Türkiye’s recent treaty practice reveals its aim to establish a balance between increased regulatory policy flexibility and ongoing investment openness. Türkiye has signed several bilateral investment treaties (BITs) containing investor–state arbitration clauses and has been a Contracting State to the ICSID Convention since 1988, as well as a party to the Energy Charter Treaty (ECT) since 1994.

Türkiye also terminated several BITs between 1987 and 2008, often because these were replaced by broader economic agreements or renegotiated to reflect more contemporary standards on investor protection and regulatory space. This approach reflects Türkiye’s broader policy to modernise its investment treaty network while avoiding automatic consent to outdated or overly restrictive ISDS formulations.

In addition, within the Presidency of the Republic of Türkiye, under the Directorate of Administrative Affairs – General Directorate of Law and Legislation, a specialised administrative unit has been established – the Department of International Arbitration and Alternative Dispute Resolution (Uluslararası Tahkim ve Alternatif Çözümler Daire Başkanlığı). This unit co-ordinates Türkiye’s defence strategy in international investment disputes, prepares state submissions, monitors global ISDS developments and provides inter-institutional consultation with relevant ministries and regulatory agencies.

Türkiye’s engagement is not limited to ICSID. It also plays an active and sustained role in the UNCITRAL Working Group III (ISDS Reform) process, which constitutes the principal global platform for investor–state arbitration reform. Turkish government officials regularly participate in WG-III sessions, submit written and oral comments, and collaborate with other states and the UNCITRAL Secretariat on the design of a reformed ISDS architecture. Türkiye has advanced detailed positions on:

• the development of a Code of Conduct for arbitrators and adjudicators;
• enhanced transparency obligations;
• regulation and disclosure of third-party funding;
• security for costs and protection against frivolous or abusive claims;
• procedural economy tools, including early dismissal mechanisms;
• ethical standards and conflict-of-interest safeguards for arbitrators;
• the potential establishment of a Multilateral Investment Court (MIC) and an appellate mechanism; and
• the creation of an Advisory Centre on International Investment Disputes (ACIIS) to support developing and middle-income states.

Türkiye’s broader reform agenda within UNCITRAL complements its written submissions during the ICSID Rules Amendment project, submitted through the Ministry of Industry and Technology and the Ministry of Energy and Natural Resources, which addressed third-party funding, security for costs, provisional measures, arbitrator disqualification standards, mediation and the publication of decisions. Türkiye participated in the 2019 Washington ICSID meeting and continued to contribute to subsequent working papers, particularly Working Paper No 4.

Overall, Türkiye’s national position reflects neither a wholesale rejection of investor–state arbitration nor unconditional acceptance of traditional ISDS structures. Rather, Türkiye advocates for measured, modernised and more balanced ISDS mechanisms that preserve regulatory autonomy while maintaining access to neutral dispute resolution fora. As global reform efforts progress, Türkiye’s future investment treaties are expected to adopt more calibrated or restructured ISDS clauses, in line with evolving UNCITRAL and ICSID reform benchmarks.

Türkiye is a party to several major arbitration conventions, including the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention”), the ICSID Convention, and the European Convention on International Commercial Arbitration. Türkiye signed the ICSID Convention on 24 June 1987, the European Convention on 21 April 1961, and ratified the New York Convention on 2 July 1992. Türkiye is also a signatory to the ECT, which it signed on 17 December 1994.

In addition to being a signatory to the aforementioned conventions, Türkiye is also a member of several international organisations that administer arbitration rules, such as the Permanent Court of Arbitration (PCA), the International Chamber of Commerce (ICC), the Stockholm Chamber of Commerce (SCC) and the World Intellectual Property Organization (WIPO).

Investor–state arbitration is the most commonly chosen mechanism for resolving investment disputes in Türkiye, particularly by foreign investors, with ICSID arbitration being the preferred forum. While arbitration is widely favoured due to its neutrality and efficiency compared to domestic litigation, not all investors opt for arbitration.

Türkiye’s BITs also provide multiple dispute resolution options, including recourse to competent Turkish courts or ad hoc arbitration under the UNCITRAL Arbitration Rules.

In recent years, certain sectors in Türkiye have seen notable investor–state arbitration activity. The most prominent industries include energy projects, telecommunications, finance and large-scale infrastructure. Among these, the energy sector – particularly electricity generation, renewable energy and natural gas distribution – has dominated arbitration claims against Türkiye. This trend is largely driven by regulatory reforms, policy shifts, changes in feed-in tariffs, adjustments to renewable energy support mechanisms, and reforms in pricing and licensing. Such regulatory changes, combined with economic volatility, have created uncertainty for investors, often resulting in arbitration proceedings.

In 2024, Türkiye ranked eighth globally in ICC arbitration, with 80 parties involved in proceedings. The most prominent sectors represented in these cases were construction and engineering, energy, transportation, financing and insurance, telecommunications and specialised technologies. Other sectors included healthcare and pharmaceuticals, business services, and trade and distribution. This reflects Türkiye’s growing engagement in international arbitration, particularly in industries with large-scale projects and complex cross-border transactions.

These sectors – ie, construction and infrastructure, energy and finance, dominate arbitration because they involve high-value, long-term projects with complex contractual structures and multiple stakeholders. Construction and infrastructure projects often face delays, cost overruns and scope changes. Energy projects are highly regulated, and frequent policy shifts, tariff changes and licensing reforms create uncertainty. Finance is critical for funding these projects, and disputes over guarantees, risk allocation and compliance often arise. The cross-border nature of these industries makes arbitration preferable for neutrality and enforceability.

Türkiye has been involved in a significant number of arbitration cases with foreign investors. Among the arbitration cases in which Türkiye has been a party and that have been publicly disclosed, some of the most notable examples are as follows.

Libananco v Türkiye, Cementownia v Türkiye and Europe Cement Investment and Trade SA v Türkiye

These cases primarily concerned the scope of protection for foreign investments, and expropriation under international law. They were all decided by ICSID arbitral tribunals and all disputes arose from Türkiye’s 2003 expropriation of shares in Turkish electricity companies ÇEAŞ and KEPEZ. The claimants alleged violations of the ECT; particularly provisions on non-discriminatory treatment and protection against unlawful expropriation.

