This article deals with a specific problem regarding the interpretation and scope of arbitration agreements with a focus on international arbitration. In practice, the parties to a fixed-term contract regarding a continuous relationship (e.g., lease agreement, distributorship agreement) commonly continue the relationship de facto without explicitly entering into a new agreement at the end of the term. In such a case, the problem arises whether the arbitration clause in the original written contract covers disputes arising out of the legal relationship that continues beyond the initially agreedupon term.

To tackle this problem, the article firstly inquires as to the legal consequences of such de facto continuation of a legal relationship under Turkish law. The study hereby submits that such a de facto continuation shall, as a rule, be construed as a tacit extension (i.e., renewal, prolongation) of the same contract. 

The article continues with general considerations regarding the interpretation of arbitration agreements, followed by discussions the applicable law to the interpretation of arbitration agreements. The prevailing view is that the law applicable to substantive issues regarding the arbitration agreement, which is the one also governs the issue of interpretation. The trend in international arbitration calls for a broad interpretation of the arbitration agreement. The ratio of such approach is that business persons acting in good faith can easily be presumed to desire a one-stop method to resolve their given disputes. In particular, the Swiss Federal Court more than once has stated in its decisions that once parties’ consent to arbitrate has been ascertained, the scope of the arbitration agreement shall be interpreted extensively.

The article also questions the role Article II of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) with regard to the interpretation of arbitration agreements, whereby the said convention applies. According to one view in literature, the interpretation of arbitration agreements should be done in light of the pro-arbitration objectives of the convention. This view relies on the suggestion that Article II of the NYC mandates an international rule of arbitration agreements subject to the NYC. If this view is adopted, the interpretation of arbitration agreements would be conducted irrespective of the national law applicable to the arbitration agreement.

Even if the view suggesting that Article II of the NYC imposes an international rule for interpretation of arbitration agreements be not followed, or in cases where the NYC does not apply, the study hereby argues that Turkish courts should interpret arbitration agreements broadly and in a pro-arbitration manner in line with the trends in international arbitration. The Turkish legislator has openly stated their intention to draft a legal framework in line with trends in international arbitration. The preamble of the International Arbitration Law states that this law was prepared “based on the model law prepared by the United Nations Commission on International Trade Law (UNCITRAL) and the contemporary understanding, developments and principles in comparative international arbitration law.” Similar language has been used in the explanatory notes on rules regulating domestic arbitration. The judiciary must take into account these intentions of the legislator.

However, a brief look at case law of Turkish Court of Cassation reveals the court’s tendency to interpret arbitration agreements restrictively. Decisions by first instance courts are found that conform to the trends in international arbitration but that were later overturned by the Court of Cassation. This article examines one example of such a decision. The analysis shows that the Court of Cassation’s approach to the issue is neither compliant with the views adopted in this article nor with the trends in international commercial arbitration.

The conclusions reached can be summarized as follows:

1- In contrast to the Court of Cassation’s decision, a fixed-term distributorship agreement whose parties continue the relationship de facto without entering into a new agreement explicitly at the end of the term should be construed as a tacit extension of the same contract.

2- When parties extend an existing contractual relationship, the arbitration agreement shall also cover the disputes relating to the extended period, unless the parties’ will to the contrary can be ascertained. This outcome is in line with the presumed intentions of business people acting in good faith. The fact that the parties did not re-express their intention to arbitrate in accordance with the written form requirement at the time of the extension of the contract does not in itself indicate their intention to resolve the disputes before the state courts for the extended period. This conclusion is also consistent with the practice of international arbitration and the opinions on Article II (2) of the NYC. However, in exceptional cases where parties in addition to extending the term of the contract also substantially modify their contractual rights and obligations, the re-expression of their intention to arbitrate may be necessary.

3- The parties may also establish a new contract with similar content following the expiration of the first contract at the end of a certain period. In this case, whether the arbitration agreement regarding the first contract will also cover the new contract should be evaluated. This evaluation requires an interpretation of the parties’ intentions. The starting point for this interpretation will be the text of the arbitration agreement. However, the standard arbitration clauses that are generally used in practice state that disputes “in connection with” or “relating to” the contract in which the clause is included will be resolved through arbitration, and such arbitration clauses are interpreted broadly in international arbitration practice. This assessment should take the relationship between the two contracts into account. If the second contract is deemed to be a continuation of the previous contract, economically if not also legally, or to complement the first, the arbitration agreement in the first contract should cover the second contract as well. Of course, the solution to this problem ultimately requires the interpretation of the parties’ intentions. In practice, similar problems are also encountered in cases where a settlement agreement without an arbitration clause has been concluded in relation to the main contract containing an arbitration clause, or in cases where more than one contract has been concluded for the same work or project and only one or more of them contain an arbitration clause. In the practice of international arbitration practice, there is a tendency to interpret the arbitration agreement broadly in such cases. Unless a different dispute resolution method has been agreed upon in the contracts that do not contain arbitration clauses and no other facts are found to support the parties’ intention to the contrary, to assume that the parties’ intention is to resolve their disputes with a single dispute resolution method would be appropriate.

4- The decision of the 11th Civil Chamber of the Turkish Court of Cassation, as well as previous decisions by the Court of Cassation on similar matters, does not appear in line with the conclusions reached above or with the practice of international arbitration. When analyzing the legislature’s recent regulations on arbitration, the legislature is seen to have aimed to establish a legal order in accordance with the contemporary understanding, developments, and principles in comparative international arbitration law. Having the courts adopt a more arbitration-friendly approach in their legal practice and in line with this aim of the legislators would be appropriate.