Enforcing a Foreign Arbitral Award Against Turkish State Entities

A foreign arbitral award against a Turkish state entity or a state-owned company can be enforced in Türkiye through the same New York Convention framework applied to private parties, but practical execution raises additional questions about which assets are available for enforcement, since certain assets used for public functions may enjoy protection from seizure. A creditor should plan the enforcement strategy with these distinctions in mind from the outset.

Where the losing party in arbitration is a Turkish state entity or an entity substantially owned or controlled by the state, obtaining a favourable enforcement decision is only part of the challenge; the creditor also needs to identify assets that are legally available for execution, since assets dedicated to public services are generally treated differently from ordinary commercial assets belonging to a state-owned company operating in the market.

Articles 60 to 63 of Law No. 5718 on Private International Law and International Civil Procedure (MOHUK) govern the recognition and enforcement of foreign arbitral awards generally, without creating a separate substantive standard for cases involving a state entity as debtor. The New York Convention likewise does not distinguish between private and state respondents for the purpose of the grounds on which enforcement can be refused. The distinct issue in these cases concerns the subsequent execution stage, where general principles limiting seizure of assets dedicated to public service can affect what is practically available to satisfy the award.

In practice, a state-owned company engaged in ordinary commercial activity is generally treated similarly to a private commercial entity for enforcement purposes, with its commercial assets available for execution in the same manner as those of any other debtor. Where the entity performs public administrative functions, or where specific assets are dedicated to public service, execution against those particular assets tends to be more difficult, requiring careful identification of assets that fall outside such protection.

There is ongoing discussion about how to draw the line between a state entity's commercial assets, available for execution, and assets serving a public function that may be shielded from seizure, particularly for entities that combine both commercial and administrative roles. International practice generally distinguishes between sovereign immunity from jurisdiction, which is largely set aside once a state has agreed to arbitrate, and immunity from execution over specific assets, which is analysed separately and can persist even after enforcement of the award itself is granted.

A creditor pursuing enforcement against a state entity should, from an early stage, investigate which of the debtor's assets are commercial in character and located in Türkiye, since the availability of such assets materially affects the practical value of pursuing enforcement, independent of whether the enforcement decision itself is granted.

The general procedural timelines applicable to enforcement of foreign arbitral awards in Türkiye apply equally where the debtor is a state entity, and the creditor should also be attentive to any specific procedural requirements that may apply when pursuing execution against a public or state-related debtor.

The competent Turkish civil court of first instance handles the enforcement action for the arbitral award, while execution against identified assets proceeds through the relevant Turkish enforcement offices, subject to any specific protections applicable to assets used for public functions.

The creditor should gather the arbitration agreement, the award, and information distinguishing the debtor's commercial activities and assets from any administrative or public-service functions, since this distinction is central to identifying assets realistically available for execution.

Creditors sometimes assume that because a state entity agreed to arbitrate and lost, all of its assets are automatically available for execution; this is not correct, since immunity from execution over assets used for public functions is analysed separately from the state's earlier agreement to arbitrate. Others underestimate the importance of early asset investigation, only to find that available commercial assets are limited once enforcement is finally granted.

Creditors dealing with a Turkish state entity as debtor should treat asset identification as a parallel workstream to the enforcement action itself, since a favourable enforcement decision only delivers practical value once genuinely available commercial assets have been identified and pursued through the appropriate execution procedure.