Validity of Online Arbitration Agreements in Turkish Law

This article examines, from the Turkish law perspective, the validity of arbitration agreements which are made online. The term of ‘online arbitration agreement’, in this article, does not mean the agreement for ‘online arbitration’ which corresponds to the arbitration proceedings conducted by online methods. This article aims showing the validity conditions of the online agreements for any types of arbitration.

1. Parties, Legal Capacity, and Types of Agreement

Real or legal persons may be the signatory parties of online arbitration agreements. Anyone who is willing to enter into an arbitration agreement can sign and enforce such agreement. It should be remembered that such person must have legal capacity of entering into an arbitration agreement. According to Article 10 of Turkish Civil Law (TCL), every real person with mental competence and the age of majority who is not under legal disability has the legal capacity to enter into contracts and take obligations. Article 49 of TCL regulates the capacity of legal persons which is gained upon having the necessary bodies in accordance with law and establishment documents. Parties with the necessary legal capacity may decide to sign the arbitration agreement at online platforms.

These online platforms are important to understand the features of online arbitration agreements. Through online arbitration agreements, parties, by using online methods, agree on bringing their present or future disputes before an arbitral tribunal. However, parties do not have to be present at the same place while signing this agreement. Rather, online communication methods will be used for parties to come together on internet.

Parties of a dispute may sign the arbitration agreement via internet web site, mobile phone application or blockchain. The methods and forums for online arbitration agreements are shaped in line with the needs of parties and characteristic of the legal relationship between parties. For instance, e-commerce relationships keen to encourage parties to make online arbitration agreements. When a buyer purchases an item on an e-commerce website, parties are advised to make an agreement before money and goods exchange. Because, buyer and seller do not come together and neither have the chance of signing a physical type of arbitration agreement. Therefore, most of the time such agreements are signed online and these agreements may include an arbitration clause.

If the agreement on the web site refers reader to another web page from the main page with a hyperlink and allow the reader for clicking on the approval section after scroll down the whole agreement, such agreement will be referred as ‘browse-wrap’ agreement.[1] Another type of online arbitration agreement is the ‘click-wrap’ agreement where the reader clicks on an ‘I agree’ button to enter into the arbitration agreement before even seeing the content of the agreement.[2] Mobile phone applications may also prefer having ‘browse-wrap’ or ‘click-wrap’ online arbitration agreements before allowing the user subscribe for the service provided by the application.

2. Consent and Reasonable Communication

The most important condition for and the constituent element of bringing the dispute before an arbitral tribunal is the agreement of parties.[3] Each and every party of the dispute must have given their consent to arbitration. This requirement derives from the acceptance of national courts as the natural place of dispute settlement. Since the courts have judicial power over the disputes, both parties must agree to depart from such judicial power.[4] Valid arbitration agreement will prevent parties to seek for court litigation. Therefore, such serious result must be based on parties’ explicit consent. Otherwise, the lack of mutual consent to arbitration prevents the parties to seek for arbitration.

According to Court of Cassation, parties’ consent to arbitration must be explicit and final due to the arbitration’s negative impact which prevents the dispute to be brought before the courts.[5] Online arbitration agreements must also fulfill such high level of consent requirement. The wording of online arbitration agreement must clearly indicate the choice of arbitration. If the expressions in the agreement cause a doubt on parties’ consent to arbitration, Court of Cassation may tend to invalidate such online arbitration agreement.[6] For example, some arbitration clauses are formulated as follows: “any disputes arising out of this Contract will be resolved, first, by an arbitral tribunal consisting of three arbitrators appointed by the parties. If the dispute is not resolved within 30 days by arbitration, Istanbul courts will have jurisdiction”. Such arbitration clause is deemed invalid by the Court of Cassation due to the lack of certainty on parties’ will and consent for arbitration.[7]

Ruling in Cullinane v. Uber Technologies[8] indicates the importance of the consent requirement. The case was brought before a federal court by a user of Uber application against Uber Technologies in the United States of America. The user had claimed Uber charged unnecessary fees to passengers. The district court (first level local court) granted Uber’s motion to compel arbitration and dismissed the case. But the appeals court reviewed the contract formation process provided by the Uber application. The appeals court found that Uber’s application contains under the Uber’s Terms of Service a subscription agreement with an arbitration clause. However, the link was not presented and shaped to show the Terms of Service refers the User to an agreement with a special term such as an arbitration clause. User was given no warning of the arbitration agreement which has been written with the same font, style, and color of the rest of the contract. Therefore, the Court decided that the terms of online arbitration agreement were not clearly and conspicuously presented to the User. Lack of reasonable communication to the User brought the Court to the conclusion that the User had not given the necessary consent to arbitration.

