proper choice of arbitrators and a foreign law/set of rules is more likely to give better results than a proper choice of the seat, since it does not partially but fully reflect the genuine interests and intentions of the parties.

4. Conclusion

To conclude, there is no single principal as to -a certain subject-matter related, institutional or ad-hoc or a particular sectoral dispute- which one of the two very opposite approaches should be followed. However, the parties of the arbitration agreement should have a clear approach on which theory to follow and draft the agreement accordingly. Both theories are majorly influential in the designation of the seat. Therefore, in order for a seat to enjoy a strong position within the “most arbitration-friendly jurisdictions”, embracing a combination of both theories and incorporating the winning edges of each theory, is first and foremost.

Since the law of the seat of arbitration still constitutes a major building block within the arbitration process, the seat theory is definitely not to be considered as an out-of-date dinosaur, then again, it can never be disregarded. Yet, as it is losing demand, harmonization of the arbitration laws in a global level seems to be the common practice of future. Once in for all, a well-thought-of choice of a foreign lex arbitri fully compatible with parties’ interests, with expert arbitrators and a not only assisting but also an operating court, may suffice to out- perform and predominate over the inherent advantages in which the seat theory brings.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

IV. THE PRACTICE-RELATED IMPACTS OF THE SEAT & SEAT-INFLUENCING ASPECTS

Before diving into the core and tackling the key considerations of choosing the proper seat, the main reasons why the choice of seat has been considered so critical along the way should be briefly recaptured as it sets the tone. Even though the seat is also of great legal importance serving as the bridge between the dispute in hand and the applicable jurisdiction to the dispute, the root cause of such vital attention to the concept of seat primarily arises from its practice-related considerations.

First and foremost, the reason of the seat of arbitration being an essential determinant lies behind the fact that by providing a seat indication in an arbitration clause, the parties establish a legal relationship between the arbitration and a certain legal system. This very matter is the main reasoning of EAA referring to the place as the “juridical seat of the arbitration” in broad terms67. Thus, no matter ad-hoc or institutional, an arbitration clause missing an explicit or implicit indication of seat shall automatically mean no applicable jurisdiction to the dispute.

Hence, determination of the seat is closely connected with the planning of arbitration. Carelessly drafted clauses lacking a designation of seat is an immediate loss of a very important planning tool and is likely to lead to unpredictabilities at any stage within the arbitration proceedings68.

In pursuance of avoiding potential rooms for argument and undesired future consequences, smart and choosy selection of the seat is highly crucial. Since the diversification among jurisdictional aspects is to a large extent caused by the rivalry of becoming the most favorable seat, the decision should be thoroughly considered after reviewing local rules of arbitration. Therefore, even though it may seem as a straightforward choice to the parties of the dispute, the preference should be dealt with due care and precision to the practical aspects having a part69.

As explained, lex arbitri, “the system of law governing the arbitration”, is the national legislation applicable to the arbitration proceedings and is prima facie influenced by the seat. Indeed, the choice of seat is weighted on, inter alia, the arbitral infrastructure and the judiciary involvement of the chosen jurisdiction. For instance, TIAA automatically applies to

67 English Arbitration Act (1996), Section 3. 68 Ly FD, “The Place of Arbitration in the Conflict of Laws of International Commercial Arbitration: An Exercise in Arbitration Planning” (1991) 12 Northwestern Journal of International Law & Business 56. 69 Swang M and Chan D, “Determining the Parties' True Choice of the Seat of Arbitration and Lex Arbitri” [2013] Selected Essays on International Arbitration 546.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration arbitrations having its place in Turkey, but doesn’t apply to an arbitration having its place in Singapore. Hence, since Turkish law would be the law applicable to the hardcore of the arbitration, the parties should make sure of the nonexistence of rules possibly contrary to their prospective claims while opting for a certain seat and a jurisdiction.

However, the level of significance attributed to the seat does not show a collective conformity throughout different jurisdictions. The practice-related importance of the seat mainly depends on the legislation of arbitration in a certain legal system or within the body of a specific organization. “The importance of the seat of arbitration for the determination of the law applicable to the individual issues often depends on the theory which the state employs to classify arbitration in general, as well as on the theory which the state employs to determine the importance of the seat of arbitration.”70.

By providing a distinct section for selection of the seat in their model arbitration clauses, both LCIA, SIAC and ISTAC acknowledge the practice-related significance of the determination of the seat71. Similarly, while UNCITRAL model clause incorporates a reference to the seat72, ICC does not introduce a sub-section for designating it. Yet, it is exclusively asserted that “The ICC Arbitration Rules do not limit the parties’ free choice of the place…..”73.

Besides lex arbitri, the seat of arbitration may also implicitly influence the choice of the law applicable to the merits of the dispute. As LCIA74 and ISTAC75 rules provide, in the absence of any explicit choice by the parties, the substantive law applicable to the dispute is that of the country where the arbitral tribunal has its place. Therefore, besides its gravity on the legal environment of the arbitration, due to its indirect impact on the substantive law applicable to the dispute in several occasions, suggesting that the law at the seat of arbitration has a more significant influence than the law applicable to the merits, would be a legitimate proposition. Affirmatively, in practice, an indirectly designated substantive law applicable to the arbitration is less of a concern and usually a less severe ground of negotiation than the directly seat-influenced system of law governing the arbitration.

70 Bělohlávek AJ, “Seat of Arbitration and Supporting and Supervising Function of Courts” [2015] Czech (& Central European) Yearbook of Arbitration 26. 71 See the recommended clause of LCIA at: ; Recommended clause of SIAC at: ; Recommended clause of ISTAC at: at page 21. 72 See UNCITRAL Arbitration Rules (2013) Annex, Model Arbitration Clause for Contracts. 73 See ICC Arbitration Rules (2017), Standard ICC Arbitration clause: 74 LCIA Arbitration Rules (2014), Article 16(2). 75 ISTAC Arbitration Rules (2015), Article 23(1).

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

The absolute content of lex arbitri shows variations among jurisdictions. There are undoubtedly a wide range of considerations while opting for a seat. Yet, the common decisive considerations of primary importance -mostly governed by lex arbitri- inter alia, are as follows76:

1. Mandatory Provisions of the National Arbitration Legislation: The level of clarity between mandatory and non-mandatory rules and the level of party autonomy granted.

2. Professional Requirements for the Arbitral Tribunal: Eligibility of the arbitrators.

3. Jurisdiction of the Arbitral Tribunal: Entitlement of the arbitral tribunal to rule on its own jurisdiction and court intervention to a challenge of arbitrator(s) jurisdiction.

4. Court Interference to Arbitral Proceedings: Minimalized grounds of court interference, the risk of excessive court interference and the risk of party manipulation to delay the proceedings.

5. Enforcement of the (foreign) Arbitral Awards: Limited grounds of enforcement, national courts’ willingness on allowing enforcement and procedural simplicity of enforcement.

6. Challenging the Arbitral Awards: Limited grounds of appeal, national courts’ willingness on granting a decision to set aside, procedural simplicity of the appeal and the estimated duration in which an award can be set aside.

7. Monetary Concerns: Fair cost allocation, certainty on cost recoverability and cost- effectiveness.

8. Practicality Considerations: Unique characteristic as a hub, locational convenience and facility availabilities.

76 Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th Oxford University Press) 205, 258, 304, 341, 440, 594 and 641.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

V. TACKLING THE KEY CONSIDERATIONS

1. Mandatory Provisions of the National Arbitration Legislation: The level of clarity between mandatory and non-mandatory rules and the level of party autonomy granted.

As touched upon, designation of a forum-shopped foreign seat, thus, an external lex arbitri, is restrictedly executable in so far as it does not dissent with any expressively or impliedly enacted mandatory provisions of the law of the seat of arbitration. Hence, in case of a conflict of laws between the foreign lex arbitri and the mandatory laws of the seat, the latter prevails and the mandatory laws will be binding over the chosen procedural law. The parties, then, cannot deviate from the mandatory provisions of the domestic law. “It may well be that the lex arbitri will govern with a very free rein, but it will govern nonetheless”77.

If parties to the agreement compromised on designating a foreign procedural law, such appointed law should on a vast scale, if not entirely, harmonize with the lex loci arbitri. In case that “forum-shopping” of procedural laws is preferred, a foreign law with limited and preferably lightly regulated “bright-line”78 mandatory provisions should be favored. Therefore, before opting for the delocalized view and choosing a foreign applicable law, its conformity with the mandatory provisions of the seat should be well studied. A higher possibility of a seat’s mandatory rules being in conformity with the external lex arbitri directly means more autonomy granted to the parties.

