Türkiye has no policy of opposing investor–state arbitration or of avoiding treaties that contain investor–state dispute settlement (ISDS) provisions. Its recent practice shows continued support, coupled with an emphasis on modernising investment treaties and on balancing investor protection against the State’s regulatory autonomy.

Türkiye maintains a broad network of bilateral investment treaties (BITs), remains a contracting state to the ICSID Convention and is a party to the Energy Charter Treaty. It also continues to conclude new treaties: a BIT with Kazakhstan was signed on 14 May 2026, and BITs with Iraq, Cuba, Tajikistan and the Republic of the Congo were signed in 2024, none of which has yet entered into force. Türkiye has terminated or replaced a number of older BITs, but principally where these were outdated or superseded by newer agreements, which reflects the modernisation of its treaty network rather than a retreat from ISDS.

The domestic institutional framework has also developed. In May 2026, an Arbitration Department (Tahkim Daire Başkanlığı) was established within the General Directorate of Legal Affairs of the Ministry of Justice, tasked with following national and international developments in arbitration and co-ordinating institutional work in this field. The Ministry has expressly linked the strengthening of arbitration mechanisms to attracting foreign investment and increasing Türkiye’s international investment volume. The initiative implements the 2025–2029 Judicial Reform Strategy, which identifies greater effectiveness of arbitration and the expansion of institutional arbitration as policy objectives.

Türkiye also participates in the international reform debate through UNCITRAL Working Group III, having submitted a government paper during the 2025 sessions; the Working Group continued its work in 2026, including on a standing mechanism and an appellate tribunal.

Türkiye’s position therefore amounts neither to a rejection of investor–state arbitration nor to unconditional acceptance of traditional ISDS structures. It favours modernised and more balanced mechanisms that preserve regulatory autonomy while retaining access to neutral fora, and its future treaties can be expected to adopt the more calibrated ISDS clauses emerging from the UNCITRAL and ICSID reform processes.

Türkiye is a party to several major arbitration treaties, including:

• the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”);
• the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”); and
• the European Convention on International Commercial Arbitration.

In addition, Türkiye is a contracting party to the Energy Charter Treaty (ECT), which was signed on 17 December 1994. The ECT contains investment protection provisions and provides for investor–state dispute settlement mechanisms, including international arbitration.

Türkiye also participates in the work of various international institutions and organisations relevant to international arbitration and dispute resolution, including:

• 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).

Their respective arbitration rules and dispute resolution mechanisms may be relevant to disputes involving Turkish parties or the Turkish State, depending on the applicable arbitration agreement or treaty.

Investor–state arbitration is a well-established and frequently used mechanism for resolving investment disputes involving Türkiye. Türkiye has been involved in a significant number of treaty-based ISDS proceedings, particularly under its bilateral investment treaties and the ICSID Convention. According to UNCTAD’s Investment Dispute Settlement Navigator, 51 known treaty-based ISDS cases have been brought by investors whose home state is Türkiye, while 19 cases have been brought against Türkiye as the respondent state, as of 31 December 2025.

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

Türkiye’s treaty practice generally preserves access to international arbitration while, in a number of treaties, also allowing or requiring recourse to domestic courts depending on the circumstances. The coexistence of these mechanisms means that investors generally assess the available forums and applicable procedural requirements before commencing proceedings rather than invariably proceeding directly to arbitration.

In recent years, certain industries in Türkiye have seen notable investor–state arbitration activity. The most prominent industries include:

• energy projects;
• telecommunications;
• finance;
• construction; and
• 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 2025, Türkiye secured a spot in the top 10 global nationality rankings in ICC arbitration. 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.

