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 11<SUP>th</SUP> civil chamber of the court of cassation

Abstract

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.