THE AUTHOR:
Erdem Küçüker, Attorney-at-law registered at the Istanbul Bar Association.
By signing an arbitration agreement, parties commit to resolving their disputes through arbitration. Parties’ intention to arbitrate forms the core of the arbitration agreement. The intention to arbitrate was discussed in two recent proceedings before the Turkish Court of Cassation. Both proceedings arose from the same legal relationship, where parties agreed to settle their disputes with arbitration in London, while they also accepted the jurisdiction of English courts. The Court reconfirmed that for a valid arbitration agreement, the parties should clearly demonstrate their intention to arbitrate, which lacked in the underlying dispute. This article summarizes the two proceedings and comments on the decisions rendered in them.
Proceedings
In the underlying dispute, the parties signed a distributorship agreement in 1985. The distributor committed to sell the vehicles and spare parts provided by the supplier in Türkiye. Parties chose that English law shall govern the entire agreement. The agreement included an arbitration clause with a seat in London, and it also provided for the non-exclusive jurisdiction of English courts. In 2013, the parties signed a novation agreement, which had a dispute resolution clause authorizing English courts for the resolution of disputes. The supplier’s termination of the distributorship agreement took effect in 2014.
Following the termination of the agreement, the supplier commenced ICC arbitration proceedings in London (Proceeding No. 1), whereas the distributor turned to the Turkish state courts for its claims (Proceeding No. 2).
Proceeding No. 1: ICC Arbitration and the Enforcement of Foreign Arbitral Award
Arbitration proceedings (2015-2016): The supplier filed for ICC arbitration proceedings, claiming inter alia the payment of its due receivables. The distributor did not participate in the proceedings (except for filing three letters where it claimed the invalidity of the arbitration agreement). The arbitral tribunal found that it has jurisdiction and decided in favour of the supplier.
First instance court proceedings on enforcement (2020): The supplier commenced proceedings for the enforcement of the foreign arbitral award in Türkiye. The first instance court granted the enforcement request, also finding that the arbitration clause in the distributorship agreement is valid despite the jurisdiction clause in the novation agreement.
First appeal proceedings before the Court of Appeal (2021-2024): The Court of Appeal held that the validity of the arbitration agreement should be evaluated according to the law chosen by the parties (i.e., English law). Noting that the UK Arbitration Act only includes validity requirements as to form, but not as to substance, the court decided to apply validity principles that it considers to be widely accepted in the national and international sphere. The court held that in order to be valid, an arbitration agreement must indicate the parties’ intention to arbitrate, without raising any doubts. The court found that the arbitration clause in the distributorship agreement is invalid, as it also accepts the jurisdiction of the state court. The court further found that the jurisdiction clause in the novation agreement also invalidates the arbitration agreement. The court thus rejected the enforcement request.
Second appeal proceedings before the Court of Cassation (2024-2025): The Court of Cassation reiterated the Court of Appeal’s finding that the arbitration agreement should include a clear intention to arbitrate. The court held that the reference to English courts in the arbitration clause does not provide for the state court’s jurisdiction in support of arbitration, rather it stands as an alternative option to arbitration. Concluding that the intention to arbitrate is not clear, the court confirmed the decision of the Court of Appeal, which rejected the enforcement request (11th Civil Chamber of the Court of Cassation, 3 July 2025, Docket No: E. 2024/5356, Decision No: K. 2025/4827, findable here).
Proceeding No. 2: Ordinary State Court Proceedings
First instance court proceedings (2016-2020): The distributor commenced ordinary court proceedings in Türkiye, seeking compensation. The supplier invoked the arbitration agreement and sought dismissal of the case on jurisdictional grounds. The first instance court found that the parties accepted the jurisdiction of English courts not as an alternative to arbitration, but as a further legal remedy following the termination of arbitration for post-award remedies. The court therefore decided that the arbitration agreement is valid and dismissed the case in accordance with the supplier’s jurisdictional objection.
First appeal proceedings before the Court of Appeal (2021): The Court of Appeal decided that the provision where the parties accepted English courts’ jurisdiction addresses the ancillary jurisdiction of the state courts in matters for support of arbitration. Holding that this does not render the arbitration agreement invalid, the court rejected the appeal.
