Investment Arbitration and ICSID: A Foreign Investor’s Right to Arbitrate Against Turkey 2026 — Bilateral Investment Treaties, the Energy Charter Treaty, Turkey’s ICSID Notification, Preconditions and Enforcement of Awards

Türkçe sürüm: Yatırım Tahkimi ve ICSID: Yabancı Yatırımcının Türkiye’ye Karşı Tahkim Hakkı

Disputes between a foreign investor and the state hosting the investment are often resolved by international arbitration rather than by that state’s own courts. The best-known institution in this field is ICSID, established within the World Bank. Investment arbitration is a technical field with its own rules; proceedings may be brought on the allegation that a state has breached its obligations towards an investor. This guide explains, with a focus on Turkey, what investment arbitration is, how ICSID works, Turkey’s position under the ICSID Convention and its notification, the treaties on which a claim against Turkey can be based, the preconditions and domestic time limits, and how awards are enforced in Turkey and abroad. It is for general information only; for a specific investment or dispute, you should consult a specialist lawyer.

What is investment arbitration and what is ICSID?

Investment arbitration is a method of dispute resolution in which disputes between a foreign investor and the host state are decided by independent arbitrators. It differs from commercial arbitration in that one party is a sovereign state and the dispute is usually based on obligations arising from international treaties. Its purpose is to secure international capital flows by giving investors a neutral forum.

ICSID stands for the International Centre for Settlement of Investment Disputes. It was established within the World Bank by the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, also known as the Washington Convention. Its task is to provide for the settlement of disputes between states and foreign investors by arbitration and conciliation.

Turkey and ICSID

Turkey signed the ICSID Convention on 24 June 1987. The domestic legislation approving ratification is Law No. 3460 of 27 May 1988. According to ICSID’s official list of contracting states, Turkey deposited its instrument of ratification on 3 March 1989, and the Convention entered into force for Turkey on 2 April 1989. Over time, Turkey has appeared before ICSID as a respondent and has also been part of the system through its own investors.

Being a party to ICSID does not mean that Turkey has consented to arbitration in every dispute. Under Art. 25(1) of the Convention, the jurisdiction of the Centre extends to legal disputes arising directly out of an investment between a contracting state and a national of another contracting state which the parties have consented in writing to submit to the Centre. This written consent is usually found in a bilateral investment treaty, the Energy Charter Treaty or an investment contract. Once consent has been given, no party may withdraw it unilaterally (Art. 25(1)). Consent to ICSID arbitration is, unless otherwise stated, deemed consent to the exclusion of any other remedy; however, a state may require the exhaustion of local remedies as a condition of its consent (Art. 26). The investor’s home state may not give diplomatic protection in respect of a dispute which its national has consented to submit or has submitted to ICSID, unless the other state fails to comply with the award (Art. 27).

Turkey’s notification. Art. 25(4) of the ICSID Convention allows contracting states to notify the classes of disputes they would or would not consider submitting to the jurisdiction of the Centre. In its notification of 3 March 1989, Turkey stated two points: only disputes arising directly out of investment activities that have obtained the necessary permission in conformity with the legislation on foreign capital and have effectively started will be submitted to the Centre; and disputes concerning ownership and rights in rem over real estate are entirely within the jurisdiction of the Turkish courts and will not be submitted to the Centre. Under Art. 25(4), such notifications are for information purposes; they are not reservations and do not by themselves remove consent given in an investment treaty. Nevertheless, in real estate investments and in projects whose permitting process has not been completed, investors should expect the state to raise a jurisdictional objection based on this notification; which route is open must be assessed together with the text of the relevant treaty.

The bases of the right to arbitrate against Turkey

In investor-state arbitration, the tribunal’s jurisdiction rests on the state’s consent. For Turkey, the sources of that consent are as follows:

Which investors are protected? Turkey’s main bilateral investment treaties

Turkey has signed agreements on the reciprocal promotion and protection of investments with many countries. The table below shows, from the treaty database of the United Nations Conference on Trade and Development (UNCTAD), the signature and entry-into-force dates of treaties with some of the countries that invest most in Turkey. Since a treaty may later be replaced or terminated, the current status and treaty text must be checked separately in any specific dispute.