In each case, the claimants failed to prove they were legitimate investors at the time of expropriation. The tribunals found that the alleged share transfers were not supported by credible evidence and that ownership had not been established. In Libananco, the tribunal declined jurisdiction because the claimant could not demonstrate ownership prior to expropriation. Similarly, Cementownia and Europe Cement claims were dismissed due to lack of proper documentation and questions regarding the legality of the investments.

These cases are legally significant because they reinforced the bona fide investor principle, which holds that transactions made solely to gain access to arbitration constitute an abuse of process. The rulings underscore that tribunals will impose serious consequences when claimants fail to establish genuine investment ownership.

Tulip Real Estate and Development Netherlands BV v Türkiye

This case was decided by an ICSID arbitral tribunal under the ICSID framework and concerned the alleged expropriation of a real estate development project in Türkiye. A Dutch investor sought USD450 million in damages after its agreement with Emlak Konut GYO A.Ş. for the Ispartakule III project was terminated due to delays by the Emlak Konut consortium. Tulip argued that Türkiye was responsible for Emlak Konut’s actions as a state-owned enterprise and claimed breaches of the Türkiye–Netherlands BIT, including fair and equitable treatment and protection against expropriation. Türkiye contended that the dispute was purely contractual and outside the scope of the BIT, emphasising that Emlak Konut operates as a separate legal entity. In 2014, the tribunal ruled in favour of Türkiye, holding that majority state ownership does not automatically make the state liable for a company’s contractual breaches under a BIT. This decision is legally significant as it reaffirmed the principle of ownership liability, clarifying that state responsibility requires more than mere shareholding.

Ipek Investment Limited v Türkiye

In the matter of İpek Investment Limited v Türkiye, a UK-registered company alleged that Türkiye violated the 1996 UK–Türkiye BIT by expropriating its 100% ownership of Koza İpek Holding under anti-terrorism measures. The Koza Group, a conglomerate active in mining, energy and media, was alleged to have links to terrorism financing. Türkiye argued that the share transfer was a fraudulent, retroactive restructuring by the Turkish İpek family, intended to establish ICSID jurisdiction for an anticipated dispute.

The tribunal examined the restructuring and concluded that the investment had been arranged to benefit from ICSID protection in the event of a foreseeable dispute, constituting an abuse of process. In 2022, the tribunal dismissed the claims due to procedural misuse and ordered the parties to share arbitration costs. This case is legally significant as it reaffirmed that restructuring an investment solely to access international arbitration when a dispute is reasonably foreseeable amounts to bad-faith abuse of the ICSID system.

Türkiye’s approach to investor–state arbitral awards must be understood in light of the distinct enforcement regimes applicable under the ICSID Convention and, where relevant, the UNCITRAL Arbitration Rules.

Under the ICSID Convention, Türkiye has no discretion to refuse enforcement of an ICSID award. Pursuant to Articles 53–54, ICSID awards are binding and must be treated as if they were final judgments of Turkish courts. This regime leaves no room for public policy review, merits scrutiny or any other domestic challenge mechanism. Accordingly, Türkiye has not exhibited any pattern of resistance to the enforcement of ICSID awards, as enforcement is a treaty obligation rather than a matter of national judicial policy.

Where issues arise, Türkiye has relied exclusively on the annulment mechanism under ICSID Convention Article 52, which provides limited and exhaustively listed grounds for annulment, including manifest excess of powers, serious departure from a fundamental rule of procedure and failure to state reasons. Türkiye has, in several ICSID cases, filed annulment applications strictly within these procedural grounds. Examples include cases in which the state sought annulment following allegations of fraudulent or fabricated evidence (such as Libananco v Turkey, Europe Cement v Turkey and Cementownia v Turkey), or where procedural irregularities were alleged. These efforts reflect the normal use of ICSID’s internal supervisory mechanism rather than hostility to investor–state arbitration.

Importantly, Türkiye has not attempted to use its domestic courts to resist, delay or review ICSID awards. Enforcement proceedings in Türkiye under Article 54 are straightforward and administrative in nature; Turkish courts do not examine the merits of the award nor apply any domestic public policy control.

For non-ICSID investment awards (eg, awards rendered under UNCITRAL Arbitration Rules in treaty disputes), Türkiye applies the New York Convention, and its courts generally adopt a pro-enforcement stance. Refusals of enforcement are very rare and typically limited to the narrow Convention grounds.

Overall, Türkiye’s record demonstrates consistent compliance with its international obligations, reliance on ICSID’s internal annulment mechanism where appropriate, and an absence of systematic resistance to investor–state arbitral awards.

According to official data published by the Ministry of Trade, Türkiye has concluded bilateral investment treaties with 98 countries, 76 of which are currently in force. The contracting states cover almost the entire European Union (EU) (with the exception of Ireland) as well as a wide geographic range in Europe, Asia, Africa and Latin America, including, among others, the United States, China, France, Germany, Japan and Russia. In parallel, Türkiye is also party to a number of treaties with investment provisions, such as the ECT and the ICSID Convention, the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA), the WTO agreements and investment agreements concluded within the framework of the Organisation of Islamic Cooperation (OIC).

In addition, Türkiye has concluded Free Trade Agreements (FTAs) with 38 countries, 22 of which are currently in force. These include agreements with European Free Trade Area (EFTA) states, North Macedonia, Bosnia and Herzegovina, Palestine, Tunisia, Morocco, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Mauritius, the Republic of Korea, Malaysia, Moldova, the Faroe Islands, Singapore, Kosovo, Venezuela and the United Kingdom.

While several earlier FTAs were repealed upon the accession of the relevant partner states to the EU, Türkiye continues to expand and modernise its network; for example, FTAs with Lebanon, Sudan and Qatar have been signed but are not yet in force, and negotiations to modernise the Türkiye-UK FTA and to revive the suspended FTA with Syria are ongoing.

Against this background, and as further discussed under 1.1 National Position, Türkiye maintains an active, generally pro-trade and pro-investment treaty policy. It is therefore reasonable to expect that additional investment treaties and free trade agreements (including those with investment chapters) will be ratified or upgraded in the near to medium term.

Türkiye has long relied on a Model Bilateral Investment Treaty (the “Model BIT”), first adopted in the early 2000s and substantially revised in 2009, which remains the most recent and widely used template for Türkiye’s treaty practice. The majority of Türkiye's modern BITs follow the structure and terminology of the 2009 Model BIT, with limited country-specific adjustments.