Second appeal proceedings before the Court of Cassation (2021-2023): The Court of Cassation decided that:
- The arbitration agreement would be invalid from a Turkish law perspective,
- English law governs the arbitration agreement; and
- The lower court should have decided after investigating whether such an arbitration agreement is invalid under English law.
The court thus revoked the lower court decisions.
First instance court proceedings on remand (2024): On remand, the first instance court resisted in its decision and decided that the arbitration agreement is valid. In its reasoning, the court held that:
- The arbitration clause in the distributorship agreement is valid since the English courts’ jurisdiction is agreed for arbitration-related proceedings; and
- The jurisdiction clause in the novation agreement does not apply to disputes arising out of the distributorship agreement.
Appeal proceedings before the Assembly of Civil Chambers of the Court of Cassation (2025): On a further appeal, the Assembly of Civil Chambers of the Court of Cassation noted that the existence of the intention to arbitrate should be evaluated according to the lex fori (i.e., Turkish Law) instead of the law applicable to the arbitration agreement. The court accepted that the law applicable to the arbitration agreement can only be applied, if it is concluded that the parties validly formed an arbitration agreement with their valid intentions. Referring to the arbitration agreement between the parties, the court concluded that the provision for the jurisdiction of English courts cannot be interpreted clearly as granting jurisdiction for arbitration-related court proceedings, instead it stands as an alternative to the arbitration. Noting that a valid arbitration agreement should clearly provide for parties’ intention to arbitrate, the court, by majority, held that the arbitration agreement is invalid under Turkish law and therefore rejected the respondent’s jurisdictional objection (Assembly of Civil Chambers of the Court of Cassation, 1 October 2025, Docket No: E. 2024/653, Decision No: K. 2025/584, findable here).
Commentary
The author intends to comment on the:
- Determination of the law applicable to the arbitration agreement and:
- Findings on the validity of the arbitration agreement under Turkish law, respectively.
Law Applicable to the Arbitration Agreement
Proceeding No. 1 concerned the enforcement of a foreign arbitral award. Article V(1)(a) New York Convention (1958) (“NYC”) provides that if “[the arbitration] agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made” an arbitral award’s enforcement may be rejected. The distributorship agreement containing the arbitration clause is governed by English law, which seems to also cover the arbitration clause, according to the parties’ agreement. Thus, the validity of the arbitration agreement should have been analysed according to English law. The Court of Appeal correctly found that English law should be applied to the validity of the arbitration agreement. Yet, reading between the lines, the Court of Appeal appears not to have determined whether such an arbitration agreement should be valid from the perspective of English law, based on the material available in the case file. Thus, it applied the principles that it considers to be widely accepted. In the end, the Court of Cassation also did not refer to English law, when reasoning its decision. The author considers that, according to the wording of Article V(1)(a) NYC, the Court of Cassation should have applied English law for the validity of the arbitration agreement.
Proceeding No. 2 involved an ordinary state court proceedings where the supplier (appearing before the court as the respondent) invoked the arbitration agreement. As the arbitration included a foreign element, the provisions of the Turkish International Arbitration Act (2001) (“TIAC”) were applicable. Article 5 TIAC provides that if the respondent’s jurisdictional objection for arbitration is accepted, the court shall dismiss the case on jurisdiction. This article neither provides guidance on the level of the analysis that the court must conduct in the review of the validity of the arbitration agreement, neither does it mention the law that will apply to the validity of the arbitration agreement. That being said, Article 4(3) TIAC states that the applicable law that the parties chose shall apply, failing which the Turkish law (as the law of the seat of arbitration) governs. This rule is identical to Article V(1)(a) NYC. In this regard, the Court of Cassation returned the case file to the first instance court for it to investigate whether the arbitration agreement is valid under English law, with which the first instance court seemingly did not proceed accordingly. On a further appeal, the Assembly of the Civil Chambers of the Court referred to Turkish law, as lex fori, as the law that will apply to determine whether the parties indeed formed an arbitration agreement with valid intentions. The author believes that there is no reason to depart from the wording of the Article 4(3) TIAC, and the Assembly of the Civil Chambers of the Court should have applied English law, as correctly indicated by the Court of Cassation.
On that note, the author wishes to underscore that the law applicable to the arbitration agreement involves crucial legal implications. Amongst others, it will directly determine the law, which will decide whether an arbitration agreement is valid or not. Thus, parties should place importance to the selection of the applicable law.
