Turkish Supreme Court: binding effect of arbitration clause on non-signatories
In its recently published decision dated 4 April 2012, the Turkish Supreme Court considered whether an arbitration clause in a pro-forma invoice was only binding on the parties who signed it.
Following a dispute between multiple parties under a contract that contained an arbitration clause, a claim was filed in a local Turkish Court of First Instance. The contract in question had not been signed by the parties. Aside from the main contract, there was also a pro-forma invoice that contained an arbitration clause. However, the pro-forma invoice was not signed by all of the parties to the main contract.
The Court of First Instance dismissed the action, ruling that it did not have jurisdiction due to the existence of an arbitration clause. However, the court failed to consider the fact that the main contract was not signed by the parties, or that the pro-forma invoice was signed by only some of the parties. The decision was appealed to the Turkish Supreme Court.
The Turkish Supreme Court reversed the Court of First Instance decision, finding that the arbitration clause in the main contract was ineffective as it had not been signed by the parties. Further, the Supreme Court noted that the pro-forma invoice included an arbitration clause, which some, but not all, of the parties had signed. The lower court had erred in failing to take this fact into consideration. It should have held that the court had jurisdiction in respect of those parties who had not signed the invoice.
This decision illustrates the issues that can arise in multi-party arbitral proceedings, and emphasises that an arbitration clause is only binding on the signatories to it. In this case, therefore, the arbitration clause was not binding on those parties to the main contract that had not signed the pro-forma invoice.