Consistent with the United Nations Commission on International Trade Law (UNCITRAL) Model Law 1985 (the Model Law), the International Arbitration Law deals with objections to a court's jurisdiction based on an arbitration agreement.(1) Article 5/1 of the law provides that if a party initiates court proceedings to resolve a dispute which falls within the scope of an arbitration agreement, the counterparty can object to the court's jurisdiction based on said agreement. The submission of objections and the resolution of disputes concerning the validity of an arbitration agreement are subject to the Civil Procedure Law.(2) If a court accepts such an objection, it will dismiss the lawsuit on procedural grounds.
However, while the Model Law states that a court "shall refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed", the International Arbitration Law does not address whether the courts have the authority to review the validity of a relevant arbitration agreement, which raises doubts about their authority.
In its 2007 and 2014 decisions, the 15th Chamber of the Court of Appeals held that in the case of an objection to a court's jurisdiction based on an arbitration agreement, the courts have no authority to decide whether the arbitration clause in the agreement is valid if the dispute is subject to the International Arbitration Law.(3) The 15th Chamber's reasoning was that:
- arbitral tribunals have the authority to rule on their own jurisdiction, including any objections with respect to the existence or validity of an arbitration agreement under Article 7/H of the International Arbitration Law, which corresponds to Article 16 of the Model Law; and
- the courts can review the validity of an arbitration agreement only in a setting aside lawsuit after the arbitral tribunal renders the award.
However, a dissenting opinion stated that there is no legal provision preventing the courts from reviewing the validity of an arbitration agreement. In a 2017 decision, the 15th Chamber changed its jurisprudence and accepted that, under the International Arbitration Law, the courts:
- must review the validity of arbitration agreements in cases where an objection to their jurisdiction has been based on an arbitration agreement; and
- can dismiss a lawsuit on procedural grounds only if the relevant arbitration agreement is valid.
The change in the 15th Chamber's jurisprudence runs parallel with that of other chambers of the Court of Appeals, which also generally hold that the courts have the authority to review the validity of an arbitration agreement in case of an objection to the court's jurisdiction based on said agreement.(4)
Considering the above, the Court of Appeals has adopted a uniform approach towards the authority of a court to review the validity of an arbitration agreement in case of an objection to the court's jurisdiction. This jurisprudence confirms the law and purpose of arbitration. Article 5/1 of the International Arbitration Law refers to the Civil Procedure Law's relevant provisions regarding the submission of objections and the resolution of disputes concerning the validity of an arbitration agreement. Under Article 413/1 of the Civil Procedure Law, the courts must accept this objection and dismiss a lawsuit on such grounds only if the arbitration agreement is not null and void, inoperative or incapable of being performed. Although the International Arbitration Law does not address whether a court has the authority to review the validity of a relevant arbitration agreement in case of an objection to the court's jurisdiction, the Civil Procedure Law grants this authority to the courts.
In addition, if the courts can review the validity of an arbitration agreement only in a setting aside lawsuit after the arbitral tribunal renders the award, this may result in a situation in which the parties incur expenses and waste time arbitrating when the arbitral award will be set aside due to the arbitration agreement's invalidity.
For further information on this topic please contact Okan Demirkan or Cihan Mercan at Kolcuoglu Demirkan Koçakli Attorneys at Law by telephone (+90 212 355 9900) or email ([email protected] or [email protected]). The Kolcuoglu Demirkan Koçakli Attorneys at Law website can be accessed at www.kolcuoglu.av.tr.
Endnotes
(1) The International Arbitration Law 4686 of 21 June 2001.
(2) The former Civil Procedure Law 1086 of 18 June 1927, which was referred to in Article 5/1 of the International Arbitration Law, was replaced by the Civil Procedure Law 6100 of 12 January 2011, which entered into force on 1 October 2011.
(3) The 15th Chamber of the Court of Appeals' decision, 27 June 2007 (2007/2145 E and 2007/4389 K); the 15th Chamber of the Court of Appeals' decision, 1 July 2014 (2014/3330 E and 2014/4607 K).
(4) The 11th Chamber of the Court of Appeals' decision, 16 March 2015 (2015/2400 E and 2015/3627 K).
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