The Model BIT reflects a post-entry protection approach meaning that foreign investors do not receive pre-establishment market-access commitments, but once an investment is duly admitted under domestic law, they benefit from a comprehensive set of substantive guarantees. Central features of the 2009 Model BIT include the following.

• Legality requirement and broad investment definition – investments are protected only if made in accordance with the host state’s laws, in line with Türkiye’s notification under ICSID Article 25(4). The investment definition is broad and asset-based, covering shares, claims to money, intellectual property, concessions and similar rights.
• National treatment and most-favoured-nation treatment – foreign investors must be treated no less favourably than domestic investors and investors from any third state, subject to conventional exceptions (taxation, regional economic integration agreements, etc).
• Fair and equitable treatment and full protection and security – the Model BIT provides a modern formulation of FET, often interpreted through arbitral jurisprudence to include protection against denial of justice, arbitrariness and discrimination.
• Expropriation (direct and indirect) – expropriation is permitted only for a public purpose, on a non-discriminatory basis, following due process and against prompt, adequate and effective compensation based on the fair market value of the investment.
• Free transfer of funds – investors may freely transfer capital, returns, liquidation proceeds and compensation payments without undue restriction.
• Umbrella clause – although wording varies across Türkiye’s BITs, many versions of the Model BIT include an umbrella clause obliging the host state to honour specific commitments made to investors.
• Duration and survival – the typical validity period is ten years, with investments made during the treaty’s lifetime continuing to benefit from protection for an additional ten-year survival period following termination.

Overall, the 2009 Model BIT reflects Türkiye’s commitment to maintaining a balanced investment protection framework while preserving regulatory space in sensitive sectors.

Türkiye has concluded 38 FTAs, 22 of which are currently in force, covering a wide range of partners across Europe, the Middle East, Africa and Asia. In addition, Türkiye’s 1995 Customs Union with the EU remains the core framework governing its external trade in industrial goods.

However, Türkiye’s FTAs generally do not include investment protection standards or investor–state dispute settlement (ISDS). Instead, investment protection is primarily provided through Türkiye’s BITs. Only a small number of Türkiye’s more recent FTAs contain limited investment-related provisions, and even these do not alter the fact that the principal source of substantive protections – such as FET, protection against expropriation, and access to ICSID arbitration – remains the BIT network, not the FTAs.

Türkiye continues to pursue new and modernised FTAs, but these developments do not materially change the overall structure in which trade agreements liberalise market access, while BITs provide investor protection and dispute resolution mechanisms.

Türkiye does not publish commentaries, exchanges of notes, or other interpretive aids for its investment treaties. Although Türkiye does not publish them publicly, through the Articles 31,32 and 33 of the Vienna Convention on the Law of Treaties, tribunals can interpret Türkiye’s BITs.

Türkiye has a national investment law called the Foreign Direct Investment Law (the “FDI Law”), Law No 4875, which was adopted on 5 June 2003 and published in the Official Gazette on 17 June 2003. The FDI Law aims to promote direct investment in Türkiye, ensure the protection of foreign investors’ rights, and align investment and investor definitions with international standards.

Key Provisions

Under the FDI Law, foreign investors are permitted to make direct foreign investments in Türkiye and are subject to the same treatment as domestic investors, unless otherwise stipulated in international agreements or special laws. Furthermore, the FDI Law states that foreign direct investments may not be expropriated without public benefit and without fair and adequate compensation being paid to the investor. Net profits, dividends, sales, liquidation and compensation payments resulting from foreign investors’ activities and transactions in Türkiye; amounts owed under licence, management and similar agreements; and principal and interest payments on foreign loans may all be freely transferred overseas through banks or private financial institutions.

Dispute Resolution Provisions

In contrast to Türkiye’s bilateral investment treaties, the FDI Law does not contain dedicated provisions on dispute resolution. As a result, disputes arising from investment-related contracts are governed by the general legal framework applicable to the type of contract in question, and may be submitted to national or international arbitration depending on their legal nature.

Under relevant articles of the Resorting to Arbitration for Disputes Arising from Concession Agreements Law No 4501 (“Law No 4501”), disputes arising from public-service concession agreements or contracts concluded by foreign investors with the administration may be referred to international arbitration, provided the agreement includes a valid arbitration clause and the dispute contains a foreign element. For private-law investment contracts – including those involving state-owned or state-controlled entities – arbitration agreements are assessed under the Turkish Code of Obligations, the Turkish Commercial Code and, where relevant, the International Arbitration Law (IAL).

These contractual dispute resolution mechanisms operate separately from Türkiye’s BITs, which offer foreign investors a distinct and broader layer of protection. BITs provide substantive guarantees such as fair and equitable treatment, protection against direct and indirect expropriation and most-favoured-nation treatment, as well as access to treaty-based investor–state arbitration (ICSID or UNCITRAL), irrespective of the contractual framework.

Direct arbitration clauses are common in contracts concluded between investors and the Turkish state or state-owned entities, particularly in energy, infrastructure and concession projects. Pursuant to Law No 4501, such contracts may validly include international arbitration clauses where a foreign element exists. These mechanisms provide an effective forum for resolving purely contractual disputes, such as performance, payment or termination issues. However, the protection afforded by contractual arbitration is limited to breaches of the contract itself and does not extend to sovereign or regulatory measures taken by the state.

By contrast, Türkiye’s BITs and the ECT offer more comprehensive protection. In addition to guarantees such as fair and equitable treatment and protection against direct and indirect expropriation, many of Türkiye’s BITs include an umbrella clause, which elevates contractual commitments undertaken by the state to the level of international treaty obligations. This allows certain breaches of investment contracts to be pursued as treaty claims, not merely contractual claims. Investors are also granted access to ICSID or UNCITRAL Arbitration Rules, irrespective of any contractual arbitration clause.

In practice, contractual arbitration and treaty arbitration operate in parallel but distinct spheres:

• contractual arbitration addresses private-law disputes arising under the investment contract; whereas
• BIT/ECT arbitration provides a broader framework to challenge sovereign conduct and enforce international investment protections, including those derived from umbrella clauses.

Given that no comprehensive public source provides access to all arbitral awards and parties’ submissions, on the basis of publicly available documentation and information, the following can be identified as the common complaints advanced by foreign investors against Türkiye in international investment arbitration.

