Determining the law applicable to an arbitration agreement is a controversial issue in various aspects. The increase in problems regarding the extension of arbitration agreements to third parties in practice has revealed the importance of determining the law applicable to the arbitration agreement. Essentially, it has become important whether the arbitration agreement is valid for the third parties subject to the extension request. However, in cases where there is no request to extend the arbitration agreement to third parties; it should not be overlooked that there are also invalidity claims among the existing parties.

The invalidity claims of arbitration agreements can be raised before arbitrators, as well as before state courts. Both in cases of annulment of arbitral awards and cases of enforcement of foreign arbitral awards, the validity of arbitration agreements and the determination of the law to be applied to arbitration agreements are handled by state courts. However, as will be seen below, the lack of a uniform regulation and/or practice regarding the law applicable to arbitration agreements has led to different decisions by the courts of various states on this issue. Particularly in cases of annulment of arbitral awards and/or requests for recognition and enforcement, decisions are made by the relevant state courts. These decisions are rendered according to the trends that dominate the issue of extension in the relevant legal systems. In this context, first of all, emphasis should be placed on determining the law applicable to the arbitration agreement depending on the intent of the parties. It is generally accepted that the law applicable to the arbitration agreement can be determined by the parties.

In other words, the parties can determine the law applicable to the arbitration agreement as well as the law applicable to the main contract. However, it is a fact that the parties generally do not include a separate choice of law clause to be applied to the arbitration agreement. In fact, the law applicable to the main contract is generally chosen but, the law applicable to the arbitration agreement has not been determined by the parties expressly. For this reason, the implied choice of law and the role of the law applicable to the main contract are mostly discussed. 

Recently, high courts in various legal systems have demonstrated different tendencies regarding the law applicable to arbitration agreements, and contradicting evaluations have been made, especially regarding the extension of the arbitration agreement to third parties. While some higher courts consider the choice of law applicable to the main contract by the parties as an implied choice of law, others consider the determination of the seat of arbitration as an implied choice of law. In addition, where there is no choice of law, assessments have been made based on the most closely connected law, especially by the English courts.

A recent decision rendered by the German Federal Court on March 9, 2023, is noteworthy in this regard. The decision examines whether the arbitral award may be enforced in the event that the arbitration agreement is extended to companies within a group of companies. The Federal Court upheld the rejection of the request for enforcement of the arbitral award after examining various issues. On appeal to the Federal Court, the Koblenz Regional High Court ruled that the arbitration agreement could not be extended to a third party. Although there are no detailed evaluations regarding the extension of the arbitration agreement to the companies in the group, it can be said that the decision reflects the perspective of German law. The Federal Court determined the applicable law to the arbitration agreement on the basis that the extension of the arbitration agreement to third parties is a matter of the law applicable to the substance of the arbitration agreement. The applicable law to the arbitration agreement was determined as German law, despite the seat of arbitration being Russia. Because the contract contained a choice of law clause indicating that the contract is subject to German law. The Court interpreted that the law applicable to the arbitration agreement was impliedly determined by the parties and concluded that the extension of the arbitration agreement to third parties under German law was not appropriate. Similarly, in some recent decisions of the English Supreme Court and the French Supreme Court on the requests for enforcement and annulment of arbitral awards, especially in some cases where the issue of extension to third parties is discussed, different principles are applied on the applicable law to the arbitration agreement and different conclusions are reached in parallel cases. Legal certainty and predictability have been undermined as a result of these different approaches. In this respect, the English Law Commission has recently proposed an amendment to the English Arbitration Act, which, if enacted, will eliminate the implied choice of law in determining the law applicable to the arbitration agreement in English law. 

In this study, firstly, the dispute subject to the decision of the German Federal Court and the discussions regarding the determination of the applicable law to the arbitration agreement on the basis of this decision are discussed. For this purpose, firstly, information on the dispute subject to the decision is provided, and then the approach of some other legal systems and recent judicial decisions on the determination of the applicable law to the arbitration agreement are analyzed. In particular, taking into account the developments regarding the implied choice of the law applicable to the arbitration agreement by the parties, the appropriateness of the interpretations regarding the implied choice of the applicable law is discussed. Finally, the views on the determination of the applicable law in Turkish international arbitration law are evaluated. 

It should also be noted that this study addresses the question of determination of the applicable law to the arbitration agreement in cases where the issue is discussed before the state courts, upon the first objection to arbitration, and upon requests for annulment or enforcement of arbitral awards.