The presented article is devoted to exploring the possible existence and implication of regional agreement or convention that regulates the conduct of international commercial arbitration and the enforcement of arbitral awards regarding the members of the Organization of Turkic States.
It is worth noting that this topic has obtained relevance on the eve of the First International Law Congress of Turkic States, which will be held on May 13–14 in Istanbul. Particularly, the establishment of a joint arbitration center for the Turkic States and the common mediation and arbitration mechanisms are considered to be the subjects expected to be dedicated by legal professionals with the aim of strengthening the comprehensive integration between the Turkic States in the legal field.[1] Undoubtedly, this academic event will also involve participants from different countries and will lead to important results.
The Organization of Turkic States, which includes Azerbaijan, Kazakhstan, Kyrgyzstan, Türkiye, Uzbekistan, and observer states such as Hungary, Turkmenistan, and the Turkish Republic of Northern Cyprus, has been serving to strengthen the economic integration.[2] Taking into account the continuing dynamics in mutual trade and investment activities, it’s necessary to establish an effective dispute settlement mechanism in order to solve the disputes arising from commercial or investment operations.
The role of arbitration
As previously mentioned, due to the increasing scope of cross-border trade and investment projects implemented by the engaged states, the encouragement to establish a shared legal framework for resolving international commercial disputes becomes unavoidable.
Contrary to complicated litigation procedures brought before the local courts, arbitration as one of the dispute resolution methods is considered to be a preferred legal instrument for resolving commercial disputes concerning international trade because of its neutrality, efficiency, enforceability, and costly affordability. Notwithstanding, it is possible to note that any kind of the disruptions leading to obstacles in regional economic development also shall be eliminated by various alternative dispute resolution methods such as negotiation and mediation practices. The flexibility of international arbitration ensures the parties to maximize their income with opportunity to minimize their risks by the properly drafted dispute resolution clauses.
Certainly, providing the uniform juridical structure for recognizing and enforcing arbitral awards between the OTS countries will lead to the following advantageous:
- Formulating the legal predictability for investors and business. On the other hand, the assumed agreement will have an essential influence on investing confidence.
- The solid dispute resolution framework may accelerate the reinforcement of foreign direct investment (FDI) and regional trade.
- The unified dispute settlement mechanism will bring the OTS to the global position among other organizations. Therefore, if the OTS grows its influence, a collective approach to arbitration inevitably will consolidate the region’s position in international trade and diplomacy. By harmonizing its practices with the international standards, the OTS may attract global businesses and create a more sustainable investment environment.
Consequently, within the Organization of Turkic States (OTS), the need for a comprehensive unified legal framework to regulate arbitration process and ensure the enforcement of arbitral awards occupied a pivotal role in the light of vasting economic cooperation and investment initiatives between member states. Despite the fact that there is currently no publicly available agreement specifically governing international commercial arbitration between the OTS members, such an initiative could significantly enhance economic cooperation and investment security.
Note:
- In the context of the energy sector it should be noted that the members of OTS make a valuable contribution to the EU's policy on the diversification of energy supply sources. For instance, Southern Gas Corridor which is consisted from the Trans-Adriatic (TAP), Trans-Anatolian (TANAP) and South Caucasus Pipeline Expansion (SCPX) pipelines delivering natural gas from the Shah Deniz gas field of Azerbaijan to Europe are important for the EU because it also opens the energy door to the other countries of the Caspian Sea especially Kazakhstan and Turkmenistan. Similarly, the Baku-Tbilisi-Erzurum pipeline project where the natural gas from the biggest gas field Shah Deniz which is located in Azerbaijani territory of the Caspian Sea is reaching Europe via Georgia and Turkish gas network. In addition it is necessary to mention the largest operational oil pipeline Baku-Tbilisi-Ceyhan (BTC) represented the oil industry power of the country. The increasing volume of transit of Kazakh oil through the Baku-Tbilisi-Ceyhan (BTC) pipeline will promote the actualisation of maritime infrastructure due to the geographical factor.
The EU as a big trade partner of Azerbaijan is interested in expanding its investments and to create strong connections in the Southern Caucasus region. Worth mentioning that the security and stability in the South Caucasus matches the interest of the EU policy according to the security of energy supplies from the Caspian region. Moreover, during the energy cooperation period Türkiye by hosting the different energy pipelines recommended itself as a trustable transit partner which made a worthwhile contribution to the sustainable energy supplies of the EU.