• Fair and equitable treatment (FET) – consistent with global trends, FET is the most frequently invoked complaint by investors in cases against Türkiye. Beyond being the most cited, it also appears to have the greatest practical impact, as tribunals have shown a comparatively higher tendency to find a breach of this standard than of other protections. In several cases, the allegation is framed together with the “minimum standard of treatment, including denial of justice,” particularly where investors argue that administrative, regulatory or judicial conduct was unpredictable, prolonged or inconsistent.
• Direct or indirect expropriation – expropriation constitutes the second most common category of complaints after FET and has also been accepted in at least one publicly known case (Westwater Resources v Türkiye). A significant number of disputes brought against Türkiye arise from the termination of concession agreements, annulment of licences, or state intervention in privatisation or infrastructure projects. In such cases, investors typically allege that these measures amount to direct or indirect expropriation.

While not as central or outcome-determinative as FET and expropriation, the following complaints also appear with regularity in various cases and can be regarded as common allegations raised against Türkiye:

• full protection and security;
• umbrella clause violation;
• arbitrary, unreasonable and/or discriminatory measures; and
• national treatment.

For the investors that resort to ICSID arbitration for their disputes, there are several mandatory constraints arising from the ICSID Convention which limit this autonomy. Under Article 39 of the ICSID Convention, a majority of the tribunal may not be nationals of either party to the dispute, unless the parties expressly agree otherwise.

Furthermore, regardless of the parties’ preferences, arbitrators must meet strict eligibility standards set out under Article 14 of the ICSID Convention. ICSID arbitrators must possess high moral character, recognised competence in the fields of law, commerce, industry or finance, and the ability to exercise independent judgement. A party cannot appoint someone who does not meet these minimum thresholds. In addition, UNCITRAL Arbitration Rules (Article 11 and 12) impose mandatory disclosure and impartiality obligations. Lastly, certain FTAs and multilateral agreements specify guidelines for arbitrators’ qualifications.

On a more general note, according to the Türkiye’s IAL, parties are generally free to agree on the number of arbitrators, qualifications and method of their appointment. However, the IAL sets out that the number of arbitrators should be an odd number, and if the parties cannot decide on the number of the arbitrators, it will be three.       

Investors can select among ICSID, or other institutional arbitration centres through Türkiye's BITs. However, if the parties’ selected method for choosing arbitrators fails, in order to avoid a standstill in the selection process, there are default procedures in place. According to Article 38 of the ICSID Convention, the chairman of the World Bank Group will appoint the arbitrator or arbitrators not yet appointed in the event that the parties fail to constitute an arbitral tribunal. The ICSID Convention does not contain a special rule for multi-party appointments.

Under Article 8 of the UNCITRAL Arbitration Rules, if for any reason the appointment cannot be made according to the stipulated procedure, the appointing authority (designated by Türkiye’s BITs and the ECT) may exercise its discretion in appointing the sole arbitrator. In addition, UNCITRAL has an explicit rule for multi-party arbitrations. According to Article 10/3 of the UNCITRAL Arbitration Rules, if the parties fail to jointly constitute an arbitral tribunal, the appointing authority shall constitute the arbitral tribunal and may revoke any appointment already made and appoint or reappoint each of the arbitrators and designate one of them as the presiding arbitrator.

Article 1 of the IAL provides that the terms of any applicable international agreement shall take precedence over the provisions of the IAL. Under ICSID Convention and UNCITRAL Arbitration Rules (as incorporated through Türkiye’s BITs), domestic courts have no role in appointing, reviewing or replacing arbitrators. Under the ICSID Convention, all matters concerning the constitution of the tribunal, the replacement of arbitrators, and any default appointments fall solely within the authority of ICSID bodies. Under UNCITRAL, the appointment disputes are resolved exclusively through the appointing authority under Article 8–10 of the UNCITRAL Arbitration Rules. This applies even if the investor is foreign and Türkiye is the respondent state.

According to Article 57 of the ICSID Convention, a party may propose to a tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required for panel members (possessing high moral character, recognised competence in the fields of law, commerce, industry or finance, and reliability to exercise independent judgment, and ability to exercise independent judgement). In addition, a party may propose the disqualification of an arbitrator on the ground that they were ineligible for appointment to the arbitral tribunal under the provisions of ICSID Convention on the constitution of the arbitral tribunal (such as the nationality standards applicable to the members of a tribunal).

According to Article 12 of the UNCITRAL Arbitration Rules, any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence. A party may also challenge the arbitrator appointed by it only for reasons of which it becomes aware after the appointment. In addition, if an arbitrator fails to act or it is impossible for them to perform their functions, the procedure of the challenge of an arbitrator shall apply as well.

On the other hand, in situations where Turkish law becomes relevant, there are no specific statutory provisions in Türkiye governing the refusal of investor–state arbitration. Such proceedings are instead subject to the general rules of the IAL, and according to Article 7(C), an arbitrator may be challenged if:

• they do not possess the qualifications agreed by the parties;
• there is reason to challenge them under the arbitration procedure agreed by the parties; or
• existing circumstances give rise to reasonable doubts as to the arbitrator’s impartiality or independence.

The independence, impartiality and disclosure obligations of arbitrators in investor–state arbitrations involving Türkiye are governed primarily by the ICSID Convention and Arbitration Rules, and the UNCITRAL Arbitration Rules, depending on the forum chosen under the relevant investment treaty.

Under Articles 14(1) and 57 of ICSID Convention, arbitrators must possess the qualities required to exercise independent judgement, and may be challenged on the basis of any fact indicating a manifest lack of independence or impartiality. On the other hand, under Articles 11 and 12 of the UNCITRAL Rules, the arbitrators are required to disclose any circumstances that may give rise to justifiable doubts as to their independence or impartiality, and provide that such doubts constitute grounds for challenge.

International agreements like the ICSID and UNCITRAL, which require the disclosure of any possible conflicts of interest in order to guarantee openness, have a big impact on Türkiye’ s arbitration system. Türkiye’s BITs also often include provisions for selecting arbitrators, sometimes specifying independent bodies or institutions like ICSID or UNCITRAL to oversee the process.