Canada and countries without a treaty. According to Turkey’s Ministry of Trade, Canada is not among the countries with which Turkey has signed a bilateral investment treaty, and the UNCTAD database lists no bilateral investment treaty between the two countries. Canada has been a party to the ICSID Convention since 1 December 2013; but, as explained above, ICSID membership alone does not amount to Turkey’s consent. For an investor from Canada or another country without a treaty, protection depends on making the investment through a company in a country that has a treaty with Turkey, or on including an arbitration clause in the investment contract. The structure should be set up before a dispute arises or becomes foreseeable; otherwise a tribunal may treat the restructuring as an abuse of process. For a concrete example from the mining sector, see Can a Foreign Company Get a Mining License in Turkey?

Before arbitration: negotiations, waiting periods and fork-in-the-road clauses

Most investment treaties provide for a negotiation period, before arbitration can be commenced, during which the dispute should be settled amicably. Under the Energy Charter Treaty, this period is three months (Art. 26). Some treaties also require the dispute to be submitted to the host state’s local courts for a certain period, or require the investor to choose once between the local courts and arbitration (a fork-in-the-road clause). Because these conditions vary from treaty to treaty, the first step is always to read the dispute settlement clause of the relevant treaty.

Domestic remedies: administrative courts, the Constitutional Court and the ECtHR

International arbitration does not remove the investor’s rights under domestic law; the two routes are often planned together. Against administrative acts such as licenses, permits or expropriation, an action for annulment and a full remedy action for compensation (tam yargı davası) can be brought before the administrative court. The time limit is, as a rule, sixty days (Administrative Judicial Procedure Law No. 2577 (İYUK), Art. 7); for acts subject to the expedited procedure, such as EIA decisions and urgent expropriation, it is thirty days (İYUK Art. 20/A).

Once domestic remedies have been exhausted, an individual application can be made to the Constitutional Court. The application concerns rights guaranteed by the Constitution that also fall within the scope of the European Convention on Human Rights, and must be made within thirty days from the date on which legal remedies were exhausted (Law No. 6216, Arts. 45, 47/5). Public legal persons cannot make an individual application; private legal persons may apply only on the grounds that a right belonging to the legal person has been violated; and foreigners cannot apply in respect of rights recognized only for Turkish citizens (Art. 46). Since the right to property falls outside both limits, a foreign-owned company can also apply alleging a violation of its right to property. At the last stage, an application can be made to the European Court of Human Rights within four months, relying on Article 1 of Protocol No. 1, which protects property. The relationship between these remedies and investment arbitration must be handled carefully, especially under treaties with a fork-in-the-road clause.

Enforcing awards in Turkey and abroad

ICSID awards are binding on the parties and are not subject to any appeal or any other remedy except those provided for in the Convention (Art. 53). Each contracting state recognizes an ICSID award as if it were a final judgment of its own courts and enforces the pecuniary obligations it imposes (Art. 54(1)). A party seeking recognition and enforcement applies, with a copy of the award certified by the Secretary-General, to the court that each state has designated for this purpose (Art. 54(2)). Turkey has designated the commercial court of first instance (asliye ticaret mahkemesi) as this court; the competent court is that of the place agreed in writing by the parties, failing which that of the domicile of the party against whom the award was made or of the place where that party’s assets are located; where there is no commercial court of first instance, the civil court of first instance (asliye hukuk mahkemesi) has jurisdiction. In this application, the court does not review the merits of the award, and the grounds for refusal in the New York Convention do not apply. However, these provisions do not derogate from the rules on state immunity from execution (Art. 55); attachment of a state’s assets is subject to the immunity rules of the country concerned.

Arbitral awards made outside ICSID in another country, for example under the UNCITRAL rules, are recognized and enforced under the New York Convention. Turkey is a party to that Convention with the reciprocity and commercial reservations; the Convention therefore applies only to awards made in another contracting state, and the enforcement of foreign arbitral awards in Turkey is governed by Art. 60 et seq. of Law No. 5718 on Private International and Procedural Law (MÖHUK). An award whose seat of arbitration is Turkey is not a foreign award; it is governed by International Arbitration Law No. 4686. For details, see our guides (in Turkish) Yabancı Hakem Kararının Tenfizi (enforcement of foreign arbitral awards) and ICSID Kararının İptali (annulment of ICSID awards).

