Introduction

Alternative dispute resolution methods (hereinafter the “ADR”) are one of the methods for resolving disputes that may arise under the types of agreements frequently used in venture capital. ADR may be regulated either as the subject matter of a separate agreement between the investor and the entrepreneur or as a clause within the venture capital (hereinafter the “VC”) agreement. Whether ADR is included as a contractual clause or made the subject of a separate agreement does not affect its legal effect due to the doctrine of separability.

Disputes in VC agreements may arise for a variety of reasons. In Convertible Loan Agreement (“CLA”) agreements, a breach of an obligation subject to a condition may constitute the subject matter of a dispute; likewise, in SPA agreements, a dispute may arise from the allocation of shares.

In this respect, designating Turkish courts as the forum for disputes arising under VC agreements also entails certain issues. The public disclosure of the dispute—thereby compromising the confidentiality of the investment process—or the erosion of the investment amount due to inflation as a result of protracted proceedings are examples of potential problems. Undermining the investment process for such reasons also hampers the investor’s search for the optimal venture.

Among the leading institutions to which parties may resort for resolving disputes arising under VC agreements in Türkiye within the scope of ADR is the Istanbul Arbitration Centre (hereinafter “ISTAC”). ISTAC’s Med-Arb Rules are suitable for application to ensure the prompt and effective resolution of potential disputes.

The General Framework of ADR in Türkiye

Legislative Framework

In Türkiye, ADR has become institutionalized—particularly over the past decade—through legislative reforms and has evolved into a significant complement and alternative to the national judicial system. In this context, mediation and arbitration mechanisms come to the fore in particular.

• Mediation

In Türkiye, mediation is governed by Law on Mediation in Civil Disputes No. 6325, dated 22 June 2012 (hereinafter the “Mediation Law”). The Law aims to facilitate the resolution of private-law disputes over which the parties may freely dispose, through a mediator—an impartial and independent third party. It sets out in detail the requirements for the registration of mediators, the commencement and conduct of the mediation process, the parties’ rights and obligations, and the legal nature of the mediation settlement agreement.

Under the Mediation Law, the document executed by the parties as a result of a mediation settlement has the force of a court judgment once an enforceability annotation is obtained. This arrangement ensures that the ADR mechanism can yield not only an amicable settlement, but also a binding and enforceable outcome.

• Domestic Arbitration

In Türkiye, domestic arbitration is regulated under the Code of Civil Procedure No. 6100 (Article 407), which entered into force in 2011 (hereinafter the “CCP”). The CCP addresses arbitration in Articles 407 to 444. It sets out in detail the validity of the arbitration agreement, the appointment of the arbitrator or arbitral tribunal, the arbitral procedure, the issuance of arbitral awards, and the filing of an action for annulment against arbitral awards. The CCP’s approach to arbitration prioritizes party autonomy and recognizes, to a significant extent, the arbitrators’ authority to determine procedural rules.

• International Arbitration

International arbitration is regulated in Türkiye by International Arbitration Law No. 4686, dated 21 June 2001 (hereinafter the “IAL”). The IAL is essentially based on the UNCITRAL Model Law and applies to disputes involving a foreign element. It contains provisions regarding the form of the arbitration agreement, the appointment of arbitrators, the conduct of arbitral proceedings, the issuance of arbitral awards, actions for annulment, and interim measures. The IAL has provided a legal basis for parties to opt for arbitration in international contracts and has made Türkiye a more attractive venue for international arbitration.

• Recognition and Enforcement of Foreign Arbitral Awards / The New York Convention

Türkiye became a party, in 1991, to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter the “Convention”). This Convention is widely regarded as the most significant international instrument governing the recognition and enforcement of international arbitral awards in contracting states. Under the Convention, in order to enforce a foreign arbitral award in Türkiye, the relevant party applies to the Turkish courts, and the courts may refuse enforcement only on the basis of the limited grounds for refusal set out in the Convention.

ADR Institutions and Key Actors 

• Istanbul Arbitration Centre (ISTAC) 

“The Istanbul Arbitration Centre (ISTAC) is an independent, neutral and impartial institution providing efficient dispute resolution services for both international and domestic parties. The ISTAC’s dispute resolution services are available to all contracting parties, without any membership requirements.

The ISTAC Arbitration and Mediation Rules, developed by the Centre to reflect modern institutional standards, came into force on 26 October  2015. These innovative and efficient rules address the current demands of  arbitration and mediation proceedings. Within arbitration, the ISTAC provides services like Fast Track Arbitration, Emergency Arbitrator appointments and ad hoc procedures. Furthermore, ISTAC arbitral awards are binding and enforceable worldwide.

• International Chamber of Commerce (ICC) 

The International Chamber of Commerce (hereinafter the “ICC”) is one of the leading institutional frameworks for the resolution of international commercial disputes. Its activities in this field are carried out primarily through the ICC International Centre for ADR. By offering procedures such as mediation, expert determination, document-based dispute resolution, and other amicable settlement methods, ICC provides flexible and confidential processes that go beyond classical arbitration. The ICC’s ADR (amicable dispute resolution) mechanisms enable parties to resolve their disputes in a swift, cost-effective, and impartial manner. The 2014 ICC Mediation Rules introduced practical and internationally recognized standards that give priority to party autonomy in the mediation process. 

• London Court of International Arbitration (LCIA)

The London Court of International Arbitration (hereinafter the “LCIA”) is one of the world’s leading independent arbitration and ADR institutions. Headquartered in London, the LCIA offers parties not only arbitration but also alternative dispute resolution mechanisms such as mediation and expert determination.

• Mediation Department Presidency

The Mediation Department Presidency was established in 2013 under the Ministry of Justice pursuant to Law on Mediation in Civil Disputes No. 6325, and is tasked with regulating the administrative and institutional infrastructure of mediation in Türkiye. The Mediation Department Presidency is responsible for, inter alia, the registration and supervision of mediators, the organization of training and examination processes, the setting of implementation standards, and the nationwide coordination of mediation services. It is also within the remit of the Mediation Department Presidency to maintain statistics relating to mediation proceedings and to contribute to the development of the relevant legislation.