According to Article 7 of the IAL, any individual approached for an arbitral appointment must, before accepting the role, disclose all circumstances that may give rise to justified doubts regarding their independence or impartiality. An arbitrator may subsequently be challenged if they do not possess the qualifications agreed by the parties, if a ground for challenge exists under the agreed arbitral procedure, or if circumstances arise that justify doubts as to their impartiality or independence.

On a more local level, institutions like the Istanbul Chamber of Commerce Arbitration Center (ITOTAM) and the Istanbul Arbitration Centre (ISTAC) align their rules with international standards. ISTAC has imposed strict independence requirements and mandated complete disclosure of any financial or professional relationships. For instance, ITOTAM follows similar guidelines to those of major institutions like the ICC, stressing the importance of impartiality and requiring arbitrators to disclose conflicts before being appointed. If there is a concern, parties can challenge an arbitrator, and the process is designed to address these issues fairly. ISTAC, which is one of Türkiye’s most prominent arbitration centres, also enforces strict standards for arbitrator independence. Its rules mandate comprehensive disclosure of any potential biases, whether personal, professional or financial. If a party feels an arbitrator is not impartial, they can formally challenge the appointment and the ISTAC board will review the case. In this way, ISTAC ensures that transparency and fairness are maintained throughout the arbitration process.

Although ICSID tribunals are empowered under Article 47 of the ICSID Convention to recommend provisional measures, such recommendations do not constitute an “award” and therefore do not benefit from the enforcement regime applicable to ICSID awards under Article 54. As a result, measures such as interim attachment, injunctive relief or asset preservation orders cannot be executed in Türkiye on the basis of an ICSID provisional-measures decision alone.

Instead, in practice, parties must apply to Turkish courts to obtain enforceable interim measures. ICSID provisional measures may guide or support such applications, but they cannot themselves be directly enforced, nor do they bind Turkish enforcement authorities.

This distinction is critical:

• a provisional measure is not equal to an arbitral award;
• therefore no enforcement immunity or ICSID Article 54 protection applies; and
• ICSID provisional measures cannot replace the need for a domestic court order.

In more detail, in Turkish jurisdiction, a tribunal is permitted to grant preliminary or interim relief, subject to the conditions and limitations set forth under the applicable arbitration rules and laws. Parallel to that, the interim measures and interim attachments are regulated in this manner under Article 6 of the IAL and accordingly, unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order interim measures or interim attachment.

However, a tribunal cannot issue measures that are enforceable by public authorities or that are binding on third parties. The party requesting an interim measure may apply to domestic courts to obtain such a measure. A party’s request to a court for such measures before or during arbitration does not constitute a breach of the arbitration agreement.

Turkish courts may refrain from enforcing interim measures rendered by foreign arbitral institutions. Although interim measures are binding within the arbitration process, their temporary and non-final nature makes them difficult to enforce. However, in 2014, the Court of Cassation 6th Civil Chamber ruled that it is not necessary to obtain recognition of a foreign court or arbitral award in order to request an interim attachment on a claim determined by such a foreign decision (No 2014/3906-2014/4941). This is because an interim attachment merely involves the temporary seizure of the debtor’s assets and rights.

Although enforcement of the foreign award cannot occur before its recognition becomes final, there is no legal obstacle to requesting an interim attachment based on that award. Whether the attachment procedure has been completed is a subsequent matter and cannot form the basis of a judgment. As a result, if an interim measure is required, the requesting party may apply to the competent domestic court together with documents demonstrating that the legal requirements for granting such measures have been fulfilled. This process applies under the Civil Code of Procedure and the Enforcement and Bankruptcy Law.

Article 6 of the IAL further regulates, if a party fails to comply with interim measures or an attachment ordered by the arbitrator, the opposing party may seek court assistance to enforce them. Court-ordered measures automatically lapse once the arbitral award becomes enforceable or the claim is dismissed. Article 6 of IAL does not expressly stipulate which authority is responsible for hearing objections to interim relief ordered by Turkish courts. In 2022, the Court of Cassation 6th Civil Chamber also clarified that objections to such interim measures issued by Turkish courts should be heard by Turkish courts, regardless of whether arbitral proceedings have commenced (No 2022/3529-2022/4699).

Following the issuance of the final arbitral award, it is possible to seek provisional measures to prevent the losing party from disposing of its Turkish assets. Accordingly, the successful party may apply to the Turkish courts for provisional attachment of assets in connection with the final award while the enforcement process is pending.

It should be noted that, according to the consistent decisions of the Court of Cassation 6th Civil Chamber, only final awards are enforceable in Türkiye (No 2024/273-2024/387). Therefore, in such cases, the court issues a completely new interim measure rather than enforcing a previously granted order. Additionally, a party that has obtained court-ordered measures must initiate arbitration within 30 days, otherwise the measures will cease to have effect.

Both international rules applicable to investor–state arbitration and Turkish national arbitration law permit orders for security for costs. Under ICSID, Rule 53 of the 2022 Arbitration Rules expressly authorises tribunals to order security for costs, although such measures are granted only exceptionally. Under UNCITRAL Arbitration Rules, Article 26(2)(c) empowers tribunals to order appropriate security as part of interim measures.

The IAL does not contain any express provision regarding the obligation to provide security for the other party’s costs. However, similar to that under Article 16(C) of the IAL, the arbitral tribunal may require the claimant to advance funds to cover the costs of the proceedings. These costs include:

• the arbitrators’ fees, travel expenses and other related costs;
• the fees and expenses of experts or other individuals appointed or engaged by the tribunal;
• the travel expenses and other costs of witnesses, approved by the tribunal;
• the legal fees of the prevailing party’s counsel, determined in accordance with the applicable minimum fee schedule;
• court fees payable in connection with any applications to the courts under the law; and
• the administrative and notification costs associated with the arbitration proceedings.

Furthermore, under the Law on International Private and Procedural Law No 5718, foreign natural and legal persons initiating a lawsuit, participating in proceedings or engaging in enforcement proceedings before Turkish courts are required to provide security, as determined by the court, to cover the costs of the proceedings and any damages or losses incurred by the opposing party. However, the court may exempt a party from providing such security on the basis of reciprocity.

In addition, the Turkish legal framework does not explicitly prohibit the ordering of security for costs. In fact, Türkiye itself has requested security for costs in numerous cases in which it has appeared as a respondent (Libananco Holdings Co Limited v Türkiye and Europe Cement Investment & Trade SA v Türkiye).