Examples of cases against Turkey

Investment arbitration cases brought against Turkey show in concrete terms which treaty the protection rests on. Tulip Real Estate Investment and Development Netherlands B.V., incorporated in the Netherlands, brought a case against Turkey at ICSID under the Netherlands–Turkey Bilateral Investment Treaty; the investor’s claims were dismissed by the award of 10 March 2014, and the application for annulment of that award was decided on 30 December 2015 (ICSID Case No. ARB/11/28). This example also shows that being able to rely on a treaty does not mean that the case will be won. Canada’s Alamos Gold, after its Kirazlı licenses in the Kaz Mountains were not renewed, brought its 2021 claim concerning all of its assets in Turkey not from Canada but through its Dutch subsidiaries, relying on the same Netherlands–Turkey treaty. In September 2025 the company announced that it had agreed to sell the shares of the company holding its Turkish projects and that the arbitration would remain suspended and would be discontinued once certain milestones were met. The sale closed in October 2025.

Checklist for investors

For the full legal framework that applies to foreign investors in Turkey, see our Legal Guide for Foreign Investors in Turkey; for the protected standards in detail, see our guides (in Turkish) on bilateral investment treaties (BITs), fair and equitable treatment, indirect expropriation and the Energy Charter Treaty.

What is an investor-state dispute?

An investor-state dispute is a dispute arising from a foreign investor’s allegation that the host state has breached its international obligations relating to the investor’s investment. For example, unlawful expropriation of the investment, discriminatory treatment or breach of assurances given to the investor may give rise to such claims. The claim is, as a rule, brought directly against the state.

Where does the tribunal’s jurisdiction come from?

In investment arbitration, the arbitrators’ jurisdiction usually rests on arbitration provisions in bilateral investment treaties, multilateral treaties or investment contracts between the investor and the state. In other words, through these instruments the state is deemed to have consented to arbitration in advance. Correctly identifying the basis of jurisdiction is the foundation of the whole process.

Bilateral investment treaties and the Energy Charter Treaty

Bilateral investment treaties (agreements on the reciprocal promotion and protection of investments) are signed between two states and grant certain guarantees to the investors of the contracting states. Among multilateral instruments, the Energy Charter Treaty allows investor-state arbitration for energy investments. Which treaty applies depends on the investor’s nationality and the nature of the investment.

The protected “investment” and “investor”

To benefit from investment arbitration, there must be a protected “investment” within the meaning of the relevant treaty and an “investor” who made that investment. The scope of these concepts is defined separately in each treaty; some assets count as investments while others may fall outside the scope. These concepts should therefore be assessed under the relevant treaty before a claim for protection is made.

The state’s main obligations

The main obligations that investment treaties impose on states include treating the investor fairly and equitably, expropriating an investment only in the public interest and against compensation, not discriminating between domestic and foreign investors, and permitting transfers of capital related to the investment. An allegation that these obligations have been breached can form the basis of a claim in arbitration.

Distinctive features of ICSID arbitration

ICSID arbitration is a self-contained system that operates largely independently of national legal systems. Supervision of the proceedings is left to the ICSID Convention’s own mechanisms rather than to national courts. This is one of the most important features that distinguish ICSID from other forms of arbitration.

Enforcement of ICSID awards

Under Article 54 of the ICSID Convention, contracting states must recognize an ICSID award as if it were a final judgment of their own courts and enforce the pecuniary obligations it imposes. In other words, ICSID awards are not subject to the review that applies to the enforcement of ordinary foreign arbitral awards; however, an application for recognition and enforcement must be made to the court designated by the contracting state. Turkey has designated the commercial court of first instance as that court. This is an important safeguard provided by the ICSID system.

Annulment at ICSID

An ICSID award cannot be challenged before national courts; instead, an application for annulment can be made on limited grounds before an ad hoc committee constituted under Article 52 of the ICSID Convention. These grounds include the tribunal having manifestly exceeded its powers, a serious departure from a fundamental rule of procedure, or failure to state the reasons on which the award is based. Annulment review is not intended to re-examine the merits either.

Investment arbitration outside ICSID

Investment disputes are not always heard under the ICSID umbrella. To the extent permitted by the relevant treaty, the parties may also resort to ad hoc arbitration under the UNCITRAL Arbitration Rules or to arbitration administered by institutions such as the Permanent Court of Arbitration (PCA). In that case, review and enforcement of the award may be subject to rules different from those of ICSID.

Points to watch in a claim against a state

An investment arbitration against a state requires rigor in identifying the basis of jurisdiction, proving protected investment and investor status, observing any consultation (cooling-off) periods and meeting the procedural preconditions. Mistakes made at the start can later lead to jurisdictional objections. Specialist legal support is therefore essential.