1.1 London

As is usual, it is quite a challenge to differentiate between the mandatory and non-mandatory provisions of a national arbitration legislation. However, EAA distinctly provides clear-cut explanations for this very matter by furnishing an explicit list for its mandatory provisions.79 Those stringent rules include, inter alia, the certain powers of the courts such as the power to stay legal proceedings80, extension of agreed time limits81, removal of the arbitrators82, the courts’ power to determine questions of a tribunal’s substantive jurisdiction83, the basic

77 Henderson A, “Lex Arbitri, Procedural Law and the Seat of Arbitration” (2014) 26 Singapore Academy of Law Journal 898. 78 Standardized provisions consisting of objective factors, leaving no room for further interpretation. 79 English Arbitration Act (1996), Section 4(1), 4(2) and Schedule 1. 80 English Arbitration Act (1996), Sections 9 & 11. 81 English Arbitration Act (1996), Section 12. 82 English Arbitration Act (1996), Section 24. 83 English Arbitration Act (1996), Section 32.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation duties of tribunals and parties84, enforcement of the award85, challenges to the (foreign) award86 and so forth.

Yet, even though the mandatory provisions under English legislation are indeed precise, a great deal of material issues regarding the conduct of the proceedings are heavily regulated and the parties’ autonomy on such matters are strictly limited. That is to say, a preference of foreign procedural law with its seat in London is most likely to conflict with domestic laws on multiple levels and the parties might not even be able to fully enjoy their autonomous decision of a foreign lex arbitri.

1.2 Singapore

Contrary to English legislation, IAA does not offer a certain list of mandatory provisions within itself, meaning there is no sufficient certainty on the contractually dispensable aspects which parties can depart from. However, the statute expressively mandates a limitation on the freedom to alter lex arbitri by stating that variations over lex arbitri is only allowed when they are not inconsistent with a provision of the Model Law and IAA87. Additionally, the reverse interpretation of its wording suffices to demonstrate that, by (not) emphasizing on phrases as “unless otherwise agreed by the parties” and suchlike derivatives, IAA implicitly provides a bare distinction between its imperative provisions and non-mandatory rules88. Thereby, bindingness of a certain rule is simply a matter of subjective interpretation which may then lead to different readings and applications among practitioners and authorities.

Since Singapore’s national arbitration legislation is mainly extracted from UNCITRAL rules, the level of party autonomy endorsed in the provisions are consequentially dominant over its mandatory rules. “The freedom of the parties to determine the rules …… allows them to tailor the rules according to their specific needs and wishes… The freedom of the parties is subject only to provisions of the model law, that is, to its mandatory provisions”89.

As a result, even though it lacks drawing of a clear line between its mandatory and non- mandatory provisions, Singapore’s international arbitration legislation is highly permissive on parties’ autonomy to alter lex arbitri by offering farther lightly regulated rules.

84 English Arbitration Act (1996), Sections 33 & 40. 85 English Arbitration Act (1996), Section 66. 86 English Arbitration Act (1996), Section 67 & 68. 87 International Arbitration Act (2002), Section 15A.(1). 88 Some mandatory provisions of International Arbitration Act (2002), including Article 34, 35 etc. 89 UNCITRAL’s Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, A/CN.9/264 (25 March 1985), Pg. 44-45.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

1.3 Istanbul

Similarly, neither TIAA nor TCCP does not explicitly provide a particular listing for its mandatory provisions. Since the legislation is partially enacted by UNCITRAL inspirations, the autonomy of parties’ is quite influential and there is no express indication of provisions being absolutely binding. Therefore, under Turkish arbitration legislation, the parties are only free to designate a foreign lex arbitri, subject to the mandatory provisions of TIAA90.

To the extent apprehensible by its wording, the imperative provisions -not to be subjected to any deviations, which are injected throughout the act- are mostly matters of due process and equal treatment. Such to be obligatorily respected rules consist, including but not limited to, the application to the court for an order to extend the arbitration period91, TIAA’s scope of application92, arbitrability of the disputes depending on its subject matter93, interim measures granted by courts94, statutory rule of odd number of arbitrators95, the right to a fair trial and equal treatment by the parties96 and impartiality97 and challenge98 of arbitrators.

1.4 Conclusion

To sum up, despite its self-evident mandatory rules of application, in case of a choice of seat as London, the party autonomy would be notably limited since a great variety of procedural issues are strictly regulated. On the contrary, Singapore and Istanbul mostly provide softer regulations on their domestic laws by leaving many matters of procedure to the discretion of parties and the arbitral tribunal. Yet, their national laws are not clear enough on severalizing the mandatory and non-mandatory provisions which in fact may pave the way for false and/or deficient interpretation. Notwithstanding, no matter mandatory or not, SIAC tends to regulate beyond procedural matters while TIAA, intentionally or not, provides alike procedural aspects in a straight-forward manner without detailed formulae. Such approach may as well forestall the unnecessary struggle on unimportant conflict of laws situations, but it can also free a certain spectrum of issues solely to the attention and judgement of the arbitrators. (See Chart 1).

90 Turkish International Arbitration Act (2001), Article 8(A). 91 Turkish International Arbitration Act (2001), Article 10(B).2. 92 Turkish Code of Civil Procedure (2001), Article 407 & Turkish International Arbitration Act (2001), Article 1(2). 93 Turkish Code of Civil Procedure (2001), Article 408. 94 Turkish International Arbitration Act (2001), Article. 6(5). 95 Turkish International Arbitration Act (2001), Article 7(A).1. 96 Turkish International Arbitration Act (2001), Article 8(2). 97 Turkish International Arbitration Act (2001), Article 7(C).1. 98 Turkish International Arbitration Act (2001), Article 7(D).1.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

Grading: Mandatory Provisions of the National Arbitration Legislation. 10 9 8 7 6 5 4 3 2 1 0 Level of clarity between mandatory and non- Level of party autonomy granted. mandatory rules. (10 = maximum autonomy) (10 = maximum clarity)

London Singapore Istanbul (Chart 1)

2. Professional Requirements for the Arbitral Tribunal: Eligibility of the arbitrators.

For the sake of smooth and effective arbitral proceedings, adequate composition of the arbitrators -holding the final say on the dispute- is undoubtedly a key measure. Within this regard, a lex (loci) arbitri employing prominent arbitrators whom are familiar with and experienced on the subject-matter of the dispute and also whom will not abstain from intervening in the procedural aspects when needed, would be the right choice99. An arbitrator eager to interoperate with the other members of the tribunal, particularly with the presiding arbitrator, should be preferred in the process of appointment100. In addition, nationality, language, occupation and availability are other considerations of such selection101.

2.1 London

Apart from certain procedural duties102 and the principle of impartiality103, there are neither any other statutory requirements of eligibility nor farther professional qualifications stipulated to the arbitrators within the scope of English arbitration legislation. Nevertheless, to what extent such gap in the law can be considered “conscious” is a question of subjective estimation.

99 Lincoln B, “Choosing an arbitrator” [2002] Victoria Focus 127. 100 Oglindă B, “Key criteria in appointment of arbitrators in international arbitration” (2015) 5 Juridical Tribune 127. 101 Mosk RM and Ginsburg T, Becoming an International Arbitrator: Qualifications, Disclosures, Conduct, and Removal 349-353. 102 English Arbitration Act (1996), Section 33.1(a). 103 English Arbitration Act (1996), Section 33.1(a) & LCIA Arbitration Rules (2014), Article 5(4).

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

From a personal point of view, the legal vacuum herein, is an intentional one. The main rationale behind English legislatives not feeling compelled to legally obligate arbitrator eligibility stems from their confidence placed towards the long-lasting arbitration history and culture. A projection of such advancement is the constitution of CIArb104, a non-profit charity based in UK providing professional qualifications, education, guidance, support and practice training to (prospective) arbitrators. More importantly, with London being an internationally accepted legal hub, it hosts first class arbitrators guaranteeing judicial excellence and integrity for the dispute, not to mention the long list of specialist arbitrators in various subject-matters105. Therefore, with the help of such arbitration awareness, sustained availability and great volume of expert arbitrators, it is highly likely to find adequate arbitrators in London, competent in the specific subject-matter of the dispute on hand.

2.2 Singapore

Just as England, Singapore’s arbitration legislation does not offer a particular setting for the statutory requirements of arbitrators other than impartiality and independency. Yet, distinctly, SIAC implicitly projects qualifications for arbitrators106 which may include nationality, experience, and area of specialty. Also, in a situation where arbitrators appear not to carry some of these pre-requisites, they may as well be challenged by the parties107.

Given the fact that Singapore comparingly has a newer arbitration infrastructure, covering the issue of arbitrator efficiency by imposing autonomous say is well-thought-off. If the statutory rules were to stipulate strict requisites for arbitrators, the overburden of professional requirements would not only discourage arbitrators to initiate the process, but also would drastically compress the range of selection. Instead, in disputes where detailed investigation and parallel expertise is absolutely required, parties can still simply agree on extra arbitrator qualifications.