PSEG Global Inc and Konya Ilgin Elektrik Üretim ve Ticaret Limited Şirketi v Türkiye

This ICSID case arose under the Türkiye–United States BIT and concerned a concession agreement for the construction of a lignite-fired thermal power plant at Konya-Ilgın. Negotiations over the concession continued for several years without producing an effective agreement, against a background of successive changes to the Turkish electricity regime. The claimants alleged expropriation, breach of fair and equitable treatment (FET) and breach of an umbrella clause. In its award of 19 January 2007, the tribunal rejected the expropriation claim, finding that no compensable taking of the claimants’ rights had occurred, but held that Türkiye had breached the FET standard by reason of the continuing instability of the legal framework and the conduct of the responsible administration during the negotiations. The claimants were awarded approximately USD9 million against a claim of some USD224 million, calculated on the basis of costs actually incurred rather than projected profits.

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 claimant sought approximately USD10 billion, alleging, inter alia, expropriation and breaches of the ECT.

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 generally takes a compliance-oriented approach to investor–state arbitral awards and has not adopted a general policy of resisting their enforcement. For ICSID awards, Türkiye is bound by Articles 53 and 54 of the ICSID Convention, under which awards are final and binding and must be recognised and enforced in accordance with the Convention. Domestic courts do not have jurisdiction to review the merits of an ICSID award or refuse enforcement on ordinary public policy grounds.

Under the ICSID Convention, the relevant grounds for annulment are those set out in Article 52, namely that:

• the tribunal was not properly constituted;
• the tribunal manifestly exceeded its powers;
• there was corruption on the part of a tribunal member;
• there was a serious departure from a fundamental rule of procedure; or
• the award failed to state the reasons on which it was based.

In practice, the great majority of ICSID cases brought against Türkiye have been decided in its favour, whether on jurisdiction or on the merits. In those cases, the annulment mechanism has been invoked by the unsuccessful claimants rather than by the State, and the ad hoc committees have consistently upheld the awards. This was the outcome in Libananco v Türkiye (decision on annulment of 23 May 2013), Alapli Elektrik v Türkiye (10 July 2014) and Tulip Real Estate v Türkiye (30 December 2015).

Where awards have gone against it, Türkiye’s practice has been to comply rather than to litigate. For example, Türkiye did not apply for annulment of the 2007 award in PSEG Global v Türkiye.

The only publicly known annulment application brought by Türkiye itself arises out of Akfel Commodities and I-Systems Global v Türkiye. Following the award of 23 July 2025, Türkiye applied for annulment under Article 52; the application was registered on 27 August 2025 and enforcement of the award was provisionally stayed. That proceeding remains pending and the award has not been made public.

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.

Türkiye has an extensive network of bilateral and multilateral investment and trade agreements. According to UNCTAD’s Investment Policy Hub, Türkiye has 141 bilateral investment treaties (BITs), covering a wide range of jurisdictions across Europe, the Middle East, Central Asia, Africa and the Americas.

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).

Also, Türkiye has concluded free trade agreements (FTAs) with 38 countries; however, 11 were repealed upon their accession to the EU. Currently, Türkiye has 24 FTAs in force: namely, EFTA, Israel, Macedonia, Bosnia-Herzegovina, Palestine, Tunisia, Morocco, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Mauritius, South Korea, Malaysia, Moldova, Faroe Islands, Singapore, Kosovo, Venezuela, the United Kingdom, the UAE and Qatar. The FTAs signed with Lebanon, Sudan and Ukraine are under the ratification process.

Türkiye has long relied on a Model Bilateral Investment Treaty (the “Model BIT”), first adopted in 2000 and substantially revised in 2009. A further Model BIT has reportedly been in use since 2016, although its text has not been made publicly available. Accordingly, the 2009 Model BIT remains the most recent publicly available template, while the terms of Türkiye’s individual BITs vary depending on their date and negotiating partner.

As the 2016 Model BIT is not publicly available, the key features outlined below are based on the publicly available 2009 Model BIT and Türkiye’s recent treaty practice. 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 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 – The publicly available 2009 Model BIT does not contain a standalone umbrella clause. Any obligation requiring a contracting state to observe specific commitments made to an investor must therefore be established from the applicable individual treaty and should not be assumed to be a general feature of the Model BIT.
• 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, Türkiye’s model treaty practice reflects its commitment to maintaining a balanced investment protection framework while preserving regulatory space in sensitive sectors.