Practical recommendations

When making a cross-border investment, assessing from the outset which treaties protect the investment and which arbitration route would be open in a possible dispute; structuring the investment with the protective scope of the relevant treaties in mind; and examining procedural time limits and conditions early when signs of a dispute appear will prevent the loss of rights.

Jurisdictional objections: the state’s first line of defense

In investment arbitration, jurisdiction is debated before the merits are reached; a significant share of cases end at this stage.

The last row determines the timing of planning. For an investment to benefit from protection, the structure is expected to have been set up before the dispute became foreseeable. Share transfers or intermediate companies set up after a dispute has arisen may be treated as an abuse aimed at obtaining arbitral jurisdiction, and the case then fails at the jurisdictional stage. The investment structure should therefore be set up long before any dispute emerges, with its commercial reasons documented.

Scope of protection: which state conduct counts as a breach?

Not every adverse administrative act can be taken to arbitration; a breach of specific standards is required.

Expropriation. Direct taking or indirect expropriation; regulations that effectively destroy the value of the investment.

Fair and equitable treatment. Protection of legitimate expectations, prohibition of arbitrariness, procedural safeguards.

Full protection and security. Ensuring physical and legal security.

Non-discrimination. More favorable treatment of domestic investors or investors from third countries.

Free transfers. Transfers of profits and capital must not be blocked.

Umbrella clause. The state’s undertaking to comply with the contracts it has concluded with the investor.

The second standard is the one most often relied on in practice. The principle of protecting legitimate expectations requires that investments made in reliance on specific assurances, permits and incentive commitments given by the state are not later left unprotected. However, for an expectation to be considered “legitimate”, the state must have made a specific commitment directed at the investor; an assumption that the general legislation will not change is not sufficient. Written undertakings, permit letters and incentive certificates obtained at the investment stage should therefore be carefully archived.

Costs and funding of the proceedings

Investment arbitration is a long and expensive process; the budget should be set up from the outset.

The fifth row has been one of the most debated issues of recent years. Third-party funding enables investors who could not otherwise bring a claim because of the high costs to do so; however, disclosure of the funder’s identity may be required for the arbitrators’ independence assessment, and concealing it causes problems later. The existence of a funding agreement may also strengthen the other side’s request for security for costs. If funding is to be obtained, the disclosure obligation and the risk of a security order should therefore be taken into account from the outset.

Collecting the award: the immunity barrier

Obtaining a favorable award does not mean that the money will be collected.

The second row is a fact that many investors learn years later. Recognition of the award and actual seizure of the state’s assets are subject to different regimes; even if recognition is obtained, attachment may not be possible because of immunity from execution. In practice, collection often ends in negotiation and settlement. For this reason, when a claim is brought, the countries in which the respondent state holds commercial assets should be researched and a collection strategy should be set up without waiting for the award. See also our guide (in Turkish) Devletin Yargı Bağışıklığı ve Tahkim (state immunity and arbitration).

Frequently Asked Questions

What is ICSID and what does it resolve?

ICSID is the Centre established within the World Bank by the 1965 Washington Convention that resolves disputes between states and foreign investors through arbitration and conciliation.

Is Turkey a party to ICSID?

Yes. Turkey signed the ICSID Convention on 24 June 1987; the ratification law is Law No. 3460 of 27 May 1988. The instrument of ratification was deposited on 3 March 1989, and the Convention entered into force for Turkey on 2 April 1989.

In what circumstances can an investor bring arbitration against a state?

As a rule, where the state has consented to arbitration in the relevant investment treaty and there is a protected investment; for example, in claims of unlawful expropriation or discriminatory treatment.

How is an ICSID award enforced in Turkey?

Under Article 54 of the ICSID Convention, contracting states recognize and enforce an ICSID award as if it were a final judgment of their own courts. In Turkey, an application for recognition and enforcement is made to the commercial court of first instance with a copy of the award certified by the Secretary-General; the court does not review the merits of the award.

Can an ICSID award be challenged?

Not before national courts; an application for annulment can be made on limited grounds before an ad hoc committee constituted under Article 52 of the Convention.

Does ICSID membership alone give a right to arbitrate against Turkey?

No. ICSID’s jurisdiction depends on the parties’ written consent to submit the dispute to the Centre (ICSID Art. 25(1)). Turkey’s consent is usually found in a bilateral investment treaty, the Energy Charter Treaty or an arbitration clause in an investment contract.

Which countries does Turkey have bilateral investment treaties with?