2.3 Istanbul

Identically, besides impartiality and independence108, there are no special qualifications of eligibility for arbitrators envisaged by Turkish rules. ISTAC rules simply settle to state that its Board of Arbitration “shall take into consideration prospective arbitrator’s availability and

104 See more at: 105 Scott-Moncrieff L, “Arbitration: What Makes London So Special?” (15 November 2002). See at: 106 SIAC Rules (2016), Rule 13(2). 107 SIAC Rules (2016), Rule 14(1). 108 ISTAC Arbitration Rules (2015), Article 12.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation required ability to conduct the proceedings” while appointing the arbitrator109. However, unlike English codification, Turkish law provides room for party determination in terms of qualifications of the intended arbitrators110. Also divergently, the parties are not obliged to designate the arbitrator(s) from a “pre-approved” list. Thus, Turkish legislative framework grants independence on parties as to qualifications, authority, experience, nationality etc. of the arbitrators and to externally elect them.

As is seen, Turkish legislators opted for a softer regulation by still giving regard to party autonomy, which is sound. Due to yet unsettled arbitration infrastructure and newly enacted laws111, the arbitration consciousness within the legal climate of Istanbul is quite embryonic. Therefore, expecting full guidance and case experience from arbitrators whom are already a far cry from compared city arbitrators in terms of expertise, thereby coming up with statutory obligations, would just overload the selection process by clearing the way for the problem of arbitrator compliance.

2.4 Conclusion

Both seats of London, Singapore and Istanbul do not stipulate special requirements of arbitrator eligibility within their statutory framework. Yet, while Model Law inspired Singapore and Istanbul leads up to apply party autonomy by pre-agreeing on certain qualifications, London does not feel such necessity to regulate mainly because of its diversified number of eligible arbitrators. All these legislative approaches are befitting considering the current condition of their arbitration substructure. (See Chart 2).

109 ISTAC Arbitration Rules (2015), Article 15. 110 Turkish International Arbitration Act (2001), Article 7(B).3. 111 ISTAC Arbitration Rules came into force in 26 October 2015 & Turkish International Arbitration was ratified in 21 June 2001.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

Grading: Professional Requirements for the Arbitral Tribunal. 10 9 8 7 6 5 4 3 2 1 0 Eligibility of the arbitrators. (10 = maximum eligibility)

London Singapore Istanbul (Chart 2)

3. Jurisdiction of the Arbitral Tribunal: Entitlement of the arbitral tribunal to rule on its own jurisdiction and court intervention to a challenge of arbitrator(s) jurisdiction.

“Kompetenz-Kompetenz”, corresponding word-to-word with “jurisdiction on jurisdiction”, refers substantially to the principle whether an arbitral tribunal has the definite jurisdiction to decide on a dispute brought before it, and neutralizing the role of national courts on its competence112. So that a “Kompetenz-Kompetenz” acknowledged seat -since such principle in essence aims to satisfy the direct and the initial intent of parties’ (solving the dispute through arbitration)- should always be preferred. Anyway, most of the jurisdictions have already appreciated it.

Thereof, the various dimensions of court interference in case of a challenge on arbitrator(s) jurisdiction, becomes the eventual decisive consideration ultimately creating most of the difference on the seat’s lex arbitri. Within those dimensions, the most influential ones are, inter alia113, the timing of the court intervention114 and the employed procedure115 on different challenge scenarios. In other words, at which stage will the court take the challenge before its judgement and the complexity of procedural steps stipulated to a party during and after its challenge on arbitrator jurisdiction.

112 Hruskovicova K and Siwy A, “Austria: Who Decides Who Decides? ECJ Rules on the "Kompetenz-Kompetenz" Of Arbitral Tribunals” [2010] Schoenherr Roadmap`10 1. 113 The others include standards of the review, public power, cost savings, whether it automatically stops the arbitration, applicable laws on a challenge and so forth. 114 Park WW, “The Arbitrator’s Jurisdiction to Determine Jurisdiction” (2006) 13 ICCA Congress Series 14. 115 Park WW, “The Arbitrator’s Jurisdiction to Determine Jurisdiction” (2006) 13 ICCA Congress Series 18.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

3.1 London

With regard to “Kompetenz-Kompetenz”, English legislation grants the arbitral tribunal to decide on its own substantive jurisdiction, unless otherwise agreed by the parties116. The tribunal, therefore, enjoys a limited discretion on concluding whether the dispute brought before is within the scope of the arbitration agreement, since the provision is not a mandatory one offering parties autonomy on depriving tribunal from final say on its own jurisdiction.

Besides (non) jurisdictional objections raised directly to the arbitral tribunal117, English courts are also authorized by law to hold the final decision on tribunal’s self-appointed jurisdiction. Upon a prompt application indicating parties’ collective consent in writing or with tribunal’s permission to make this application, parties may ask from the courts of lex (loci) arbitri to decide on such preliminary point of jurisdiction118. Even though this claim is not a challenge by virtue -since the judgement is sought from the court before tribunal’s decision on its own jurisdiction- a technical challenge mechanism is also introduced under EAA. Accordingly, EAA gives parties the right to challenge any arbitration award (after finalization), per se on the ground of non-existent jurisdiction119, under the conditions provided by the referred sections of the Act120. On the other hand, the validity of the agreement and so the jurisdiction of the tribunal shall only be challenged under strict conditions, which are dependent on robust procedural matters of compliance, perhaps inserted into the law as an additional tool to reduce the costs121.

Considering all, after opting for the seat as London, the right to challenge the tribunal on its decision on jurisdiction -doesn’t matter positive or negative- is granted quite a lot of times to the parties within different stages of the proceedings.

3.2 Singapore

The principal of “Kompetenz-Kompetenz” is also adopted within UNCITRAL inspired Singapore arbitration legislative framework. The arbitral tribunal has the explicit right to determine its own jurisdiction by issuing a “preliminary award”122. If a party plans to oppose

116 English Arbitration Act (1996), Section 30. 117 English Arbitration Act (1996), Section 31. 118 English Arbitration Act (1996), Section 32. 119 English Arbitration Act (1996), Section 67.1(a). 120 English Arbitration Act (1996), Section 73 & 70(2), (3). 121 English Arbitration Act (1996), Section 72. 122 SIAC Rules (2016), Rule 28(2); International Arbitration Act (2002), Section 10(1); UNCITRAL Arbitration Rules (2013), Article 16(3).

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration such award directly to the tribunal itself, such plea must be raised no later than the submission of the statement of defense or in a statement of defense to a counterclaim123.

Yet, this preliminary award is also possibly subject to national courts’ judicial discretion. No matter the tribunal found self-jurisdiction or not, a dissatisfied party is entitled to challenge the preliminary award on jurisdiction and appeal to the High Court within 30 days after having received the notice124. Such approach -meaning both positive and negative decisions on jurisdiction constituting a ground for a challenge to the High Court- is a deviation from the Model Law125. It has also been acknowledged by the Singaporean Minister of Law as he clearly states that the High Court is also empowered on reviewing negative jurisdictional decisions126. Thereupon, unless a refusal for High Court’s granting of a leave took place, parties once again have the right to further challenge the High Court decision on the preliminary ruling and bring the case before the Court of Appeal127.

Hence, unlike England, the court interference regarding a challenge to a Singaporean tribunal’s decision on its own jurisdiction -no matter positive or negative- can only proceed within a single stage of the proceedings. Yet, also divergent from the English approach, the primary courts’ decision on tribunal jurisdiction could also be appealed once again to the higher court when the seat is Singapore.

3.3 Istanbul

As a gratifying indicator of the universal recognition of “Kompetenz-Kompetenz”, the Turkish legislative framework too adopts the principal within its statutory laws, authorizing the tribunal to rule on its own jurisdiction128.

Just like Singapore, also UNCITRAL inspired Turkish legislation requires that a plea on tribunal’s decision of its lack of jurisdiction has to be raised no later than the submission of the statement of defense, since it is considered a preliminary award129. However, distinct from the Singaporean approach and the English system, but similar to Model Law, the tribunal

123 SIAC Rules (2016), Rule 28(3). 124 International Arbitration Act (2002), Section 10(3). 125 UNCITRAL Arbitration Rules (1994), Article 6 & Article 16(3). 126 Singaporean Minister’s speech was in the Parliament at the second reading of the bill proposing the 2012 Amendment. Minister specifically cited Singapore Academy of Law (SAL) Law Reform Committee’s Report on the Right to Judicial Review of Negative Jurisdictional Rulings (January 2011), as being supportive of empowering the High Court to review the negative jurisdictional rulings by a tribunal as well. 127 International Arbitration Act (2002), 10(4), (5). 128 Turkish International Arbitration Act (2001), Article 7(H); ISTAC Arbitration Rules (2015), Article 9(2); Turkish Code of Civil Procedure (2001), Article 422(1). 129 Turkish International Arbitration Act (2001), Article 7(H).

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation decision on the existence of its jurisdiction may only be challenged before the courts after the award is rendered, as a ground for setting aside the award130.