Türkiye does not prohibit the use of third-party funding (TPF) in investor–state proceedings. While there is no domestic statute specifically regulating litigation or arbitration funding, such arrangements are generally viewed as compatible with Turkish law, provided that they do not conflict with mandatory rules or professional-ethics limitations. As a result, claimants are free to obtain external financing for treaty-based claims.

In practice, third-party funding has become most visible in ICSID arbitrations involving Turkish investors or Türkiye as the respondent state. In cases such as Libananco v Türkiye and İpek Investment v Türkiye, funding-related allegations surfaced during security-for-costs discussions, illustrating that TPF has become a familiar feature of disputes linked to Türkiye, even though tribunals did not treat funding as decisive. These instances highlight that TPF is not theoretical in the Turkish context; it has already emerged in the practical dynamics of investment arbitration.

Türkiye has also expressed its broader policy position in international rule-making processes. During the ICSID rule amendment cycle and UNCITRAL Working Group III deliberations, Türkiye underlined the importance of transparency and clear regulation of third-party funding arrangements. Rather than advocating a ban, Türkiye has supported a framework that ensures disclosure and minimises abusive cost risks.

By contrast, third-party funding remains far less common in domestic litigation and arbitration. Its use is limited and largely confidential, and no mature domestic funding market has developed. Nevertheless, the increasing internationalisation of Turkish businesses continues to stimulate interest in external financing for high-value and complex disputes.

There is currently no published case law in Türkiye addressing third-party funding. Turkish courts have not yet examined the validity of funding agreements, the obligations arising from such arrangements, or their impact on procedural issues such as costs, disclosure or party equality. Likewise, no Türkiye-seated arbitral tribunal has issued an award that considers third-party funding in any meaningful way.

As a result, there is no domestic jurisprudence defining how Turkish courts or arbitral tribunals would approach third-party funding. The legal landscape remains shaped primarily by general principles of contract law and professional-ethics rules, rather than by judicial or arbitral interpretation.

There are no statutory rules in Türkiye requiring parties to disclose the existence or terms of a third-party funding arrangement. Funding agreements are treated as private contracts governed by general principles of Turkish contract law, and parties are not under an automatic obligation to reveal the identity of a funder or the details of the financing structure. In practice, disclosure may be requested only where a tribunal or court considers it necessary to assess issues such as conflict of interest, cost allocation or procedural fairness.

Domestic courts and Türkiye-seated arbitral tribunals have not yet developed any established practice on third-party funding. As a result, there is no domestic authority confirming whether the presence of funding would influence security-for-costs applications. Under Turkish civil procedure rules, security for costs is assessed based on traditional factors such as the claimant’s domicile, financial capacity and risk of non-payment, rather than on the existence of a funding arrangement. Since there is no case law addressing TPF in this context, it remains uncertain whether tribunals in Türkiye would treat third-party funding as a factor that increases or decreases the need for security.

In practice, therefore, the legal landscape in Türkiye remains shaped by general procedural principles rather than by rules specific to funding. Disclosure is exceptional, not automatic, and security-for-costs decisions continue to rely on the standard statutory criteria rather than on the presence of a third-party funder.

Under the legal framework of Türkiye, pre-arbitration procedural requirements in investor–state disputes do not arise from domestic legislation but from the provisions of the applicable bilateral or multilateral investment treaty. Türkiye’s BITs generally do not require investors to exhaust local remedies before initiating arbitration. Instead, most treaties grant investors a choice between submitting a claim to domestic courts or proceeding directly to international arbitration, often on an alternative – rather than cumulative – basis.

A consistent feature of Türkiye’s investment treaties is the requirement for the investor to issue a formal notice of dispute and to engage in a consultation or amicable settlement period. In line with the Turkish Model BIT and under most of Türkiye’s BITs, the investor shall submit a written notice describing the nature of the dispute, the underlying measures, and the relief sought. Following this notice, the investor and the host state must attempt to resolve the dispute through consultations and good-faith negotiations.

Most treaties specify a six-month cooling-off period, after which the investor may refer the dispute to arbitration if no settlement has been achieved. A small number of Türkiye’s older BITs contain variations of this mechanism, including longer consultation periods or limited recourse to local courts for a defined period. Overall, the pre-arbitration phase in Türkiye’s treaty practice is structured around written notice, good-faith discussions, and a defined waiting period before arbitration may be commenced.

The IAL of Türkiye does not regulate confidentiality or transparency, leaving these matters largely to party agreement and the applicable institutional rules. As a result, confidentiality is not automatic under Turkish law. In many commercial arbitrations seated in Türkiye, confidentiality arises because the parties agree to it or because the institutional rules – such as the ISTAC Arbitration Rules – expressly provide that proceedings and documents shall remain confidential unless the parties decide otherwise.

Investor–state arbitration introduces a different dynamic. While commercial arbitration traditions favour privacy, treaty-based disputes often involve regulatory measures, public funds or matters of broader societal impact. In these cases, greater transparency is increasingly expected. ICSID, for example, has adopted a more open framework through its 2022 rule amendments, which allow for the publication of awards and make hearings accessible to the public unless a party objects. These reforms have made transparency the default position in ICSID proceedings, subject to the protection of confidential or sensitive information.

Türkiye’s treaty practice, however, does not yet reflect a shift toward broader openness. Türkiye has not adopted the UNCITRAL Arbitration Rules on Transparency in Treaty-Based Investor–State Arbitration, nor is it a party to the Mauritius Convention on Transparency. Consequently, public access in Türkiye-related investment disputes is driven primarily by the applicable treaty and the arbitration rules chosen by the investor, rather than by any domestic policy preference for transparency.

In practice, parties must balance confidentiality and public interest by distinguishing between information that legitimately requires protection – such as trade secrets, national security-related material and personal data – and elements of the dispute that may appropriately be disclosed due to their public significance. The prevailing approach in Türkiye remains cautious: transparency can be accommodated where required by international rules, but confidentiality continues to play a central role, particularly in commercially sensitive or regulatory matters involving the state.

Under Turkish law, arbitral tribunals are generally free to award any form and amount of relief that is compatible with Turkish public policy and within the scope of the parties’ claims. In practice, this means that tribunals seated in Türkiye may grant compensatory damages (including loss of profit), orders for performance, declaratory relief and other civil law remedies. However, certain types of relief are not available: punitive damages and remedies of a purely punitive or penal nature are regarded as incompatible with Turkish liability principles and public policy, and Turkish practice likewise does not accept anti-suit or anti-arbitration injunctions as permissible arbitral remedies.

