Turkish Court of Appeal fails to clarify validity of ‘hybrid’ jurisdiction-arbitration clauses

The background

Turkey’s International Arbitration Law requires that an agreement to arbitrate disputes be clear and definite. An agreement which contains both a jurisdiction clause submitting disputes to a court and an arbitration clause, both dealing with the same subject matter, creates uncertainty. Two different divisions of the Court of Appeal have issued two apparently contradictory decisions on this issue. The decisions do, however, shed some light on how this type of clause is to be construed.

The decisions

The 11^th Civil Division held that an arbitration agreement was invalid due to lack of clear and definitive intent to arbitrate (Decision No. 2013/16901). The agreement contained an arbitration clause and a clause giving Istanbul courts jurisdiction over disputes that cannot be resolved by the arbitrators. The court noted the exceptional character of arbitration, emphasizing the need to state in clear and unequivocal terms that all or certain disputes are to be exclusively resolved through arbitration.

On similar facts, the 15^th Civil Division, although erroneously dismissing the appeal on the ground that an arbitral tribunal has exclusive competence to determine validity of arbitration agreements, in effect, upheld the lower court’s decision (Decision No. 2014/4607). The lower court had held that the arbitration agreement was valid and that the jurisdiction clause should be restricted to matters that require court intervention, i.e., interim measures and interim attachments. This is a creative interpretation; no support for it can be found in the agreement. The only justification is that since the arbitration agreement was very detailed, the parties’ intention, arguably, was to arbitrate all disputes arising from the agreement.

Conclusion

While it is helpful that the Court of Appeal has delivered two decisions on such a crucial topic that has long been the subject of theoretical debate, the 15^th Civil Division’s decision upholding the lower court’s decision, however, creates uncertainty where a consistent approach would have been better. Still, the decisions shed light on how the Court of Appeal interprets these clauses. Consequently, those drafting arbitration agreements with a seat in Turkey should seek the advice of experienced Turkish arbitration practitioners to ensure clarity of intent.

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