So, the Turkish system clearly differentiates between positive and negative tribunal decisions on its own jurisdiction. While decisions of no jurisdiction cannot be brought before the court and can only be subjected to the tribunal within a single stage of the proceedings (prior to the statement of defense), a possible challenge to a self-appointing decision of existent jurisdiction is associated with court interference only after the arbitral proceedings, within the annulment stage.

Besides being distinctive, such sui generis approach brings about certain strengths and threats. A significant upside is that since the courts review the decision on jurisdiction as a secondary authority, the aspects meritorious to arbitrator competence will have to be decided by the judges, whose assessment will be more comprehensive than tribunal’s assessment. Yet, skeptically, this very fact may also result in biased judges with a preconception and possibly cloudy judgements about the challenge. However, this way of practice is also capable of minimizing the “foot dragging strategies”131 aimed to hinder the proceedings since a party seeking such tactic will not be likely to afford the cost of a challenge. On the other hand, this approach may as also unveil the risk of arbitrators displaying themselves competent just to be qualified for their statutory pay.

3.4 Conclusion

Within those fundamentally same, contrasting in detail dealings regarding the entitlement of the arbitral tribunal to rule on its own jurisdiction, there cannot be extracted any hard-edge conclusions as to the preferable or to-be-favored seat. This is since the issue dealt, after all, strongly depends on the different position and the claim(s) of the parties. However, certainly more decisive than recognition of the principal of “Kompetenz-Kompetenz”, the lex arbitri with the most result-oriented mechanisms available in alternative challenge situations offering various elbow rooms for parties, could be considered one jump ahead. In this regard, London proposes the most actions to be taken to a jurisdictional objection both from Singapore where both positive and negative decisions can be brought before the court within a single stage (before the submission of the statement of defense) and from Istanbul where the lex arbitri

130 Turkish International Arbitration Act (2001), Article 15(A)1.d. 131 Meaning that a party is using rules of procedure in a manipulative manner, in order to delay the proceedings.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration recognizes such challenges either within or after the proceedings (at the stage of appeal), dependent on the outcome of the tribunal decision being positive or negative. (See Chart 3).

Grading: Jurisdiction of the Arbitral Tribunal. 10 9 8 7 6 5 4 3 2 1 0 Entitlement of the arbitral tribunal to rule on its Court intervention to a challenge of arbitrator(s) own jurisdiction. jurisdiction. (10 = full entitlement) (10 = maximum intervention)

London Singapore Istanbul (Chart 3)

4. Court Interference to Arbitral Proceedings: Minimalized grounds of court interference, the risk of excessive court interference and the risk of party manipulation to delay the proceedings.

To what extent that the domestic courts -sitting in the jurisdiction of the tribunal- are legally allowed to intervene at and supervise through the arbitral dispute is yet another lex arbitri determined consideration. As an opposite surface of the “Kompetenz-Kompetenz” principle, local courts’ “satisfaction is generally of a prima facie existence of the arbitration agreement and deferring final adjudication of jurisdictional issues like validity and existence to the arbitral tribunal. Thereby, implying a minimal amount of judicial control in arbitration”132. As deduced from the remark herein, a minimized judicial control, or a strictly circumscribed court intervention, is the preferred arrangement when opting for a seat. And quite simply, the factual method for measuring through the extent of court intervention is by exhibiting the multiplicity of the instances and the grounds that a local court is entitled to get involved.

The court intervention is often perceived as a risk to the finalization of the award since the appointed judges are legally competent to block the proceedings upon discretion. This very matter is also rigidly linked with the pro-arbitration nature of the seat. Therefore the state’s, more precisely, the judiciary’s consensus on arbitration being a successful enough dispute

132 Aparajita G, “Role of Court Before and During Arbitration” (thesis) 7.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation resolution method and its degree of acceptancy throughout the domestic judicial system has a critical role deciding the seat’s pro-arbitration nature.

Apart from that, another risk considering local courts’ intervening to frustrate the arbitration seated in their jurisdiction, is the possibility of party manipulation by delaying proceedings through frequent court applications. A lex arbitri granting lots of court referral possibilities to the parties throughout the proceedings may be quite a dangerous choice if the element of trust is off against the opposition.

4.1 London

The grounds on which the English courts are entitled to assist the tribunal are: Enforcing a peremptory order133 when the order is not obeyed by the opposition within a time set134, interfering when a party is seeking to secure the attendance of a witness or obtain disclosure of documents or other evidence135, certain listed instances happening (taking of and preserving the evidence, making orders relating to the inspection, detention, sampling of property, sale of goods, granting interim injunctions etc.)136 and finally, by concluding on a question of law which arose during the arbitral proceedings137. While most of these instances are within the scope of party autonomy, thus available for parties to indicate otherwise, only EAA Section 43 is appointed as a mandatory provision giving no regard to party discretion.

While above grounds and instances may seem like a lot at the first glance, within their wordings they include a particular principal, which is the obligation to have exhausted all the available arbitral procedures before seeking supervision from the court. This very principal combined with the clear pro-arbitration nature of London, allows for an extraction of the fact that English legislation is designed in a way only to allow minimal interference for local courts. Hence, despite the various feasibilities of a potential court recourse, the supportive attitude of the national courts and their probability of interference being limited to a small fraction through legislation, are the pointers of a low likelihood of blockage by domestic courts when opting for London as the seat.

Another hazard attached to the court intervention, also diminished by national legislation, is the intentional delay of the arbitral proceedings by one party repeatedly applying to the

133 Meaning arbitral tribunal’s final order which stipulates a time for compliance. 134 English Arbitration Act (1996), Section 42. 135 English Arbitration Act (1996), Section 43. 136 English Arbitration Act (1996), Section 44. 137 English Arbitration Act (1996), Section 45.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration court138. Such risk is mitigated through giving the court the power to grant a stay of arbitration proceedings139 and giving the arbitral tribunal the final say on continuing the arbitral proceedings while the trial is pending140.

4.2 Singapore

Though they are generally executed by enforcement of tribunal’s interim orders, the grounds of a Singaporean Court assisting arbitral proceedings are quite extravagant since the potential enforcement of a High Court has, by law, been expressively subjected to “any kind of order” of the tribunal, no matter what the content is141. Those orders include essential ones as granting security for costs, discovery of documents, taking evidence or its preservation142 and securing the amount in dispute, etc. Besides, the court is entitled to grant interim measures to support the arbitration and the enforcement of the emergency arbitrator orders143.

The judicial control on arbitration in Singapore, therefore, is not necessarily minimized just by looking at the grounds of court interference even though the provisions are mainly borrowed from the Model Law. However, the Singaporean courts adopted an arbitration- friendly policy and attempt to keep a minimal level of judiciary intervention144. As a personal view, even though it carries the UNCITRAL nature of arbitration-friendliness and its judiciary consensus on supporting arbitration, the skepticism is still there since there are too many ways and grounds which can result in a frustration of the proceedings.

It might be the case that the Singaporean courts are time-wise efficient handling the applications, yet there is no mandatory or non-mandatory provision within its legislation stipulating a (possible) continuance of arbitral proceedings concurrently with a pending court trial. Therefore, the main point of criticism is the prospect manipulation of a malicious party. With a great deal of instances to bring before the court and a lack of statutory time limitation, a party with malicious intent may attempt to delay the proceedings with frequent applications to the court, even though Singaporean courts handle them in a rapid manner.

138 English Arbitration Act (1996), Section 12(2). 139 English Arbitration Act (1996), Section 9(4). 140 English Arbitration Act (1996), Section 32(4). 141 International Arbitration Act (2002), Section 12(6). 142 International Arbitration Act (2002), Section 12(1). 143 International Arbitration Act (2002), Section 12A. 144 See Alc v Alf, 2010 (Singapore High Court) & Equinox Offshore Accommodation Ltd v Richshore Marine Supplies Pte Ltd, 2010 (Singapore High Court).

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

4.3 Istanbul

As explicitly stated under TIAA, the only grounds for a possible court intervention to an arbitration proceeding is within the relevant articles of the act145. In this sense, Istanbul only permits judiciary control over arbitration regarding particular issues in relation with the granting of interim measures and tribunal orders of compliance with such court orders146, challenge and appointment of arbitrators147 and gathering of the evidence upon party request148.

Regarding the facts that grounds of court intervention are permitted in a conclusive manner within the act and they are intentionally compressed to a limited number, it is clear that the minimalization of the judicial control over arbitration proceedings is an already accepted principle. With an extensive facilitation of continual proceedings as such, Istanbul does not carry, at least legally, the risk of excessive court intervention and further frustration.

Since there is no provisionary mandate on the time limit of an assisting court’s decision within the TIAA, it is possible for a malicious party to intentionally delay the proceedings. However, whether several national legislations -as the TCCP providing that it is an “urgent matter”149 and the blanket clause of TCC providing a delay would be an “abuse of right”150- will suffice to deter a manipulative party, is questionable. After all, a provision within the TIAA on the time limit could have been directly forceful.

