Non-Exclusive Arbitration Agreements: A Brief Analysis of the Turkish Case-Law
As the validity of an arbitration agreement is a complex and multifaceted topic that requires an extensive and thorough analysis, we focus on what makes an arbitration agreement non-exclusive and the validity of such agreements according to the Turkish case-law.
Turkish Court of Appeal (“the Court”) designates the parties’ declaration of intent to settle their dispute in arbitration an essential element of arbitration agreement.[1] In this context, the Court holds that for an arbitration agreement to be valid, parties’ declaration of such intent must be explicit and unequivocal in a manner that leaves no room for any debate or uncertainty as to their intent.[2]
In contrast, if the parties’ intention is vague or ambiguous in a way that the formulation of the arbitration agreement either undermines or dissipates the parties’ intention to arbitrate, the agreement is deemed void or invalid.[3] Such a risk may indeed present itself in the case of non-exclusive arbitration agreements.
In non-exclusive arbitration agreements, parties typically agree to resolve their dispute in arbitration, without prejudice to their right to refer their dispute to litigation in courts. Non-exclusivity will come into question in arbitration clauses when the clause stipulates that any dispute “may” (as opposed to “shall” or “should”) be referred to arbitration, or in clauses where parties are specifically given the option to arbitrate or litigate, without setting an order of precedence commonly found in multi-tiered arbitration clauses.
The Court reviewed non-exclusive arbitration agreements in numerous decisions and on various occasions ruled that should parties leave the door open for recourse to litigation in courts, arbitration agreement shall be deemed invalid (or void) and their disputes cannot be referred to and resolved in arbitration.[4] In those decisions, the Court, on a consistent basis, held that as local courts, in principle, have general jurisdiction over any disputes between parties, arbitration agreements stipulating otherwise can be only effective, if parties’ intention to arbitrate is absolute and the expression of that intent is explicit and unequivocal.[5]
In a recent decision, the Court reiterated its aforesaid standpoint on non-exclusive arbitration agreements[6]. In that case, the agreement between the parties included an arbitration clause which stated the following:
“(…) Should the parties not settle their dispute within ten (10) days following the first meeting; then, either party can initiate an arbitration or a legal action[7] in accordance with Article 16.3.
(…) Any dispute, controversy or disagreement related to or in connection with this agreement or arising from the violation of this agreement shall be definitively resolved in arbitration.”
Although the second paragraph may be construed so as to manifest the parties’ intention to settle their disputes in arbitration, the Court referred to the phrase “legal action” in the first paragraph, interpreted that phrase as “lawsuit” and held that the arbitration clause was void due to the lack of an explicit intention to arbitrate.
The Court’s consistent approach to non-exclusive arbitration agreements and persistent emphasis on the existence of parties’ explicit and unequivocal intention to arbitrate evidently stresses the importance of careful and precise wording of arbitration agreements (or clauses). In cases where parties’ absolute intention is to arbitrate, a vaguely and ambiguously drafted arbitration agreement may be deemed invalid or void and the parties may find themselves litigating in courts despite their explicit desire not to do so, or even worse, having arbitrated their dispute and are unable to enforce the award if the arbitration agreement is found void during the enforcement proceedings.
This article has been authored by Ergin Mizrahi, LL.M. (Senior Partner and Head of Disputes) and Hasan Eker, Senior Associate.
[1] General Assembly of Civil Chambers, Turkish Court of Cassation, E. 2021/855, K. 2022/129, T. 15.02.2022.
[2] ibid.
[3] ibid.
[4] For instance; 15th Civil Chamber of Turkish Court of Cassation, E. 2016/4735, K. 2017/259, T. 23.1.2017; 15th Civil Chamber of Turkish Court of Cassation, E. 2016/1522, K. 2017/1522, T. 04.04.2017; 15th Civil Chamber of Turkish Court of Cassation, E. 2015/2198, K. 2015/2758, T. 22.05.2015; 15th Civil Chamber of Turkish Court of Cassation, E. 2014/3330, K. 2014/4607, T. 01.07.2014;15th Civil Chamber of Turkish Court of Cassation, E. 2009/1438, K. 2009/2153, T. 13.04.2009;
[5] ibid.
[6] 11th Civil Chamber of Turkish Court of Cassation, E. 2020/1634, K. 2022/1742, T. 10.03.2022.
[7] The agreement in question was drafted in Turkish and the wording used therein was “tahkim veya dava”.
