ISTAC Introduces Mediation-Arbitration Rules

What is Med-Arb?

The mediation-arbitration model, known as Med-Arb, is an alternative dispute resolution method where parties attempt to resolve a dispute through mediation, and if mediation fails, the parties resort to arbitration.  Med-Arb brings a two-tier system which uses mediation and arbitration together in the same dispute resolution process, thereby accelerating and facilitating the settlement of commercial disputes and offering parties an opportunity to resolve their disputes without resorting to courts. In this model, the person acting as a mediator can also act as an arbitrator in the same dispute only if the parties give their explicit and written consents.

According to the Rules, parties can conclude a Med-Arb agreement to resolve their disputes which have arisen or which may arise in respect of a defined legal relationship between them at any stage until the final settlement of a dispute. In order to apply the Rules, the parties must agree that the ISTAC will administer the Med-Arb process or they must agree that mediation and arbitration as previously agreed as dispute resolution methods shall be administered separately in accordance with the relevant ISTAC Rules.

Turkey and Mediation

According to the Law No. 7155 published in the Official Gazette on 19 December 2018, parties must undergo mandatory mediation prior to filing commercial cases for monetary claims. The same Law also added a provision to Article 18/A the Law on Mediation in Civil Disputes No. 6325 (“Mediation Law”) stipulating that parties who choose to settle their disputes through arbitration do not have to undergo mandatory mediation. If the parties in a dispute have already concluded an arbitration agreement, they may resolve their dispute through arbitration without undergoing mandatory mediation. However, as the practice of mediation quickly gained ground in Turkey, the Rules provide parties with the opportunity of resorting to mediation before proceeding with arbitration if they want to resolve the dispute through alternative dispute resolution methods instead of resorting to the courts.

According to the Mediation Statistics for Commercial Disputes published by the Department of Mediation, 57.7% of the 119,787 files seen in 2019 concluded with the parties reaching an agreement and 43% concluded without the parties reaching an agreement. The ISTAC officials, who described Med-Arb as an innovative dispute resolution method combining arbitration and mediation, stated that their goal was to resolve the 43% of commercial cases that could not be resolved by compulsory mediation through alternative dispute resolution methods overseen at the ISTAC. Thus, if the parties do not reach an agreement at the end of the mediation process, the ISTAC’s efforts in developing a proactive and innovative solution for arbitration – a shorter and also a confidential method compared to the courts – will make Istanbul one of the largest arbitration centres in the world.

With the signing of the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention“), Turkey has taken another important step for mediation, as it enables the enforcement of settlement agreements without the need for a court judgment or an arbitral award recording the result of a mediation. Thus, in the event that the parties that have Med-Arb clauses in their agreements settle in the mediation process, which is the first step of Med-Arb, the execution of the recorded settlement agreement in the states that are party to the Singapore Convention is guaranteed.

Conclusion

The ISTAC introduced Med-Arb to the world, which enables the parties to reach a settlement by either mediation or binding arbitration, thereby saving time and costs by combining these methods in the dispute resolution. Thus, this is the first time ever one of the prominent arbitration institutions officially encouraged a Med-Arb. With the entry into force of the Rules, even if the disputes cannot be resolved during the mediation process, these disputes will be resolved by arbitration instead of the local courts and are settled quicker and economically, Turkey has adopted the culture of settling disputes in mediation and made a crucial step towards ISTAC becoming widespread and Istanbul becoming an arbitration centre.

The Rules are available on the ISTAC’s website (https://istac.org.tr/).