4.4 Conclusion

Mainly by putting trust on its pro-arbitration nature, London did not refrain from providing broader provisional grounds for court intervention. It also successfully diminished the risk of party manipulation, for the most part. Even though Singapore assumed the principal of minimal judiciary control through case law, it was not able to sufficiently reflect this principal to its arbitral codification and mitigate the risk of court intervention. Likewise, without provisionally stipulating a time limit on the intervening court’s decision, Singapore also chose to take the risk of possible malicious delay of the proceedings. While Istanbul explicitly adopted the advantageous doctrine of minimal judicial intervention to the arbitral proceedings and thereby principally surpassed the risk of excessive court intervention, its

145 Turkish International Arbitration Act (2001), Article 3(2). 146 Turkish International Arbitration Act (2001), Article 6(3). 147 Turkish International Arbitration Act (2001), Article 7(B).3. 148 Turkish Code of Civil Procedure (2011), Article 432. 149 Turkish Code of Civil Procedure (2011), Article 316. 150 Turkish Commercial Code (2011), Article 2.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration legislation did not straight-forwardly answer the need to mitigate the risk of manipulative delay of the proceedings. (See Chart 4).

Grading: Court Interference to Arbitral Proceedings. 10 9 8 7 6 5 4 3 2 1 0 Minimalized grounds of court Risk of excessive court Risk of party manipulation to delay interference. interference. the proceedings. (10 = minimal grounds) (10 = minimal risk) (10 = minimal risk)

London Singapore Istanbul (Chart 4)

5. Enforcement of the (foreign) Arbitral Awards: Limited grounds of enforcement, national courts’ willingness on allowing enforcement and procedural simplicity of enforcement.

The ability to execute cross-border enforcement -enforcing the award outside its seat- is an inherent advantage of arbitration over litigation. In this regard, the NYC stands as the main consolidative international framework providing simple common grounds of enforcement to foreign awards within signatory states. Therefore, above all, a proper choice of seat almost always requires the adoption of NYC on a national level151.

On the other hand, certain grounds of a challenge to the enforcement proceedings -put forward through national legislation and also case law- determines the extent of the proceedings. A cautionary notice has to be made here is that the preferability of those grounds being broad or narrow, will only be evaluated from the claimant’s standpoint hereafter. Since less grounds of challenge gradually hinder the risk of nonenforcement, a claimant with an affirmative decision is more likely to enforce the award with very limited grounds of challenge. Besides the volume on the grounds, local court’s being reluctant on reviewing challenges to enforcement, which is highly correlated with the pro-arbitration nature of the seat, is also relevant to this sub-factor. Hence, seats where the local courts are in principle

151 Bickford-Smith S, “Which Seat to Choose-London, Stuttgart, Paris or Edinburgh?” [2009] Landmark Chambers 2-3.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation hesitant on accepting challenges to the enforcement proceedings brought before them, are to be preferred.

Another sub-consideration often remained in the background is the procedural simplicity of the enforcement proceedings about the arbitral award. Again, from the claimant’s stance, complicated measures of compliance are simply formality obstacles blocking the smooth operation of the enforcement.

5.1 London

England is a signatory of the NYC with the reservation indicating that it will only be applicable to the enforcement of the awards rendered in the territory of another contracting state152. Therefore, a foreign award granted within a contracting state or a domestic award granted in England can be enforced in London as if it is a court order, upon permission of the court153.

There are several grounds on challenging an enforcement within the NYC ultimately deciding on the extent of enforcement, which the EAA directly enacted154. The grounds of appeal here however, are very limited and narrowed down to the imperative ones155. Besides, due to the strong pro-arbitration nature of London, its courts also adopt a strong pro-enforcement approach. “Enforcement is at the discretion of the courts and is rarely refused, usually only on the grounds of serious deficiency with the underlying arbitral award, or if the award cannot be enforced because the enforcement would be contrary to public policy in England”156. Although it is rare, there are precedents where English courts carried out their discretion and decided in favor of the challenge157. Those two facts combined make London a very advantageous seat of enforcement for the winner of the arbitral dispute.

Even though EAA requires procedural formalities at the stage of enforcement (certified copies, diplomatic translators, etc.)158, English courts have adopted the doctrine of “hollow

152 The full list of signatories and their reservations can be found at: 153 English Arbitration Act (1996), Section 66(1) and 101(2). 154 New York Convention (1958), Article 5 and English Arbitration Act (1996), Section 103(2). 155 Under EAA (1996) article 103(2), the grounds of appeal are respectively: Incapacity of a party, invalidity of the arbitration agreement, lack of proper notice, lack of jurisdiction, procedural distortion in the composition of the tribunal, award being previously set aside or not becoming binding in the country where it was made, the non- arbitrability of the subject matter, contrasting to public policy. 156 Ostrove M and Salomon CT, Choice of venue in international arbitration (Oxford University Press 2014) 272-273. 157 Yukos Oil Company v. Dardana Ltd, 2002 (Court of Appeal); Dallah Real Estate & Tourism Holding Co v. Ministry of Religious Affairs (Pakistan), 2009 (Supreme Court of United Kingdom). 158 English Arbitration Act (1996), Section 102.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration formalism” through case law, suggesting that the provisional requirements will not be strictly chased159. So, the legal procedural complexity is only surpassed to some extent, with soft law.

5.2 Singapore

Similar to England, while declaring that it is only applicable to the enforcement of the awards made in the territory of another contracting state, Singapore is a signatory to NYC160. Therefore, both domestic awards rendered in Singapore and foreign awards subject to the NYC can be enforced just as a court order in Singapore, upon the leave of Singaporean High Court161.

Even though the grounds of challenging an enforcement application -that the Singaporean legislation foresees- mainly corresponds with NYC, there are further grounds in the IAA which are distinct from the grounds set forth in NYC162. Hence, a claimant seeking enforcement is more likely to be faced with a challenge. This situation, however, has been averted by a court developed pro-arbitration reputation. Except for robust grounds on refusal163, a Singaporean court is likely to favor and allow the enforcement proceedings.

There is very little procedural complexity to an enforcement proceeding in Singapore, the formalities are surpassed to a great deal and the ex parte proceedings are believed to be over quickly, within a month164.

5.3 Istanbul

Partially different from London and Singapore, Turkey has ratified the NYC not only with the reservation that only the enforcement of the awards made in the territory of another contracting state will be considered as a “foreign enforceable award”, but additionally provided that the dispute -which has led to an enforcement- is considered as “commercial” under Turkish law165. Also different from London and Singapore, the enforcement of a foreign arbitral award in Turkey is not regulated through its arbitration legislation, but by Turkish International Private and Procedural Law (TIPPL) which just insufficiently states that final

159 Lombard-Knight v Rainstorm Pictures Ltd, 2012 (English Court of Appeal). 160 See at: 161 International Arbitration Act (2002), Section 19 and 29(1). 162 Deducted through a comparison between New York Convention (1958), Article 5 and International Arbitration Act (2002), Section 31(2), (4). 163 International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another, 2013 (Singapore Court of Appeal). The Singaporean Court has accepted to review a challenge to the enforcement on the grounds that the tribunal which rendered the award had no jurisdiction to conclude the dispute. 164 International Arbitration Act (2002), Section 35(2) & Ostrove M and Salomon CT, Choice of venue in international arbitration (Oxford University Press 2014) 389. 165 See at:

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation foreign awards are subject to enforcement, leaving the grounds of enforcement unstressed166. In the light of such facts, it is clear that the enforcement of foreign arbitral awards in Istanbul are left solely to the implementation of NYC without supervision on a national level.

The grounds on a challenge to the enforcement proceedings set forth by Turkish legislation are very compatible with the ones stipulated in NYC, in fact a direct extraction from the convention167. However, since the arbitration-friendly character of Istanbul is still not entirely accomplished, the courts do not hold a strong pro-arbitration approach on enforcement proceedings. There are specifically two risks when it comes to the court discretion in a challenge to the enforcement proceedings in Istanbul. First, since the arbitration consciousness of the judges are to a limited level, there is always the hazard of judges interpreting the grounds for refusal of enforcement too widely, i.e. by also including the grounds enacted in the civil litigation legislation of Turkey168. Second, case law presents that Turkish courts are very sensitive to public policy169 and usually accept public policy in broader terms than internationally accepted standards170. The above-mentioned factors suggest that courts of Istanbul might not be as trust-worthy as London or Singapore in terms of allowing enforcement procedures without blockages.

The procedure of enforcement in Istanbul, is quite a complex one. Under TIPPL, the formalities which must be followed (i.e. the need to have an exequatur for the enforcement, duly certified copies, etc.) are excessive. Additionally, a solid disadvantage to the claimant enforcing in Istanbul, would be the slow review by the courts which lasts for around 6 to 12 months with multiple hearings171.

