ARBITRATION & MEDIATION IN US & TURKEY Tuncay YILDIRAN Supervisor Pf.William C.TYSON

Alternative Dispute Resolution arbitration mediation early neutral evaluation conciliation mini-trial

Arbitration dispute resolution knowledgeable neutrals binding waiver of the appeal to court

Historical Background Dated back to 1872 Shearson vs. MacMahon 1987

Regulatory Structure Federal Arbitration Act (Title 9 US Code) Section 6 (1934 Act) Section 15A (1934 Act) Section 19 (1934 Act)

Contractual Basis of ADR compulsory submission written agreement pre-dispute agreements

Eligible Disputes Any disputes arising from or in connection with the bussines of any member, or arising out of the employment or termination of employment; between or among members; between or among members and associated persons; between or among members or associated persons and public customers or others between the customer and nonmember firms if the parties agreed to arbitrate (NASD)

Types of Claims Customer – Member, Associated Person breach of fiduciary duty, fraud, churning Member – Member raiding, breach of contract Associated Person – Member discrimination, compensation, unlawful termination of contract

The Arbitrators knowledgeable in securities markets impartial non employee of sponsoring organizations

Classification of Arbitrators (Non-public arbitrators) is or within 3 years (5 years in NYSE) was associated with any securities professional retired from the securities business attorneys, accountants or other professional who devoted 20 % of his profession to the securities professionals employees of bank or other financial institutions (NASD)

Classification of Arbitrators (Public Arbitrators) himself the spouse or immediate family member (household in NYSE) not engaged in securities activities

Number of the Arbitrators disputes arising out the employment relation employment termination of employment or employment contracts employment discrimination, sexual harassment disputes between associated person with member firms or among member firms disputes between customer and securities industry

Disputes Arising Out of Employment Rule and Rule Rule and Claims up to $100,000 one public arbitrator Claims exceeding $100,000, three public arbitrators Special requirements for public arbitrators

Industry Disputes (NASD) Claims not exceeding $25,000 (Rule 10203) one non-public arbitrator decision on the pleadings and documents Claims up to $50,000 (Rule 10202) one non-public arbitrator if the claim is between $25,000-$50,000 and one of the parties request at the initial filing, three non-public arbitrators Claims exceeding $50,000 three non-public arbitrators

Industry Disputes (NYSE) by the Board of Arbitrators Claim is not exceeding $25,000 one arbitrator Claim is exceeding $25,000 three arbitrators Rule 607

Disputes Between Customer and the Industry (NASD) Claims not exceeding $25,000 (Rule 10302) one public arbitrator decision on the pleadings and documents Claims up to $50,000 (Rule 10308) one public arbitrator if the claim is between $25,000-$50,000 and one of the parties request a three arbitrator panel at the initial filing, two public/one non- public arbitrators Claims exceeding $50,000 three public arbitrators, (one non-public/two public)

Disputes Between Customer and the Industry (NYSE) Claim not exceeding $25,000 ($10,000) One public arbitrator decision on the pleadings and documents Claim exceeding $25,000 ($10,000) or the claim not involve any money claim two public-one industry arbitrator

Arbitration Case Flow

Arbitration Case Flow-1 (Submission of Claim) submission agreement statement of claim supporting documents required filing fee and hearing deposit analyze of the submission

Arbitration Case Flow-2 (Notification of Respondent) delivery of the claim to respondent reply of the Respondent with required documents time limitation to reply NASD simplified arbitration 20 days arbitration other than simplified 45 days NYSE 20 days analyze of the reply

Arbitration Case Flow-3 (Selection of Arbitrators) NASD Neutral List Selection System NYSE Voluntary Supplemental Procedure for Selecting Arbitrators Random List Selection System Enhanced List Selection System

Arbitration Case Flow-4 (Hearings) mandatory except simplified arbitration upon written request of the parties hearings can be waived participation to the hearings required initial hearing scheduled by the Director of Arbitration continuing hearings by arbitrators keeping of the records

Arbitration Case Flow-5 (Discovery of Dispute) documents provided by parties witnesses voluntary exchange of documents subpoena direct appearance of the third parties

Arbitration Case Flow-6 (Decision and Awards) formation of the decision materiality and relevance of the evidences not bind with the rules governing the adminissibility of the evidence the writing of the award publicity of the award payment of the award

Mediation voluntary informal inexpensive non-binding win-win situation

Eligible Disputes any dispute eligible for arbitration any procedural conflict that arise during the arbitration under the sole discretion of Director of Arbitration

Mediation Case Flow

Mediation Procedure-1 (Submission of Dispute) no prerequisites before the arbitration during the arbitration

Mediation Procedure-2 (Selection of Mediator) from a list or other sources of parties own discretion from the list provided by Director of Mediation (NYSE; Director of Arbitration) appointment by the Director of Mediation/Arbitration

Mediation Procedure-3 (Mediation Session) scheduling session first session generally in meeting form can be conducted in any means no record kept no subpoena caucuses

Mediation Procedure-4 (Conclusion) settlement declaration of negotiations futile arbitration process courts withdraw of mediator or parties for any reason

Mediation vs. Arbitration-1 Expedited negotiation Parties control the outcome. Mediator has no power to decide. Settlement only with party approval. Exchange of information is voluntary and is often limited. Adjudication Arbitrators control the outcome. Arbitrator is given power to decide. Final and binding decision. Often extensive discovery is required.

Mediation vs. Arbitration-2 Process is informal. Parties are active participants. Joint and private meetings between individual parties and their counsel. Outcome based on needs of parties. Result is mutually satisfactory Low cost. Private and confidential. Process is formal. Attorneys control party participation. No private communication with the arbitrator. Decision based on facts, evidence, and law. Result is win/lose award More expensive than mediation, Private (but decisions are publicly available).

Dispute Resolution in Turkey Istanbul Stock Exchange (administrative settlement of disputes) Association of Capital Market Intermediary Institutions of Turkey (formerly mediation, with the amendment arbitration)

Eligible Disputes ISE sponsored administrative settlement of disputes the disputes arising from exchange affairs and transactions ACMIIT sponsored arbitration the disputes arising other than exchange affairs and transactions

Administrative Settlement of Disputes compulsory for member firms voluntarily for customers decision made by Board of Directors Committee of Disputes assist right to appeal CMB awards paid by member, otherwise collection of the award from the deposits

ACMIIT Sponsored ADR established in February 11, 2001 until march 11, 2003 mediation with the amendment arbitration no regulation yet