3. Formal Validity

Online arbitration agreements are subject to the same formal validity conditions of traditional arbitration agreements. UNCITRAL Model Law and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) shaped most countries’ arbitration laws with regard to the formal validity of arbitration agreements. Turkish Code of Civil Procedure (CCP) and Turkish Code of International Arbitration (CIA) are in line with the Model Law and New York Convention. Article 7 of Model Law and Article II of New York Convention emphasize that arbitration agreements may be made whether as an arbitration clause in the main agreement or a separate agreement for arbitrate the disputes. Furthermore, arbitration agreement must be in writing. An agreement with the signature of parties on it will ensure such written rule. Model Law allows the fulfillment of written rule if the arbitration agreement is recorded in any form. Electronic means of communication are able to write the agreement down and record parties’ consent with the necessary devices and software.

CCP Article 412 indicates the definition and form of arbitration agreement. Article 4 of CIA contains the requirements for a valid arbitration agreement. Both Article 412 of CCP and Article 4 of CIA mandate that arbitration agreements must be in writing. Such writing may base upon a document signed by parties. Online arbitration agreements may be signed by parties with electronic signature which has the same effect of hand signature. On the other hand, written agreement rule may also be fulfilled even though parties do not sign the agreement by neither hand nor electronic signature. If the arbitration agreement is contained in an exchange of letters, telegram, fax or telex, written form of agreement will be deemed fulfilled. For instance, exchanges of e-mails is to be deemed constituting a written agreement for arbitration. Lastly, both article accept that if the arbitration agreement is recorded and transferred to electronic platforms, the rule of ‘agreement in writing’ will be fulfilled.

4. Conclusion

Online arbitration agreements are significant tools in terms of practicality, speed, and relevance to the needs of parties and disputes. Such advantages also serve the parties expectations from arbitration itself. Especially e-commerce transactions prefer online arbitration agreements which may be made via internet web sites, phone applications or blockchain.

Turkish law regulates the validity of online arbitration agreements with the same conditions applicable to traditional arbitration agreements. Parties’ capacity is the first point to be taken into account while executing an online arbitration agreement. As the arbitration is based on parties’ consent, the online arbitration agreement must clearly prove that parties give their explicit and final consent to arbitration. Then, parties must conclude such agreement in writing under the applicable code of law. As a result, online arbitration agreements can be made via various electronic means of communication by complying with the validity requirements of Turkish law.

[1] Hatice Özdemir Kocasakal, Elektronik Sözle?melerden Do?an Uyu?mazl?klar?n Çözümünde Uygulanacak Hukukun ve Yetkili Mahkemenin Tespiti, ?stanbul, Vedat Kitapç?l?k 2003, s.224.

[2] Ibid

[3] Ziya Ak?nc?, Milletleraras? Tahkim, I?stanbul 2016, s.3; Nomer, Ek?i, Öztekin Gelgel, Milletleraras? Tahkim Hukuku, 3. Bas?, I?stanbul 2008., s.15.

[4] Cemal ?anl?, Hukuki Mütalaalar?m, Adalet Yay?nevi 1. Bas?, ?stanbul, 2016. s. 444.

[5] Yarg?tay 19. HD 1999/7119 E. ve 2000/1342 K.

[6] For understanding the doubt criteria: Yarg?tay 15. HD, E.1822-2105, T.11.4.1996.

[7] Yarg?tay 15. HD, T. 22.5.2015, E. 2015/2198, K. 2015/2758.

[8]https://www.lexology.com/library/detail.aspx?g=04f575ef-3be4-49f9-b566-66b7ecaccef4 ve https://www.ballardspahr.com/alertspublications/legalalerts/2018-07-02-first-circuit-online-arbitration-agreement.aspx