5.4 Conclusion

Both London, Singapore and Istanbul are signatories of NYC and allow enforcement proceedings of foreign awards within their jurisdiction. Especially London, moderately Singapore, possess limited grounds of challenge to enforcement (to a certain degree) and their courts are arbitration-friendly, but courts of Istanbul did not reach to a full pro-arbitrative nature yet. While the procedural complexity has been precluded by London and Singapore,

166 Turkish International Private and Procedural Law Article 60. 167 Turkish International Private and Procedural Law Article 62 and New York Convention (1958), Article 5. 168 Carter JH and Baysal P, “Turkey” [2016] The International Arbitration Review 531. 169 Baysal P and Önder I, “Istanbul - Rising Star of International Arbitration” [2015] Corporate Disputes Magazine 186. 170 2003/1688 E, 2003/4438 K., (Turkish Supreme Court of Appeal). Even the fact that arbitrators deciding their own fees were considered as a ground to invoke the public policy argument, court did not let the enforcement claims to proceed. 171 Çınar E, “Enforcement of judgments and arbitral awards in Turkey: overview” 4

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration with current legislation Istanbul requires a demanding procedure with a likely long duration by comparison. (See Chart 5).

Grading: Enforcement of the (foreign) Arbitral Awards. 10 9 8 7 6 5 4 3 2 1 0 Limited grounds of enforcement. National courts' willingness on Procedural simplicity of (10 = minimal grounds) allowing enforcement. enforcement. (10 = maximum willingness) (10 = maximum simplicity)

London Singapore Istanbul (Chart 5)

6. Challenging the Arbitral Awards: Limited grounds of appeal, national courts’ willingness on granting a decision to set aside, procedural simplicity of the appeal and the estimated duration in which an award can be set aside.

The assessment of a preferable approach with regard to the grounds of appeal to an arbitral award is mainly subjective, depending on the position of the parties. From the standpoint of a claimant -who initially brought the dispute before the tribunal and was recognized with an affirmative tribunal decision- a seat where the legislation grants excessive grounds of appeal is unfavorable since this would automatically mean more defenses which the respondent can possibly invoke. Thereby, the risk of frustration would escalate. However, this very fact is not to be merely extracted by the law, national courts’ general attitude towards allowing (or refusing) appeals may ultimately be a game-changer.

A fundamental advantage of arbitration over litigation is its speed172. In this context, the appeal procedure giving finality to the award, has to be fast and fluent. First, the levels of appeal should be shortened in order to reach procedural simplicity. Also, if the duration of the recourse reaching to a final and enforceable decision takes objectively a long time, parties’

172 Edwards Ht, “Advantages of Arbitration Over Litigation: Reflections of a Judge” [1982] Conduct of the Hearing, Proceedings on the 35th Annual Meeting, National Academy of Arbitrators 23.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation initial intent of choosing arbitration would be completely ignored. Hence, the estimated duration of the appeal reaching finality is a side factor to be studied.

6.1 London

Under English legislation, a challenge to an arbitral award is available within three main grounds: In case of arbitral tribunal lacking substantive jurisdiction173, on the basis of “serious irregularity” affecting the arbitral tribunal, the proceedings or the award174 and finally on a point of law (subject-matter of the legal interpretation)175. Even though the specific situations calling forth a potential appeal within those grounds are regulated in an exhaustive manner, the grounds brought into the use of an appealing party are excessive. However, these instances are actually very limited in scope of application, in fact, this very matter is frequently underlined by case law. English courts, in principle, embraced a stringent approach against appeals and are not keen on setting the award aside without a solid base176. It is quite rare for an appeal -especially if the appealing party is invoking the “serious irregularity” defense or depending on a point of law- to be successful177. The appeal ground of tribunal’s lack of jurisdiction, on the other hand, is still often not entirely persuasive for the courts, but not impossible to lead to success178.

There are three levels for an appeal to an arbitral award, yet, exhausting all those levels in order to set the award aside is not compulsory. It also does not reflect the reality in practice. Further application to the High Court requires a permission of the Commercial Court, which is usually rarely granted179. Additionally, while the average estimated duration of the challenge proceedings are 1 to 2 months, the appeal takes approximately a year to reach judgement180. These together show that in London, the appeal procedure is quite simplified and prompt.

173 English Arbitration Act (1996), Section 67. 174 English Arbitration Act (1996), Section 68. 175 English Arbitration Act (1996), Section 69. 176 Ostrove M and Salomon CT, Choice of venue in international arbitration (Oxford University Press 2014) 269. 177 Athletic Union of Constantinople v National Basketball Association, 2002 (Court of Appeal). The merits of the case were not even reassessed by the court since the “serious irregularity” defense was invoked by the appealing party under EAA Section 68. & Kyla Shipping Company Ltd v Bunge SA, 2013 (English High Court). The appeal on a point of law was examined within a restricted deliberation. 178 Marshall R and Finlayson N, “Challenging Arbitration Awards” 4. 179 Jivraj v Hashwani, 2011 (Court of Appeal). It is one of the exceptional cases that a further appeal opportunity was granted to the appealing party. 180 Dahlberg A and Welsh A, “England and Wales” [2012] Arbitration Guide IBA Arbitration Committee 16.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration

6.2 Singapore

The grounds for setting the award aside in Model Law inspired Singapore are regulated as a dual structure -which are to be read conjunctively- mainly through UNCITRAL rules and by additional grounds set forth in IAA. The grounds developed by IAA -fraud in the making of the award and breach of natural justice-181 accompany the almost globally accepted grounds asserted by Model Law182, forming a moderate intensity on the grounds of appeal applied in the national level. Similarly, Singaporean courts are trying to keep the balance between “upholding the finality of the arbitration process and safeguarding its integrity”183. In fact, Singaporean High Court only sets the awards aside if there is straight foundation of a breach, meaning they are embracing a hands-off approach184. However, contrarily in some cases, the High Court also decided in favor of the appealing party who claimed that the general non- interventionalist approach should not always override the solid grounds of appeal185. Therefore, in case of a seat designation as Singapore, there is no explicit up-side or a significant preferable approach regarding the grounds of appeal or the courts’ general tendency to upheld challenges, since Singapore seems to adopt a stabilizing method.

The level of appeal procedures to the arbitral awards are two-tiered. A challenge must be brought within three months to the Singapore High Court following the date of the award’s receipt. If the appeal is unsuccessful, the appealing party - upon court permission- may apply to the Singapore Court of Appeal. There is no specific time with regard to the estimated duration of the appeal process since it highly depends on the effectiveness of the defense(s) invoked, yet, it can be estimatedly remarked that a challenge is often reached to a conclusion within 3 to 6 months following the application186. Within the provided information here, it can be concluded that the appeal procedure in Singapore is not entirely simple, but the court proceedings are prompter vis a vis the other dealt seats.

181 International Arbitration Act (2002), Section 24. 182 UNCITRAL Arbitration Rules (1985), Article 34(2). 183 Foyle E, “Challenging Arbitral Awards in Singapore” [2014] Kluwer Arbitration Blog 2 184 AJU v AJT, 2011 (Singapore Court of Appeal). The intention of the court was underlined by quoting “giving primacy to the autonomy of arbitral proceedings and upholding the finality of arbitral awards” & TMM Division Maritima and BLB v BLC, 2013 (Singapore High Court). It was stated that the courts should not “approach an award with a meticulous legal eye endeavoring to pick holes, inconsistences and faults in awards.” 185 AKM v AKN, 2014 (Singapore High Court). 186 The estimated duration herein is an approximate period studied by solely relying on the cases of AJU v AJT, 2011 (Singapore Court of Appeal) and TMM Division Maritima and BLB v BLC, 2013 (Singapore High Court).

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

6.3 Istanbul

The formulation of the appeal procedure of an arbitral award in Turkey is principally different than other legislations studied, in terms of its construction. The grounds are subject to a binary division, the ones which must be considered by the court ex-officio (upon court initiative) and the ones only to be directed by a party establishment (which must be proved by the party invoking it)187. However, the grounds are listed in an exhaustive manner and are content-wise almost identical with the ones applicable in London and Singapore, meaning they are standardized. The Turkish courts, on the other hand, do not strike a clear non- interventionalist attitude, especially when it comes to the ground of public policy. This sensitivity to public policy causes the courts to interpret the provision in broad terms and even to disregard the merits of the case while reviewing188.

There are two levels to an arbitral appeal, challenging the award before the Court of Appeal within 30 days of being notified on the award and the further chance to apply the Supreme Court Assembly of Civil Chambers189. Both TIAA and TCCP state that arbitral appeals will be decided by an expedited procedure within an urgent manner190. Yet, even though provisional measures as such are taken to shorten the process and prevent procedural complexity, review proceedings of arbitral appeals still take 1,5 to 2 years in practice to finalize, which is objectively a long time compared with other seats.

6.4 Conclusion

The grounds of appeal throughout the studied seats are standardized, not identical but similar in substance. Nevertheless, while the courts of London are following a true hands-off approach, Singaporean courts seem to set the award aside only when a solid ground(s) is brought before them. Turkish courts, on the other hand, do not show a clear non- interventionist approach, still lacking a pro-arbitration nature.