Türkiye has concluded FTAs with 38 countries; however, 11 were repealed upon their accession to the EU. Currently, Türkiye has 24 FTAs in force.

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 interpretative aids for its investment treaties. Although Türkiye does not publish them publicly, through Articles 31 to 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. In June 2026, Law No 7582 amended the FDI Law by introducing a statutory framework for “qualified service centres” through the addition of Supplementary Article 1.

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. The following may all be freely transferred overseas through banks or private financial institutions:

• 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.

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.

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;
• 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.

For investors that resort to ICSID arbitration, several mandatory constraints arising from the ICSID Convention limit the parties’ autonomy in selecting arbitrators. Under Article 39 of the ICSID Convention, the majority of the tribunal must be nationals of states other than the contracting state party to the dispute and the contracting state whose national is a party to the dispute. This restriction does not apply where the sole arbitrator or each individual member of the tribunal has been appointed by agreement of the parties.

Furthermore, regardless of the parties’ preferences, arbitrators must meet the eligibility standards set out in 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. Parties cannot appoint arbitrators who do not meet these minimum standards. In addition, Articles 11 and 12 of the UNCITRAL Arbitration Rules impose disclosure obligations and permit challenges where circumstances give rise to justifiable doubts as to an arbitrator’s impartiality or independence. Lastly, certain treaties specify requirements concerning arbitrators’ qualifications.

On a more general note, under Türkiye’s International Arbitration Law (IAL), parties are generally free to agree on the number and qualifications of arbitrators and the method of their appointment. However, the IAL requires the number of arbitrators to be odd; if the parties cannot agree on the number, the tribunal will consist of three arbitrators.

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.

Under Article 1 of the IAL, applicable international treaties prevail over the IAL. Accordingly, in investor–state proceedings conducted under the ICSID Convention, the constitution of the tribunal is governed exclusively by the ICSID Convention and the applicable ICSID Arbitration Rules, and Turkish courts have no role in appointing arbitrators. Similarly, where an investment treaty provides for UNCITRAL arbitration, appointments are generally made in accordance with the UNCITRAL Arbitration Rules and by the designated appointing authority, rather than by Turkish courts.

Where the IAL itself applies, however, Turkish courts have a limited appointment function. Under Article 7, if the parties have agreed on a sole arbitrator but cannot reach agreement, the arbitrator may be appointed by the competent civil court upon the application of a party. In a three-member tribunal, if a party fails to appoint its arbitrator within the prescribed period, or if the two party-appointed arbitrators fail to agree on the third arbitrator within the prescribed period, the court may make the appointment.

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 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 ICSID Convention provisions 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 applicable investment treaty and arbitration rules, most commonly the ICSID Convention and Rules or the UNCITRAL Arbitration Rules.

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.

At the domestic institutional level, the rules of the Istanbul Arbitration Centre (ISTAC) and the Istanbul Chamber of Commerce Arbitration Centre (ITOTAM) follow the approach of major international institutions such as the ICC. Both require prospective arbitrators to disclose, before accepting appointment and on a continuing basis thereafter, any personal, professional or financial relationship capable of giving rise to doubts as to their independence or impartiality. A party may challenge an arbitrator on that basis, and the challenge is determined by the relevant institutional body rather than by the tribunal itself.

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.

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.

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.

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. However, the Istanbul Chamber of Commerce Arbitration Centre rules specify that the existence of funding and the identity of the third party providing the funding should be disclosed to the ICC Secretariat.

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.

The pre-arbitration requirements applicable to investor–state disputes involving Türkiye are governed primarily by the applicable investment treaty, rather than by Turkish domestic law. Türkiye’s BITs generally require the investor to provide the State with a written notice of the dispute, setting out the relevant measures and the nature of the claim, followed by a period of amicable consultations and good-faith negotiations.

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 towards 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.

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 the following:

• 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 following:

• maturity of the investment;
• reliability of financial data; and
• 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. This approach is further reflected in the Türkiye–Hong Kong SAR BIT, which entered into force on 4 February 2026 and provides that compensation for expropriation shall reflect the real value of the investment immediately before the expropriation or before the impending expropriation became public knowledge, whichever is earlier.