Validity of the Arbitration Agreement Under Turkish Law
Despite the foregoing, both final decisions in the Proceedings 1 and 2 are correct from a Turkish law point of view. In this part, the author will limit his analysis to Turkish law.
Under Turkish law, parties’ intention to arbitrate must be shown clearly and unconditionally. If an arbitration agreement also provides for the optional or successive jurisdiction of state courts, such an arbitration agreement shall be invalid. This was the dominant jurisprudence of the Court of Cassation, which was recently reconfirmed (3rd Civil Chamber of the Court of Cassation, 15 September 2025, Docket No: E. 2025/786, Decision No: 2025/4036, findable here). Turning to the case at hand, the Court of Cassation found that reference to a state court impaired the intention to arbitrate.
Notwithstanding this, there are a few exemptions to this principle, where the Court of Cassation previously ruled as follows:
- An arbitration agreement will be valid if the jurisdiction clause provides for the state court’s jurisdiction in matters concerning cases in support of arbitration (e.g., appointment of arbitrators, taking of evidence, setting aside of arbitral awards) (15th Civil Chamber of the Court of Cassation, 27 June 2007, Docket No: E. 2007/2145, Decision No: K. 2007/4389, findable here). This was also accepted in both Proceeding No. 1 and Proceeding No. 2, where the Court impliedly found that if the jurisdiction clause had referred to state court jurisdiction in aid of arbitration, the arbitration agreement would be deemed valid.
- If parties agreed to arbitrate certain disputes arising from an agreement and litigate the rest of them, this does not taint the arbitration agreement (11th Civil Chamber of the Court of Cassation, 14 December 2022, Docket No: E. 2021/4688, Decision No: K. 2022/9097, findable here). Therefore, if, in the underlying case, the parties agreed that English courts should have jurisdiction in certain disputes arising out of the agreement and that the parties will arbitrate other disputes arising out of the agreement, the Court of Cassation could have held that the arbitration agreement is valid.
Finally, it is also worth addressing the case of multiple agreements between the parties. If parties have an arbitration clause in the original agreement, but they sign further amendments/protocols with a jurisdiction clause, this is a further instance where the intention to arbitrate might be deemed to be impaired. The Court of Cassation previously found that the parties could not rely on the arbitration clause in the original agreement, if their dispute arises out of the subsequent protocol which does not include an arbitration clause (15th Civil Chamber of the Court of Cassation, 14 September 2017, Docket No: E. 2017/776, Decision No: K. 2017/2981, findable here). In a similar manner, the Court of Appeal, in Proceeding No. 1, found that the jurisdiction clause in the novation agreement prevailed over the arbitration clause in the distributorship agreement and rendered it invalid.
The Way Forward
Considering the decisions of the Turkish Court of Cassation, the parties might wish to consider the following:
- The choice of the law of the arbitration agreement has crucial legal implications. Therefore, when selecting the law applicable to the arbitration agreement, parties should diligently consider their choice and expressly indicate it in their agreement. Once a dispute elevates to the arbitration or state court proceedings, parties should place importance on pleading and providing legal material to substantiate whether an arbitration agreement is valid under the law applicable to it.
- Parties should draft arbitration agreements governed by Turkish law (and those that have nexus to the Turkish jurisdiction (e.g., in the context of enforcement of foreign arbitral awards)) with a plain and clear language. They should refrain from including references to the jurisdiction of any state courts, to the extent possible. Although the Court of Cassation has jurisprudence where it acknowledged the agreements :
(i) for the jurisdiction of state courts in aid of arbitration proceedings or
(ii) limiting the state court jurisdiction with certain disputes; to balance interests and avoid any kind of risk of invalidity, parties might want to refrain from referring to the state courts’ jurisdiction when drafting an arbitration agreement. - Same principles should be followed in any amendments or additional agreements following the original agreement. In such agreements, one could prefer incorporating the identical arbitration clause as in the original agreement.
ABOUT THE AUTHOR
Erdem Küçüker is an attorney-at-law registered at the Istanbul Bar Association (Türkiye). He specializes in commercial arbitration, arbitration-related litigation and commercial litigation. Being registered with the Global Tribunal Secretary Platform, Erdem acts as secretary to arbitral tribunals.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