Levels to the appeal procedures directly influence the procedural simplicity and the estimated duration of the challenge. In this context, both seats of London, Singapore and Istanbul shortened their levels of appeal and simplified their procedures, only to a limited extent. The

187 Turkish International Arbitration Act (2001), Article 15(A). 188 2013/13- 1847 E., 2015/2020 K. (Turkish Supreme Court Assembly of Civil Chambers). The award was set aside on the grounds of contrasting public policy and possible non-jurisdiction of the arbitral tribunal without even fully reviewing the merits of the case. See also: 189 Turkish International Arbitration Act (2001), Article 15(A).1. 190 Turkish International Arbitration Act (2001), Article 15(A).5 and Turkish Code of Civil Procedure (2011), Article 316(1). f.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration seats with the shortest estimated duration to the longest are respectively Singapore, London, Istanbul. (See Chart 6).

Grading: Challenging the Arbitral Awards. 10 9 8 7 6 5 4 3 2 1 0 Limited grounds of appeal. National courts' willingness Procedural simplicity of the The estimated duration in (10 = minimal grounds) on granting a decision to set appeal. which an award can be set aside. (10 = maximum simplicity) aside. (10 = max. willingness) (10 = shortest duration)

London Singapore Istanbul (Chart 6)

7. Monetary Concerns: Fair cost allocation, certainty on cost recoverability and cost- effectiveness.

Because of its expensive nature, costs in general are considered as one of the worst characteristics of international arbitration among practitioners191. Yet, answers to inquiries such as what items are exactly included within the “costs” definition, how are the costs allocated between parties and to what extent costs are recoverable, have the final say on the cost arrangements of the proceedings in a particular seat. A seat, drawing explicit lines on the scope of the “costs” definition, providing certainty on fair allocation and recoverability of costs, is to be preferred.

Besides other optional and collateral costs, the cost of submission and the fee of arbitrators are usually the main determinants over the costliness or the cheapness of a seat. Nevertheless, since various arbitral seats introduced different cost items with respect to their monetary arrangements, their schedules of arbitration costs -arranged by the arbitration centers of the seats- requires a detailed check for an accurate estimation of the average costliness in each seat.

191 Friedland P and Mistelis L, “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration” (White & Case, Queen Mary University of London School of Arbitration) 7. In the survey, 68% of practitioners decided that usually high cost of arbitration is the biggest disadvantage of international arbitration.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

7.1 London

The scope of “costs” under English legislation encompasses fees and expenses of the arbitrators and of any arbitral institution, along with the legal and “other” costs of the parties192. Except parties agree otherwise or tribunal finds the costs inappropriate considering the circumstances, costs in a London-seated arbitration will “follow the event”, meaning the losing party is obliged to pay the reasonable costs of arbitration193. The recoverability of arbitrator fees and expenses are feasible to the extent that those items are reasonable. An autonomy is also granted on the parties to decide which costs are “recoverable”, yet, with lack of agreement on this matter, the tribunal has the discretion to decide194. Since one of the main focal points behind the ratification of EAA was cutting costs to a minimal level195, these features all bring about positive impacts to the monetary infrastructure of English arbitration on paper. But in reality, issue of costs may be considered as the “Achilles’ heel” of LCIA arbitration when the average estimated costs are calculated.

A 10 Million Euro196 worth dispute in London, can amount to an overall anticipated average cost of 498,107.32€ (with 2, 035.58€ of LCIA registration fee, 34,647.39€ of time spend by the Secretariats of LCIA on hourly basis, 180,692.96€ of tribunal fees and expenses, 280,731.39€ of legal and “other” costs)197. Both objectively and comparingly, it can be concluded that London-seated arbitral proceeding costs are quite astronomical, possibly the costliest around the globe.

7.2 Singapore

SIAC administration, arbitrator and expert costs are decisively listed under “costs of arbitration” in Singapore198. Unless otherwise agreed, Singaporean legislation presumes extensive discretion to the tribunal itself199, whom then -likewise London- apply the principle

192 English Arbitration Act (1996), Section 59(1). 193 English Arbitration Act (1996), Section 61. 194 English Arbitration Act (1996), Section 63 & 64(1). 195 Bickford-Smith S, “Which Seat to Choose-London, Stuttgart, Paris or Edinburgh?” [2009] Landmark Chambers 7. 196 Both the amount here and the following amounts are converted respectively from the currencies of GBP, SGD and TRY, as of 8.05.2017. 197 The estimation here is calculated in respect to LCIA Schedule of costs (found at ) by the help of unofficial online LCIA Arbitration Cost Calculator. The estimation is calculated on the assumptions of a three- arbitrator dispute, without experts or emergency arbitrators, with a low complexity dispute and with the rates of common arbitration lawyers, not corporate firms. Further sources of the assumption can be seen at: 198 SIAC Rules (2016), Rule 35(2). 199 SIAC Rules (2016), Rule 35(1). The arbitral tribunal’s discretion on costs can also be implicitly extracted from International Arbitration Act (2002), Section 20(1) c.

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration of “costs follow the event” through case law200. Yet, this provisional gap, no matter intentional or not, is likely to cause uncertainties and mistrust in cost allocation. In addition, SIAC rules oversees the tribunal, administration, legal and expert fees -meaning all costs- as recoverable.

A 10 Million Euro worth dispute held by SIAC will have the overall average estimated cost of 281,580.57€ (with 1,290.11€ of case filing fee, 258,985.59€ of arbitrator fees, 21,304.87€ of administration fees)201. Even though Singapore-seated arbitral proceedings seem to be less costly when compared to London202, it would be a total misstatement to voice that Singapore offers a truly economical and an inexpensive price.

7.3 Istanbul

Turkish legislation has accepted a wide content within the “costs” description and conclusively indicated the cost items. These are mainly the arbitrator costs and expenses, expert’s and witnesses’ fees and other expenses, attorney fees, costs charged due to court applications and finally the notification expenses203. Unless otherwise agreed, all costs and expenses of the proceedings are to be paid by the losing party. However, in a situation where the award is rendered partially in favor of both parties, both parties will be responsible from the costs depending on their degree of success which the tribunal will then post facto decide204. On the other hand, Turkish legislation or case law does not offer a precise solution as to which costs are “recoverable”. Accepting such nullity as an intentional silence, the selected arbitration set of rules or the tribunal itself will have the ultimate discretion upon the recoverability of the costs. In light of sub-factors above, the issue of costs in an Istanbul- seated arbitration are exclusively dealt in favor of parties with respect to party autonomy.

A 10 Million Euro worth dispute heard under ISTAC will lead to an overall estimated average cost of 208,188.27€ (with 74.81€ of registration fee, 42,482.23€ of administrative costs, 165,631.23€ of tribunal costs)205. The amount is reasonable and quite affordable considering

200 VV and Another v VW, 2008 (Singapore High Court). See also: 201 The amount is calculated by SIAC’s official cost calculator, with the number of arbitrators accepted as three. See at: 202 “The Costs of Arbitration” [2015] Arbitration: What In-House Lawyers Need to Know 2 203 Turkish International Arbitration Act (2001), Article 16(B) & ISTAC Arbitration Rules (2015), Article 41(2). 204 Turkish International Arbitration Act (2001), Article 16(D) and Turkish Code of Civil Procedure (2011), Article 442(4). 205 The estimation is calculated by the help of ISTAC’s official cost calculator. See at:

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation the high value of the dispute, notably when compared with arbitral proceedings seated in Singapore and especially London.

7.4 Conclusion

All of these seats explicitly regulated what items specifically encompass the definition of “costs”. While Singapore successfully covered its provisional gap on cost allocation through case law, Turkish case law did not choose to fill its legal vacuum on cost recoverability. However, both dealings still can possibly lead to vagueness and further misconduct since they presume exaggerated discretion on the arbitral tribunal.

Even though London-seated proceedings enjoy the favorable index of its well-organized substructure on the arrangement of costs, arbitration costs being neutrally over the odds is undoubtedly the biggest handicap of LCIA arbitration. Singapore, on the other hand, is also not considered as a truly cost-efficient seat. Yet, if the case-related upsides -specific to Singapore- are sufficient to outweigh the costs, the final amount may appear reasonable to proceed with. Finally, Istanbul-seated arbitral proceedings, being the most inexpensive of all, bids the most budget-friendly costs. (See Chart 7).

Grading: Monetary Concerns. 10 9 8 7 6 5 4 3 2 1 0 Fair cost allocation. Certainty on cost recoverability. Cost-effectiveness. (10 = maximum fairness) (10 = maximum certainty) (10 = maximum cheapness)

London Singapore Istanbul (Chart 7)

8. Practicality Considerations: Unique characteristic as a hub, locational convenience and facility availabilities.

Besides mainly legislation-based considerations originating from a seat’s set of arbitral rules, in-advance scrutiny on the seat’s major practical determinants is vital for practitioners prior

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration to a designation. In this sense, a seat with the special features of being a world-wide famous legal or financial center, holding a convenient location and having capacious facilities for the conduct of hearings and other proceedings, is considered one step ahead.