Though it is not immune from criticism, The Energy Charter Treaty (ECT) until now is considered to be a singular binding legal instrument to the international energy trade regulation document which was adopted after the end of the Cold War to support the dynamic of cross-border energy cooperation between different international partners.[3] The main feature that makes the Energy Charter Treaty (ECT) unique is a wide geographical spectrum including a lot of the members from the energy importers and exporters countries.[4] All the members of the Organization of Turkic States joined the mentioned multilateral treaty. Undoubtedly the dispute resolution provision is the distinguishing element of the ECT by defining it as an international legal forceable instrument to protect the foreign investors in the energy related trade agreements.
Generally there are several types of arising disputes in the international oil and gas fields:
- states versus states (interstate arbitration)
- company vs. state disputes (investor-state)
- company vs. company disputes
- individual vs. company disputes [5]
Under the auspices of the geographical aspect various energy projects which have been realized in the territories of the OTS members certainly affect the energy and business map of Europe besides the creation of new job opportunities and covering the growing energy demand of Europe.
- Regarding the transit routes, a special attention was devoted to the development of the Middle Corridor which occupied an important place in global logistic operations. By concerning China, Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, Turkey, and Europe, it is determined as an efficient alternative modern transport route. Particularly the Middle Corridor is actively integrated into global China’s Belt and Road Initiative.
Principal Points of the Proposed Arbitration Agreement
- Establishment of a Turkic Arbitration Center
A regional body responsible for governing arbitration proceedings. A centralized arbitration institution, headquartered in one of the cities of the OTS, is entitled to operate as a neutral and authoritative body to oversee arbitration proceedings. Taking into consideration the experience of existing arbitration institutions and strong economic power, Türkiye’s would be a more admissible destination in this case.
- Unified Arbitration Rules
In the absence of an agreement between the parties the arbitration process is conducted by the adopted set of procedural rules governing arbitration, including appointment of arbitrators, conduct of proceedings, providing the interim measures and evidentiary rules.
- Recognition and Enforcement of Arbitral Awards
The arbitration awards rendered by the arbitral tribunal shall have the force of a final judgement without possibility to appeal. However, based on international experience it is not excluded that under the certain prescribed conditions an arbitral award may be annulled by the application of parties.
- Language and Place of the Arbitration
The parties are free to agree on the language. Notwithstanding, the official arbitration language may be chosen from listed official languages of the OTS. The seat of an arbitration shall be determined within the OTS territories.
- Promotion of the Mediation and Conciliation
The agreement should encourage alternative dispute resolution methods prior to arbitration in order to promote amicable settlements.
- The Framework for Non-Enforcement
The recognition and enforcement of arbitral awards may also be refused if the competent authority of a state finds it controversial to the public policy of that state.
Comparison
Historically, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards facilitated the arbitration sphere worldwide by requiring signatory states to enforce foreign arbitral awards. Until now the New York Convention of 1958 year is considered to be a fundamental legal instrument regulating the enforcement matters. Simultaneously, the arbitration field has faced some changes since that time. The appearance of regional conventions in the different parts of the world illustrated the importance of arbitration on the local scope either.
To summarize, the global arbitration framework was supplemented by the regional arbitration agreements or conventions. There are some example of these conventions:
- European Convention on International Commercial Arbitration (Geneva Convention of 1961). The given convention is distinguished from the New York Convention (NYK) by a wide spectre of contents. For instance, it covers the appointment of arbitrators, applicable law, objection to jurisdiction, etc. The convention regulates the international commercial arbitration process between physical or legal persons of European countries. [6]
- The Arab (Amman) Convention on Commercial Arbitration (1987)
- Inter-American Convention on International Commercial Arbitration of 1975 (Panama Convention). It was concluded by the Governments of the Member States of the Organization of American States. The functions of convention are to regulate international commercial arbitration and the enforcement of arbitral awards between. [7]
[2] https://www.turkicstates.org/en/member-states
[3] Bram Delvaux, EU Law and the Development of a sustainable, competitive and secure energy policy. Opportunities and Shortcomings; p.83
[4] Andrei Konoplyanik and Thomas Walde, Energy Charter Treaty and its Role in International Energy (Journal of Energy & Natural Resource Law - 2006); Vol 24 No 4; p. 524
[5] A. Timothy Martin, Dispute Resolution in the international energy sector: an overview; p. 334-336
[6] https://www.newyorkconvention.org/media/uploads/pdf/1/0/104_othertreaties-1961-genevaconvention.pdf
[7] [https://www.oas.org/en/sla/dil/inter_american_treaties_B-35_international_commercial_arbitration.asp