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.

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 Article 61(2) of the ICSID Convention, tribunals have full discretion to allocate the costs of the proceedings, including legal fees and expenses. Similarly, Articles 40–42 of the UNCITRAL Arbitration Rules 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, and tribunals have applied it in both directions. In PSEG Global v Türkiye, the tribunal awarded pre- and post-award interest and ordered Türkiye to bear a significant portion of the costs of the proceedings; in Libananco, Cementownia and Europe Cement, the unsuccessful claimants were ordered to reimburse Türkiye’s legal fees and institutional costs.

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 through the autonomous mechanism of the Convention. The Court of Cassation’s 12th Civil Chamber confirmed in 2021 that they bind all contracting states and require no recognition or exequatur (No 2021/875–2021/4586). Enforcement begins only once the creditor files a copy authenticated by the ICSID Secretary-General under Article 54(2). Türkiye has designated the commercial courts of first instance as competent; their review is confined to verifying that the award is an ICSID award and the copy duly authenticated. Scrutiny on public policy, arbitrability or procedural grounds is excluded, the ICSID regime displacing the New York Convention and domestic enforcement rules alike.

Non-ICSID awards fall under the New York Convention and the International Private and Procedural Law (IPPL), whose refusal grounds mirror Article V. Article 62(1)(h) makes annulment at the seat a compulsory ground of refusal, narrowing the discretion available under Article V(1)(e), and Article VII(1) leaves little scope around it. No investment case has yet arisen, but commercial jurisprudence is consistently restrictive. Where annulment remains pending abroad, a stay of enforcement is available but exceptional rather than automatic (Istanbul Regional Court of Appeal, 14th Civil Chamber, No 2018/130–2018/1042).

Only assets allocated to sovereign or public functions enjoy immunity from execution; those used commercially do not. No Turkish court has yet ruled on such a defence in relation to an ICSID award, Türkiye having complied voluntarily with adverse awards and most claims against it having failed.

The approach of the Turkish courts has evolved markedly. Earlier jurisprudence applied the refusal grounds narrowly and at times rigidly, particularly as to procedural objections; over the past decade the Court of Cassation has moved towards greater deference to party autonomy and to the finality of awards, intervening only where the grounds under the New York Convention and the IPPL are genuinely triggered. Review remains confined to those grounds, with no reassessment of the merits; what has changed is how narrowly they are construed.

Recent decisions of the 11th Civil Chamber illustrate the point. The court has upheld enforcement of an award providing for compound interest (No 2020/7985–2022/4932) and refused to set aside an award containing a penalty clause that would be regarded as excessive under Turkish substantive law (No 2021/3492–2022/5025), holding in each case that such features do not of themselves offend public policy. In 2025, it upheld enforcement notwithstanding criminal proceedings concerning an allegedly falsified expert report and false testimony, those matters having already been examined in the arbitration and before the Paris Court of Appeal (No 2024/2560–2025/2754). Review is thus limited to essential procedural guarantees, such as due process, party equality and the proper constitution of the tribunal.

Public policy is assessed by reference to international public policy, a materially narrower standard than its domestic counterpart: enforcement is refused only where an award offends fundamental principles of justice, the integrity of the arbitral process or core constitutional values. No investment treaty award has yet been tested on this ground, and nothing in the existing case law suggests that a more state-protective threshold would be applied. Equally, such awards are not immune from review: an award perceived to intrude upon the essential core of sovereign regulatory powers, in fields such as public health, taxation, environmental protection or energy regulation, could fall within its scope.

On sovereign immunity, Turkish courts apply the restrictive doctrine and distinguish jurisdictional from execution immunity, examining the purpose to which the assets are put: those allocated to sovereign or public functions are immune from execution, those used commercially are not. No investment treaty award has yet required a ruling on the point, but decisions in commercial disputes involving foreign state entities show the courts applying a functional analysis to state-owned assets.

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.