8.1. London

“The city of London is a legal centre- not just a financial one” the English Lord Chancellor and Secretary of State for Justice once declared206. There is no doubt that London possesses a highly condensed legal environment and a long-established legal culture, providing beyond measure expertise for clients particularly in the field of international arbitration. The absolute business and legal hub nature of London automatically resulted in formation of a large variety of law firms in the city, as well as attracting the national champions all around the globe207.

Even though London does not substantially enjoy a proper strategical position location-wise, its easy transportational accessibility along with its broad facility availabilities readily covers up such not-so-critical deficit. The IDCR, London’s leading facility for the conduct of the proceedings, and CIArb combined offers more than 50 modern and fully equipped rooms and facilities for hearings, meetings and other events208.

8.2. Singapore

There is no doubt that Singapore made a name for itself for being a world-wide financial hub, ranking the 3rd most competitive financial centre according to the GFCI and ranking 2nd in PWC’s City of Opportunity Index209. Allegedly the second biggest financial hub after London210, Singapore’s financial business volume sparked off the establishment of large law firms, making it also a regional legal hub with a lot of arbitral case work load. Yet, it still did not quite dodge its reputation on being only an arbitration center for region-related disputes211. In order Singapore to be a truly international arbitration hub like London, it needs to go beyond local cases and attract disputes from different parts of the globe.

206 Kenneth Clarke H, “Lord Chancellor and Secretary of State for Justice Rt. Hon Kenneth Clarke MP Speech 14 September 2011” (CityUK Future Litigation event Clifford Chance). 207 Seraglini C and Nyer D, “The battle of the seats: Paris, London or New York?” [2011] PLC Arbitration 6. 208 See at and 209 Jun Jie W, “Singapore’s Transformation into a Global Financial Hub”, 2017, National University of Singapore/ Lee Kuan Yew School of Public Policy 1. 210 Roman D, “Watch Out London, Singapore is Next in Line as Best Financial Hub” (September 7, 2016) 211 Wilske S, “The Global Competition for the 'Best' Place of Arbitration for International Arbitrations - A More or Less Biased Review of the Usual Suspects and Recent Newcomers -” [2008] Asia Arbitration Journal 50.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

Singapore has quite a unique characteristic location-wise, standing as the binding bridge between the Eastern and the Western commercial worlds212. Additionally, Maxwell Chambers in Singapore, “Asia’s first fully-integrated dispute resolution complex with state-of-the-art hearing facilities”, offers up to 72 fully-equipped hearing rooms for the conduct of arbitral proceedings213.

8.3. Istanbul

Although it would not be quite realistic to argue that Istanbul’s current as a business center will draw near to London or Singapore in the near future, the financial hub characteristic of Istanbul is on a rise214. With such added-value, and along with its arbitration consciousness continuing to grow, formation of more and more law firms in Istanbul -which mainly deal with arbitral disputes- are likely to increase.

As a result of Istanbul’s strategical location, Turkey is the “closest Western state to the East and the closest Eastern state to the West.” 215. Such strong geographical advantage of Turkey, forming the bridge between Asia, Africa and Europe, along with its easy transportational accessibility, makes Istanbul a powerful candidate to become a regularly preferred arbitration center216. Lastly, even though not as capacious as London or Singapore, Istanbul also supplies a variety of equipped facilities for hearings, conferences and meetings for the practitioners and the parties to the dispute217.

8.4. Conclusion

London and Singapore are globally accepted financial and legal hubs, providing the clients exceptional legal expertise before and during arbitral proceedings, while Istanbul is trying to advance on this very same track. London does not truly possess a centered position around the globe, yet, Singapore and especially Istanbul enjoy a rare geographical advantage deriving

212 Poulsen L, “International arbitration venues: emerging hotspots” (September 11, 2007) 213 See at and 214 Koç YE, “World’s New Financial Hub: Istanbul” (New Turkey January 24, 2017) 215 Akıncı Z, “Why Center for Arbitration in İstanbul?” [2014] Journal of Yaşar University 92. 216 Erdoğan E and Vural Çelenk B, “The Culture of Dispute Resolution in Turkey and The Istanbul Arbitration Centre” (2016) 7 Law & Justice Review 162. 217 Aydın A, “Istanbul Arbitration Centre” [2016] Kluwer Arbitration Blog 2 & see also:

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration from their strategical location. Both seats seem to provide extensive facilities for the conduct of the proceedings, but a fair alignment, from the most capacious to the least, would be Singapore, London and Istanbul. (See Chart 8).

Grading: Practicality Considerations. 10 9 8 7 6 5 4 3 2 1 0 Unique characteristic as a hub. Locational convenience. Facility availabilities. (10 = complete hub nature) (10 = maximum convenience) (10 = maximum availability)

London Singapore Istanbul (Chart 8)

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

VI. FINAL CONCLUSION

An absolute grip for a far-reaching understanding of the weight of the “seat” conception and its designation in international commercial arbitration demands a multidimensional treatment. For the sake of employing such approach, framing the main argument on the terminological, theoretical and practice-related dimensions of the seat and its determination appears to be a fundamental necessity. For as much as, there is not any single featured remark wholly corresponding to the factual importance of the seat, it is the aforementioned magnitudes unifying and composing an all-inclusive breakdown of its gravity and designation.

The terminological perception of the seat failed to show a clear universal conformity, in addition to being often misconceived among the jurisdictions of London, Singapore and Istanbul. As different arbitral institutions, centers and legislative bodies introduced various incompatible terminologies for the “seat” and its derivatives, leaving room for all sorts of misunderstandings, an urgency to compromise on a global definitional precision came up. In accordance with this purpose, a transnational language where the “seat” or the “place” of arbitration only refers to the nation where the arbitration has its legal domicile, the “venue” or “forum” of arbitration only indicates the physical location where the arbitration proceedings takes place, the “lex arbitri” only implies the national legislation applicable to the arbitration proceedings and the “procedural rules” only means the overall set of procedural ordinances, has to be constituted. Adequate clause drafting which a harmonized terminology brings along will substantially avert potential contractual ambiguities in international arbitration.

Screening their pearls and pitfalls and setting the case specific standpoints on the seat- centered theories is often neglected by arbitration practitioners, yet it carries a significance to the core when opting for a seat and asserting its factual gravity. Noticeably, with the worldwide harmonization of the international arbitration rules, there is an unquestionable universal trend towards delocalization. However, an elaborative analysis displays that there is no single dominant winner amongst the main approaches to the seat since the seat theory also brings along equally influential features on the course of events throughout arbitral proceedings. Completely disregarding the seat theory may, thereby, cost the parties to lose the use of various practical tools. In fact, seats of London and Singapore actually prioritized the seat theory, while Istanbul seems to embrace both approaches. Hence, such self-evident set-up signalizes that the global race on being the most “arbitration-friendly” seat should not be perceived solely as adopting the transnationalist view as it presently is, it should be on the

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The Gravity of the Seat and Seat Designation in International Commercial Arbitration point of cherry-picking the advantageous components of each theory and creating a truly arbitration-friendly environment. Only then, the parties will be able to determine which theoretical approach -and subsequently which seat- to opt for after studying the case specific features and facts of the dispute.

An accurate designation of the seat requires a detailed examination of the practice-related key considerations specific to the seat inclined. In this context, seats of London, Singapore and Istanbul, incorporating both preferable and undesirable factors within their law, stand as the perfect indicators for the key considerations to be studied through. There are actually no game-changing unique regulations within London’s arbitral legislative framework, but the rules are simply almost always established in an inclusive manner, capable of overreaching the potential future complications. However, what substantially makes London the current “champion” and more appealing to the players of arbitration, is the seat’s pro-arbitration nature. The “rising star” Singapore, on the other hand, was able to set a solid arbitration legislation infrastructure while concurrently thriving to fully embrace an arbitration-friendly approach. Even though its arbitration center was newly established, Singapore seems to be taking advantage of the fact that it is a true economical hub. Finally, the “rookie” Istanbul, also succeeded to set up a robust arbitral legislation groundwork, but failed to integrate the proper arbitration consciousness within its judiciary. In fact, Istanbul needs to improve its pro- arbitration nature through positive case law, to fully make use of its exceptional strategical location.

Just as there is no single prominent index to measure the true gravity of the seat, there is no one simple best option when it comes to deciding on a seat. Every choice of seat comes along with its preferable and undesirable considerations, so the main game-plan for arbitration practitioners should be well-investigating and in-advance analyzing the key considerations exclusively special to the case and the dispute on hand. With this purpose in mind, this paper not only lays down the true importance of the seat through varied dimensions, it also serves as a genuine practical guideline for practitioners on how to designate the seat.

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An Overview of London, Singapore and Istanbul Arbitral Practice & Legislation

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