In the investment arbitration context, arbitral tribunals have repeatedly emphasised that moral damages may only be awarded in truly exceptional circumstances. Following cases such as Desert Line v Yemen and Joseph Charles Lemire v Ukraine, moral damages are generally confined to situations in which:

• the State’s conduct involves physical threats, unlawful detention or other similarly serious forms of mistreatment;
• such conduct results in severe consequences, including deterioration of health, intense stress or anxiety, humiliation or significant reputational harm; and
• both the acts and their effects are serious and exceptionally grave.

Türkiye does not depart from this jurisprudential approach. For example, in Europe Cement Investment and Trade SA v Türkiye, the tribunal accepted in principle that moral damages may be awarded under the ICSID Convention, but rejected Türkiye’s claim for moral damages on the basis that the alleged abuse of process did not reach the level of “exceptional circumstances” required by cases like Desert Line and Lemire.

In Türkiye-related investment arbitration, valuation is determined not by domestic rules but by the international standards consistently applied in ICSID and UNCITRAL proceedings. Tribunals assessing claims against Türkiye rely on globally recognised methodologies, with the choice of approach depending on the maturity of the investment, the reliability of financial data and the foreseeability of future cash flows.

Türkiye’s treaty practice reinforces this international approach. For example, the Türkiye–United Arab Emirates BIT expressly provides that compensation for expropriation shall reflect the market value of the investment immediately before the expropriation or its public announcement and must be determined in accordance with internationally recognised valuation principles. These provisions align Türkiye’s BIT framework with the established valuation tools typically applied in investment arbitration.

The discounted cash flow (DCF) method is frequently considered in Türkiye-related disputes where the investment has a stable operational history and sufficiently reliable projections. Tribunals have rejected DCF where projected revenues were too uncertain, speculative or unsupported by past performance. In such cases, tribunals generally adopt alternative methodologies including fair market value assessments based on comparable transactions, market multiples or independent appraisals. Asset-based and cost-based approaches are commonly used for early-stage projects, cancelled licences or exploration rights that have not yet begun generating income.

Overall, valuation in disputes involving Türkiye closely mirrors mainstream international practice: tribunals select the methodology that provides the most credible, evidence-based measure of economic loss, carefully avoiding speculative or overly optimistic projections.

In Türkiye, the legal framework governing the recovery of interest and costs differs depending on whether the arbitration is seated in Türkiye or arises in the context of international investment treaty arbitration. Under Turkish law, arbitrators seated in Türkiye possess broad discretion to allocate costs, and the IAL expressly regulates the types of recoverable expenses. Pursuant to IAL Article 16(B), arbitration costs may include arbitrators’ fees, travel expenses, expert and witness fees approved by the tribunal, court application charges and notification expenses. Unless otherwise agreed by the parties, the unsuccessful party ordinarily bears these costs, and partial success may lead to apportionment based on relative success. Turkish law also does not restrict the awarding of interest, and interest may be granted in accordance with party autonomy and principles of full compensation.

However, investment arbitration proceedings involving Türkiye are not governed by the IAL or domestic procedural law, but rather by the applicable BIT and by the international procedural regime under which the arbitration is conducted – most commonly the ICSID Convention or the UNCITRAL Arbitration Rules. Under ICSID Convention Article 61(2), tribunals have full discretion to allocate the costs of the proceedings, including legal fees and expenses. Similarly, UNCITRAL Arbitration Rules Articles 40–42 empower tribunals to order the recovery of arbitration costs and legal fees, guided by principles of reasonableness and equity. As a result, for Türkiye-related investment disputes, jurisdictional practice is shaped predominantly by treaty obligations and international standards rather than domestic law.

Within this framework, tribunals routinely award both pre-award and post-award interest as a core component of full reparation, especially where the underlying treaty – such as many of Türkiye’s BITs and the Energy Charter Treaty – requires compensation to be paid “without delay” or to include interest in cases of expropriation. Interest rates are commonly derived from commercial benchmarks or international law principles rather than Turkish statutory interest rules.

Cost allocation in Türkiye-related investment disputes generally reflects a “costs-follow-the-event” approach. In PSEG Global v Türkiye, the tribunal awarded damages together with pre- and post-award interest and ordered Türkiye to bear a significant portion of the arbitration costs. Conversely, in Cementownia and Europe Cement, the tribunals dismissed the claims as manifestly unfounded or jurisdictionally defective and required the claimants to reimburse Türkiye’s legal fees and institutional costs. In Libananco v Türkiye, the tribunal dismissed all claims for lack of jurisdiction and ordered the claimant to bear a substantial share of Türkiye’s legal and arbitration expenses. Although a subsequent annulment proceeding resulted in each party bearing its own legal fees for that phase, the merits award’s allocation of costs remained unaffected.

Overall, Türkiye-related investment tribunals apply international rather than domestic standards, consistently awarding interest as part of full reparation and shifting legal and expert costs, as well as institutional expenses, to the losing party – subject to equitable adjustment where warranted by the parties’ conduct or the complexity of the dispute.

Although the IAL does not prescribe a specific duty to mitigate damages under investor-state arbitration law, as a general principle, Turkish courts and tribunals accept that an injured investor is expected to take all reasonable steps to mitigate or limit their loss given the circumstances.

ICSID awards are enforced in Türkiye through the autonomous mechanism of the ICSID Convention. The Court of Cassation’s 12th Civil Chamber, in its 2021 decision (No 2021/875-2021/4586), reaffirmed that ICSID awards bind all contracting states and are not subject to any recognition or exequatur procedure under domestic law. Nevertheless, compulsory enforcement may only begin once the award creditor submits an authenticated copy of the award issued by the ICSID Secretary-General, in accordance with Article 54(2). Türkiye has designated the commercial courts of first instance as the competent authority for this purpose, and their review is strictly limited to confirming that the award is indeed an ICSID award and that the copy submitted is duly authenticated. No further judicial scrutiny – whether on public policy, arbitrability or procedural grounds – is permitted, as the ICSID regime supersedes both the New York Convention and domestic enforcement provisions.

