Research Article


DOI :10.26650/ppil.2023.43.2.1349454   IUP :10.26650/ppil.2023.43.2.1349454    Full Text (PDF)

Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation

Işık Önay

This article deals with a specific problem regarding the interpretation and scope of arbitration agreements. Following the expiration of the term in a contract pertaining to a continuous legal relationship, parties sometimes continue their relationship within the framework of the same (or similar) rights and obligations without entering into a further agreement explicitly. In such a case, the problem arises of whether the arbitration clause regarding the first contract covers disputes arising out of the legal relationship that continues beyond the initially agreed-upon term. In order to answer this question, what the de facto continuation of the legal relationship between the parties means should first be determined in terms of law of obligations. Have the parties implicitly extended the term of the contract between them, or have they implicitly established a new contract with the same content? With respect to this controversial issue, the author argues that the will of the parties as a rule is in favor of the first alternative. Secondly, answering the question requires an interpretation of the arbitration agreement to determine its scope. The interpretation of arbitration agreements is ultimately governed by the general principles of contract interpretation. According to the view advocated in this study, arbitration agreements should be interpreted broadly and in line with the trends in international arbitration. The explanatory notes by the legislator regarding arbitration legislation also support this approach. Meanwhile, the decisions by the Turkish Court of Cassation generally tend to interpret arbitration agreements restrictively. The decision this study analyzes shows the Court of Cassation to have ruled that a new contract was established between the parties with respect to a distributorship relationship, which the parties continued after the expiry date that had been initially included in the contract. The Court of Cassation concluded that the disputes arising from this contract should be resolved before the state courts, as the parties’ intention to submit disputes arising from this new contract to arbitration could not be ascertained. The study hereby argues that this decision of the Court of Cassation is open to criticism in light of the trends in international arbitration.

DOI :10.26650/ppil.2023.43.2.1349454   IUP :10.26650/ppil.2023.43.2.1349454    Full Text (PDF)

Belirli Süreli Bir Sözleşmede Yer Alan Tahkim Anlaşması Borç İlişkisinin Süre Sonunda Fiilen Devam Ettirilmesi Durumunda Uygulanabilir mi? Yargıtay 11. HD’nin Güncel Bir Kararının Eleştirisi

Işık Önay

Bu çalışmada tahkim anlaşmalarının yorumu ve kapsamına ilişkin özel bir ihtimal değerlendirilmektedir. Tarafların tahkim şartı içeren, sürekli borç ilişkisi niteliğindeki bir sözleşmenin süresinin dolması ardından, başkaca açık irade beyanında bulanarak bir anlaşma yapmadan aralarındaki ilişkiyi, aynı (veya benzer) hak ve yükümlülükler çerçevesinde fiilen devam ettirmesiyle sıklıkla karşılaşılabilir. Böyle bir durumda belirli süre sona erdikten sonraki dönemde çıkan uyuşmazlıkların tahkim yoluyla çözülmesi gerektiği söylenebilir mi? Bu soruya yanıt verebilmek için ilk olarak tarafların aralarındaki hukuki ilişkiyi fiilen devam ettirmelerinin borçlar hukuku bakımından ne anlama geldiği tespit edilmelidir. Taraflar örtülü olarak aralarındaki sözleşmenin süresini mi uzatmışlardır; yoksa örtülü olarak aynı içerikte yeni bir sözleşme mi kurmuşlardır? Tartışmalı olan bu konu bakımından bu çalışmada taraf iradelerinin kural olarak ilk ihtimal yönünde olduğu savunulmaktadır. Sorunun yanıtlanması ikinci olarak, tahkim anlaşmasının yorumlanması suretiyle kapsamının belirlenmesini gerektirir. Tahkim anlaşmalarının yorumu son tahlilde sözleşmelerin yorumuna ilişkin genel ilkeler çerçevesinde yapılır. Bu çalışmada savunulan görüşe göre, tahkim anlaşmalarının milletlerarası tahkim uygulamalarıyla bağdaşan şekilde, geniş yorumlanması gerekir. Türk kanun koyucusunun MTK ve HMK’nın gerekçelerinde kullandığı ifadeler de bu yaklaşımı desteklemektedir. Yargıtay kararlarında ise genel olarak tahkim anlaşmalarını dar yorumlama eğilimi görülmektedir. Bu çalışmada incelenen bir kararında Yargıtay, taraflar arasında belirli süre sonunda fiilen devam ettirilen bir distribütörlük ilişkisi bakımından, taraflar arasında yeni bir sözleşme kurulduğu, bu sözleşmeden doğan uyuşmazlıkların önceki yazılı sözleşmede bulunan tahkim şartı kapsamında olduğuna dair taraf iradesi tespit edilemediğinden, uyuşmazlığın devlet mahkemeleri önünde çözülmesi gerektiğine hükmetmiştir. Yargıtay’ın bu kararı bu çalışmada savunulan görüş ve yukarıdaki açıklamalar ışığında eleştiriye açıktır.


EXTENDED ABSTRACT


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.


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APA

Önay, I. (2023). Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation. Public and Private International Law Bulletin, 43(2), 491-516. https://doi.org/10.26650/ppil.2023.43.2.1349454


AMA

Önay I. Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation. Public and Private International Law Bulletin. 2023;43(2):491-516. https://doi.org/10.26650/ppil.2023.43.2.1349454


ABNT

Önay, I. Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation. Public and Private International Law Bulletin, [Publisher Location], v. 43, n. 2, p. 491-516, 2023.


Chicago: Author-Date Style

Önay, Işık,. 2023. “Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation.” Public and Private International Law Bulletin 43, no. 2: 491-516. https://doi.org/10.26650/ppil.2023.43.2.1349454


Chicago: Humanities Style

Önay, Işık,. Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation.” Public and Private International Law Bulletin 43, no. 2 (Mar. 2024): 491-516. https://doi.org/10.26650/ppil.2023.43.2.1349454


Harvard: Australian Style

Önay, I 2023, 'Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation', Public and Private International Law Bulletin, vol. 43, no. 2, pp. 491-516, viewed 3 Mar. 2024, https://doi.org/10.26650/ppil.2023.43.2.1349454


Harvard: Author-Date Style

Önay, I. (2023) ‘Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation’, Public and Private International Law Bulletin, 43(2), pp. 491-516. https://doi.org/10.26650/ppil.2023.43.2.1349454 (3 Mar. 2024).


MLA

Önay, Işık,. Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation.” Public and Private International Law Bulletin, vol. 43, no. 2, 2023, pp. 491-516. [Database Container], https://doi.org/10.26650/ppil.2023.43.2.1349454


Vancouver

Önay I. Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation. Public and Private International Law Bulletin [Internet]. 3 Mar. 2024 [cited 3 Mar. 2024];43(2):491-516. Available from: https://doi.org/10.26650/ppil.2023.43.2.1349454 doi: 10.26650/ppil.2023.43.2.1349454


ISNAD

Önay, Işık. Is an Arbitration Agreement in a Fixed Term Contract Enforceable in the Event of the De Facto Continuation of the Relationship at the End of the Term? Critique of a Recent Decision by the 11th Civil Chamber of the Court of Cassation”. Public and Private International Law Bulletin 43/2 (Mar. 2024): 491-516. https://doi.org/10.26650/ppil.2023.43.2.1349454



TIMELINE


Submitted24.08.2023
Accepted06.10.2023
Published Online28.11.2023

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