Decision of the General Assembly of Civil Chambers of the Court of Cassation on the Arbitration Clause in the De Facto Extended Contract
Introduction
The declaration of intent to resolve disputes through arbitration is the fundamental constituent element of an arbitration agreement. To speak of a valid arbitration agreement, the parties' intention to arbitrate must emerge in a way that leaves no room for dispute. If the contractual relationship between the parties continues after the expiration of an agreement containing an arbitration clause, the issue of whether the arbitration clause is valid comes to the fore. This issue was discussed in the decision of the Supreme Court of Appeals General Assembly of Civil Chambers ("CCGA") dated 29.11.2023 and numbered 2023/103 E. 2023/1185 K., and the relevant decision is reviewed in this Newsletter article.
Dispute Subject to the Decision
The dispute arose from the distribution relationship between the parties. The parties first signed a distributorship agreement on 01.06.2005, another agreement with similar provisions was concluded on 01.01.2007 and finally a new distributorship agreement was concluded on 01.01.2008 for two years. It is regulated in the Article of the contract regarding the term that the contract will expire at the end of the two-year term, unless the contract is renewed at least thirty days before the expiration of the term. After the expiration of the 01.01.2008 dated agreement, it is understood that negotiations started between the parties to conclude a new distributorship agreement, but the parties could not reach an agreement on this agreement, however, the distributorship relationship between the parties continued until 2017.
Upon the emergence of a dispute between the parties, the Claimant claimed that he terminated the distributorship relationship for just cause and demanded compensation for the damages suffered. The Defendant objected to arbitration because there was an arbitration clause in the last distributorship agreement signed between the parties on 01.01.2008.
Evaluation by the Court of First Instance and the Regional Court of Appeal
The court of first instance, which examined the dispute, stated that despite the explicit formal provision in the contract, the parties manifested their will for the continuation of the contract by continuing the contractual relationship at the end of the contract period, that this explicit actual will for the continuation of the contract should be given precedence over the formal will, that since there is no regulation regarding the distributorship contract in the Turkish legislation, the provisions regulating the agency contracts will be applied by analogy, that pursuant to Article 121/2 of the Turkish Commercial Code No. 6102, if an agency agreement concluded for a certain period of time continues to be implemented after the expiry of the term, the agreement will become indefinite term, according to all these, the distributorship agreement between the parties has become indefinite term, there is a valid arbitration clause in this agreement that has become indefinite, and the court does not have jurisdiction to hear the dispute in existence of the arbitration clause.
The Regional Court of Appeal, which examined the dispute upon the appeal filed by the plaintiff, rejected the appeal because the decision of the first instance court was by the law.
Evaluation by the Court of Cassation
The 11th Civil Chamber of the Court of Cassation, which examined the appeal against the decision, reversed the decision of the Regional Court of Appeal by accepting that no data is showing the express will of the parties that the agreement dated 01.01.2008 containing the arbitration clause was renewed under the same conditions and that the arbitration clause was also accepted, and that even if it is accepted that the distributorship relationship between the parties continued within the framework of this agreement after the termination of the agreement, it cannot be concluded that the arbitration clause in this agreement was accepted by the parties due to the principle of separability.
Evaluation by the Court of Cassation General Assembly of Civil Chambers
Upon the resistance of the court of first instance to the reversal decision of the Court of Cassation, the dispute was examined by the HCJC.
The CCGA stated that the declaration of the parties' intention to resolve the disputes through arbitration is the fundamental constituent element of the arbitration agreement, and to speak of a valid arbitration agreement, the parties' intention to arbitrate must be clearly stated in their written agreement in a way that leaves no room for dispute, and emphasized that the intention to arbitrate must be clear, precise and beyond any doubt.
Examining the concrete case in the light of these principles, the CCGA, noting that the parties agreed in the contract dated 01.01.2008 that an explicit declaration of will should be made for the extension of the contract, evaluated that the contract cannot be deemed to be extended since the parties did not make an explicit declaration of will to extend this contract, and that the parties preferred not to extend the said contract, but they wanted to carry out the distributorship relationship between them without a written contract. In the light of the aforementioned assessment, the CCGA stated that it cannot be concluded that this distributorship relationship between the parties continues under the terms and conditions in the agreement dated 01.01.2008, and ruled with a majority of votes that there is no valid arbitration agreement between the parties.
Conclusion
With the relevant decision, the CCGA once again emphasized that the existence of the will to arbitrate must be clearly and precisely expressed, rather than interpreting an implicit will, by linking the existence of the will to arbitrate to formal and strict conditions.
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