For investor–state awards rendered outside the ICSID system, Turkish law reverts to a dual framework comprising the New York Convention and International Private and Procedural Law (IPPL). The IPPL operates as the primary domestic statute governing the recognition and enforcement of foreign arbitral awards and mirrors the refusal grounds set out in Article V of the New York Convention. In particular, Article 60 et seq. of the IPPL establish the procedural basis for seeking enforcement before the competent civil court, while Article 62(1)(g) expressly mandates refusal where the award has been set aside by the competent authority at the seat of arbitration. This provision makes annulment at the seat a compulsory refusal ground under Turkish law and narrows the discretion theoretically available under Article V(1)(e) of the New York Convention.

In practice, Turkish courts adopt a conservative approach when dealing with annulled non-ICSID investment awards. While the New York Convention’s Article VII(1) permits the application of a more favourable domestic regime, the IPPL’s mandatory refusal rule leaves little room for enforcing awards that have been set aside at the seat. Although Turkish courts have not yet examined this issue specifically in the context of investment arbitration, commercial arbitration jurisprudence consistently points to a firm rejection of enforcement attempts in such circumstances.

Where annulment proceedings at the seat are ongoing, rather than concluded, Turkish courts have discretion under both the New York Convention and the IPPL to stay enforcement proceedings. The Istanbul Regional Court of Appeal 14th Civil Chamber confirmed that a stay is not automatic; the enforcement judge may await the outcome of foreign annulment proceedings but may equally proceed with enforcement where circumstances justify doing so (No 2018/130-2018/1042). Stays are therefore exceptional rather than routine.

Regarding enforcement against states, Turkish law distinguishes between assets allocated to sovereign/public functions and assets used for commercial purposes. Only the former benefit from immunity from execution. To date, no Turkish court has been required to address a sovereign immunity defence in the enforcement of an ICSID award, largely because Türkiye has historically complied voluntarily with adverse awards and because most ICSID cases brought against Türkiye have resulted in dismissals or findings of no jurisdiction.

As a result, Türkiye’s investment arbitration enforcement practice displays a clear bifurcation: ICSID awards follow a streamlined and formal procedure insulated from domestic review, whereas non-ICSID investment awards remain subject to the more rigid and seat-focused enforcement regime of the IPPL and the New York Convention. This produces a predictable, formalistic system in which the status of the award at the seat, the procedural posture of foreign annulment proceedings, and the nature of the respondent State’s assets play determinative roles.

Turkish courts have undergone a clear evolution in their approach to the recognition and enforcement of arbitral awards. Earlier jurisprudence applied the refusal grounds in a narrow and sometimes rigid manner, particularly in relation to procedural objections. Over the past decade, however, the Court of Cassation has embraced a more flexible and internationally aligned approach. The courts now show greater deference to party autonomy and the finality of arbitral awards, intervening only where the refusal grounds under the New York Convention and the IPPL are genuinely triggered. This shift is observable in both commercial and investor–state contexts, although Türkiye has not yet developed extensive domestic case law specifically concerning the enforcement of investment treaty awards.

Judicial review remains strictly confined to the procedural grounds listed in the Convention and the IPPL, and courts refrain from any reassessment of the merits. The difference lies in how narrowly these grounds are now interpreted. A particularly clear illustration comes from several recent Court of Cassation 11th Civil Chamber decisions in which the court upheld the enforcement of foreign arbitral awards that included elements such as compound interest (No 2020/7985-2022/4932) or penalty clauses that would typically be considered excessive under Turkish substantive law (No 2021/3492-2022/5025). Despite these features, the court expressly held that such matters do not, in themselves, constitute violations of public policy and therefore do not justify refusal of enforcement. This marks a significant departure from older, more interventionist practice and confirms the court’s move toward limiting its review to essential procedural guarantees – such as due process, party equality and the proper constitution of the tribunal – rather than engaging in broad substantive scrutiny.

In assessing public policy, Turkish courts apply the standard of international public policy, a concept substantially narrower than domestic public policy. Under this standard, enforcement will only be refused where the award contradicts fundamental principles of justice, the integrity of the arbitral process, or core constitutional and structural values. Although Turkish courts have not yet been asked to review a public-policy objection in relation to an investment treaty award, existing jurisprudence does not suggest that a more state-protective threshold would be applied in such cases. At the same time, it would be inaccurate to conclude that investment awards are immune from public-policy review: if an award were perceived to intrude upon the essential core of sovereign regulatory powers – for example, in relation to public health, taxation, environmental protection or energy regulation – Turkish courts may consider this within the scope of international public policy.

For non-ICSID treaty awards, enforcement proceeds under the New York Convention and the IPPL. Under Article 62(1)(g) of the IPPL, an award annulled at the seat must be refused enforcement. Where annulment proceedings are pending, Turkish courts may stay enforcement, although this is discretionary and exceptional. Commercial arbitration jurisprudence indicates that courts generally prefer to proceed with enforcement unless there is a compelling reason to await the outcome abroad, and the same logic is expected to apply in the investment arbitration context.

Sovereign immunity is evaluated under the doctrine of restrictive immunity, which distinguishes between jurisdictional immunity and execution immunity. In matters of execution, Turkish courts examine the purpose of the state assets in question. Assets allocated to sovereign or public functions enjoy immunity from execution; those used for commercial or revenue-generating activities do not. Although no investment treaty award has yet required Turkish courts to rule on a sovereign-immunity defence, existing decisions in commercial disputes involving foreign state entities demonstrate that the courts are capable of applying a functional and nuanced analysis to state-owned assets.

Overall, Türkiye’s approach reflects a meaningful transition toward a modern, internationally consistent enforcement regime. The courts remain attentive to procedural fairness and the structural integrity of the arbitration process, but they increasingly adopt a restrained review posture that upholds the enforceability of awards – whether commercial or investment-related – unless a serious procedural defect or a genuine, internationally recognised public-policy concern is present.

Any property that is allocated directly to public services and used for the benefit of the public may be considered a state asset and, pursuant to Article 82 of the Enforcement and Bankruptcy Law, is immune from seizure, except in cases where disposals are carried out in accordance with provisions of private law.

Piercing the corporate veil is an exceptional measure under Turkish law. This can only be invoked if a corporate structure has been used to evade mandatory legal obligations or circumvent the legitimate rights of third parties.