According to the UNCTAD database, there are treaties in force with the United States, the United Kingdom, Germany, the Netherlands, Russia, China, France, Italy, Spain, Switzerland, Austria, Japan, Azerbaijan and Kazakhstan; the list is not limited to these. The current status of a treaty should be checked separately in any specific dispute.

Can a Canadian investor bring arbitration against Turkey?

According to Turkey’s Ministry of Trade and the UNCTAD database, there is no bilateral investment treaty between Turkey and Canada. Canada has been a party to ICSID since 2013, but arbitration requires Turkey’s written consent. Protection therefore depends on investing through a company in a country that has a treaty with Turkey, or on an arbitration clause in the investment contract.

Can a dispute about a real estate investment be taken to ICSID?

In its notification under ICSID Art. 25(4), Turkey stated that disputes concerning ownership and rights in rem over real estate are within the jurisdiction of the Turkish courts and will not be submitted to the Centre. The notification is for information purposes and does not by itself remove consent given in a treaty; however, the state should be expected to raise a jurisdictional objection based on it. Which route is open is assessed under the relevant treaty.

Which treaty can an energy investor rely on?

Turkey has been a party to the Energy Charter Treaty since 2001. Article 26 of the Treaty allows an energy investor first to seek an amicable settlement and, if no settlement is reached within three months, to resort to international arbitration.

What should be done before going to arbitration?

Most treaties require the dispute to be notified to the state in writing and a negotiation period to pass; some require recourse to the local courts for a certain period or a final choice between the local courts and arbitration. The first step is to read the dispute settlement clause of the relevant treaty.

Does the time limit for an administrative action run while arbitration is being considered?

Yes. The time limit for bringing an action against an administrative act is, as a rule, sixty days, and thirty days for EIA and urgent expropriation decisions (İYUK Arts. 7, 20/A). Preparing for arbitration does not stop these time limits; the two routes should be planned together.

Can a foreign investor make an individual application to the Constitutional Court?

Yes. The only restriction on foreigners is that they cannot apply in respect of rights reserved to Turkish citizens; private legal persons may apply only in respect of rights belonging to the legal person; public legal persons cannot apply (Law No. 6216, Art. 46). Since the right to property falls outside these limits, a foreign-owned company can also apply. The time limit is thirty days from the exhaustion of legal remedies (Art. 47/5).

What is the time limit for applying to the European Court of Human Rights?

Four months from the exhaustion of domestic remedies (ECHR Art. 35/1). Violations of the right to property are assessed under Article 1 of Protocol No. 1.

How are non-ICSID arbitral awards enforced in Turkey?

Arbitral awards made in another contracting state under non-ICSID rules such as UNCITRAL are recognized and enforced under the 1958 New York Convention, to which Turkey is a party with the reciprocity and commercial reservations, and under Art. 60 et seq. of MÖHUK (Law No. 5718). Awards whose seat of arbitration is Turkey are governed by International Arbitration Law No. 4686.

Are there examples of investment arbitration cases against Turkey?

Yes. For example, Tulip Real Estate Investment and Development Netherlands B.V. brought a case at ICSID under the Netherlands–Turkey treaty; its claims were dismissed by the award of 10 March 2014 (ARB/11/28). Canada’s Alamos Gold also relied on the same treaty in 2021, through its Dutch subsidiaries.

Conclusion

Investment arbitration and ICSID proceedings form a distinctive and technical field that can involve high-value claims against states; correctly identifying the basis of jurisdiction and the scope of protection directly affects the outcome. For a cross-border investment or a claim against a state, you can contact us.

Related guides

• Legal Guide for Foreign Investors in Turkey — company formation, real estate, citizenship, tax and arbitration
• Can a Foreign Company Get a Mining License in Turkey? — licensing routes and treaty protection for Canadian investors
• Yatırım Tahkimi ve ICSID — Turkish version of this article
• İkili Yatırım Anlaşmaları (BIT) ve Devlete Karşı Talepler — bilateral investment treaties (in Turkish)
• Enerji Şartı Anlaşması (ECT) m.26 — energy investment arbitration (in Turkish)
• ICSID Yatırım Tahkiminde Kararın İptali (Annulment) — annulment and ad hoc committees (in Turkish)
• Milletlerarası Tahkim Kanunu (4686) — arbitration seated in Turkey (in Turkish)
• Kurumsal Tahkim: ICC ve ISTAC — institutional arbitration (in Turkish)