Nowadays innumerable contracts/ agreements have been made online, owing to rapid growth of internet technology and the electronic communication techniques. Especially consumer contracts are most frequently concluded through internet. What happens if there is a dispute related to these internet based contracts (electronic contracts) is subject to debate among lawyers
One of the dispute resolution mechanisms is 'arbitration' which aims to resolve the conflicts in shorter time and inexpensive way without litigation proceedings. Classical as well as online arbitration proceedings may be followed either within the scope of an institution or without any institution as "ad hoc". It has been discussed whether a valid arbitration agreement can be done on the internet and arbitration proceedings can be followed online. In practice, parties include arbitration clauses in their contracts formed via e-mail, they can attend to arbitration proceedings through e-mails, even there has been created web sites giving online arbitration services. This article focuses on the validity of an online arbitration agreement and issues which may come up during the arbitration proceedings with particular reference to Turkish law.
Validity of an Online Arbitration Agreement in Turkish Law
Electronic/Online arbitration may be defined as a classical arbitration which can be conducted through communication opportunities offered by the internet. Classical arbitration process is regulated in Turkish Code of Civil Procedure ("TCCP"). According to article 517 of TCCP, a valid arbitration agreement shall show parties intention to arbitrate and be in written form. Written form is explained in articles 12-14 of the Turkish Code of Obligations ("CO") and article 13 of CO demonstrates that cursively signature is the essential element of the written form.
Apart from TCCP, requirement of written form is also handled in International Arbitration Code ("IAC") and New York Convention on Recognition and Enforcement of Foreign Arbitral Awards ("NY Convention"). If there is foreignness at the contract (Foreignness status' are stated in article 2 of the IAC) made between parties IAC rules will be applicable. IAC regulates the form of arbitration agreement. Article 4/2 of IAC indicates that an arbitration agreement shall be in writing. Besides, it is commonly accepted that requirement of written form is fulfilled in online arbitration agreements. As to Turkish Laws, signature is the most significant part of written form whereas under IAC written form can be created without signature. The important thing for IAC is being able to reach the content of the arbitration agreement afterwards. Therefore IAC finds adequate the soft copy written text showing the intentions of parties.
As mentioned above, in some legal systems including Turkish Legal System, it is required that for a valid written form, the document shall be in writing and signed by both parties. However as modern technology allows, written form can be created via e-mails or other communication means although it is not clearly stated in any laws or regulations. In order to have a valid arbitration agreement under Turkish Law, parties shall mutually agree that their e-mail communication will be regarded as a written form of agreement. If there is no such agreement, binding and effective arbitration will not be able to exist thus arbitrators will reject to resolve the dispute, or enforcement of arbitral award will not be possible according to article 5 of NY Convention. NY Convention requires arbitration agreement to be in written form for recognition and enforcement of foreign arbitral awards. Pursuant to the NY Convention Article 2/2: "The term agreement "in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams." It is commonly agreed that main purpose here is to display the clear intention of parties to arbitrate. Communication means stated in this provision are not numerous clauses, as the term "shall include" specifies. Interpreters of the NY Convention are in the opinion that as traditional means of communication is modernizing, scope of article 2 of NY Convention must be regarded with a broader perspective. As a matter of fact, there has been an advisory jurisdiction manifesting that the means of arbitration agreement stated in article 2 shall not be interpreted in a restrictive manner. Therefore an arbitration clause in an electronic contract and a separate online agreement to arbitrate may both constitute valid arbitration agreements under NY Convention. However under Turkish Law, as stated above, parties signatures must be included under the written text showing the intentions of parties to arbitrate. As soon as the use of electronic signature becomes widespread, correspondingly valid arbitration agreements may come into effect under Turkish Law and online arbitration may be the most frequently referred dispute resolution mechanism.
Probable Issues in Online Arbitration
It may be an obstacle for arbitrators to follow up proceedings online. For example in classical arbitration and litigation, hearings and examination of witnesses have significant importance in occurring of personal conviction of judges or arbitrators. At online arbitration proceedings, it will be difficult to acquire such personal conviction.
Place of arbitration must be specified in online arbitration agreement. If parties do not determine a place, arbitrators will do so. Determining the place of arbitration is important, because if parties have not agreed on the applicable law of procedure, laws of place of arbitration will be applicable. In fact online arbitration does not take place in a certain spot, therefore it is said to be "de-localized arbitration" by Cybertribunal which is an institution giving online arbitration service.
Enforcement of an online arbitration may cause some problems because arbitrators give and announce their decisions online without signing. Unless there's an electronic signature on the arbitral award, its enforcement in Turkey will be prevented, because just-as a valid arbitration agreement, a valid arbitration award has to be in written form with signatures of both parties. At practice, arbitrators have signatures on hard copy of the arbitral awards, so the arbitral awards are being partially online. Whenever electronic signature becomes widely used and arbitrators can sign soft copy of their decisions, arbitration proceedings can be completed wholly as online.
According to some legal opinions in Turkish legal doctrine, online arbitration shall only be applied to consumer contracts formed via internet. In practice most of the online dispute resolution services deal with consumer disputes rather than commercial. There are many consumer contracts made on internet and number of them is gradually increasing. In these contracts, consumer do not come face to face with seller, therefore it is problematic to submit the dispute before a court. Even consumer may not know sufficient information about seller that will enable him/her to bring a lawsuit. For these reasons online arbitration is reasonably convenient for consumers.
In conclusion, it is indisputable that internet has been an important part of our daily lives, not only it has a great role in our communication, but also it has been expediting our commercial relationships. Notwithstanding, in practice some difficulties may come up, and online arbitration offers practical, cheaper and convincing results for the parties of an online contract as an alternative dispute resolution mechanism. In case of a valid arbitration agreement, binding and enforceable online arbitral award may come into existence and that way disputes will be resolved in shorter times within the framework of opportunities provided by communication technology.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.