Turkey: Requirement Of Specific Authority For Representatives To Arbitrate In Turkish Law

Introduction

The issue of authority for representatives in arbitration is among the preliminary questions that require assessment both by arbitrators and national courts, if the lack thereof is alleged. The lack of authority causes numerous problems, including the arbitration agreement being null and void, any award thereunder being subject to annulment and not being enforceable. Such nullity will result in a dispute, mandatorily being resolved by national courts regardless of the intention to submit a legal dispute to arbitration.

Turkish law provides for certain requirements in order for a party to execute an arbitration agreement, or refer a matter to arbitration through a proxy. Voluntarily appointed proxies of such a party need to be expressly and specifically authorized to arbitrate within their powers of attorney.

This Newsletter article shall assess the specific authority requirement for representation in arbitration under Turkish law.

Specific Authority for Representation in Arbitration under Turkish Law

Authority and the provisions governing the formation, scope and effects of a power of attorney are regulated mainly under two principle codes, Turkish Code of Obligations no. 60981 ("TCO") and the Civil Procedure Code no. 61002 ("CPC").

Art. 71 et seq. CPC is comprised of provisions3 governing the power of attorney. Art. 72 CPC states that the former Code of Obligations no. 818 ("Former CO") provisions shall apply to powers of attorney. The subsequent provisions regulate both the scope of a power of attorney and matters that require specific authority in procedural law. Art. 74 CPC foresees that an attorney must be specifically authorized in order to realize certain actions, which include "conclud[ing] an arbitration or arbitrator agreement". Therefore, a generic power of attorney is insufficient unless it expressly authorizes the attorney to conclude arbitration or arbitrator agreements.

The TCO regulates the power of attorney, its establishment, scope and effects in its Art. 502 et seq. Art. 504/3 TCO also states that a proxy may not realize certain transactions, unless specifically authorized for such transaction in the power of attorney. "Refer[ring] to the arbitrator" falls within the scope of those transactions that require specific authority to be provided in a power of attorney.

The above statutory provisions thus provides for limits to the general representative authority of voluntarily appointed proxies to conclude arbitration agreements. A representative may not realize certain specific transactions on behalf of its principle that includes the execution of an arbitration agreement, based on a generic power of attorney, which does not provide specific authority for such actions.

Legal Persons

Real persons realize transactions on behalf of themselves personally. Legal entities, on the other hand, act through their bodies, who realize transactions on behalf of the legal entity. The transactions realized by the bodies of a legal entity are deemed to be made by the legal entity itself, rather than through proxies. Therefore, persons forming the bodies of legal entities, who are authorized to act on behalf of the legal entity, do not act as representatives, but the principal legal entity itself. Thus, specific authority is not required for the board of directors of a joint stock company or a manager of a limited liability company to conclude arbitration agreements.

The bodies of the entity are not required to be specifically authorized to execute an arbitration agreement. They execute such agreements as the principal, not as the representative. Hence, the specific authority requirement under the CPC and the TCO as assessed, above, is not binding on the bodies of a legal entity.

Notwithstanding, should a legal entity specifically authorize a third person as an attorney or proxy to execute an agreement with an arbitration clause, or an arbitration agreement on its behalf, such power of attorney must include specific authorization regarding the arbitration agreement.

Commercial Auxiliaries

The authority of commercial auxiliaries of a merchant to conclude arbitration agreements on behalf of the principals is a matter that requires assessment with regard to specific authority. Commercial representatives, as foreseen under Turkish law, may be classified as dependent or independent auxiliaries, or auxiliaries with or without representative powers. This classification sheds light on the authority of such auxiliary to execute an arbitration agreement on behalf of the merchant.

Commercial representatives, who both are a dependent auxiliaries and have representative powers, are persons appointed and authorized by the merchant in order to manage the commercial enterprise and represent the merchant in transactions governing the enterprise (Art. 547 TCO). The commercial representative is defined as the alter ego of the merchant. Therefore, instead of defining the scope of authority, the exceptions to authority of the commercial representative must be specified. In fact, the authority of a commercial representative may be limited solely in two ways: by conferring it to the transactions of a branch office, or through foreseeing joint representation with another person. Therefore, it is accepted that the authority to execute an arbitration agreement on behalf of the merchant is inherent in the commercial representative.

Commercial proxies are persons appointed by the merchant to manage the enterprise or certain operations thereof, without conferring the authority to act as a commercial representative (TBK m. 551). The authority granted shall comprise of the ordinary business of an enterprise. The authority of commercial proxies may be limited, as opposed to that of the commercial representatives. Unless expressly authorized, commercial proxies may not realize certain transactions, including filing of lawsuits or participating in and following up pending lawsuits. It is accepted that the execution of an arbitration agreement may not be considered to be an ordinary task. Therefore, unless expressly specifically authorized to do so, commercial proxies may not execute arbitration agreements on behalf of the merchant.

Commissioners and marketers are subject to the rules governing the power of attorney (Art. 520/2 and 532/2 TCO). Therefore, specific authority is required for them to execute arbitration agreements.

Agencies that are independent auxiliaries contractually undertake to permanently act as intermediary for agreements, or execute agreements on behalf of the merchant regarding a commercial enterprise within a designated territory (Art. 102 Turkish Commercial Code No. 61024 ("TCC")). An agent must be expressly authorized in order to conclude agreements on behalf of the merchant (Art. 107 TCC). Therefore, specific authority is necessary for execution of arbitration agreements by agents.

Consequence of Lack of Specific Arbitration

The rulings of the Supreme Court of Turkey requires the existence of specific authority in order for a representative to execute an arbitration agreement, and to declare arbitration agreements concluded in the absence of such specific authority as null and void. A ruling of the Assembly of Civil Chambers dated 22.2.2012 and no. 11-742/825, which reads "... Accordingly, in order for a representative to conclude an arbitration agreement, specific authority must be granted. Otherwise, the arbitration agreement [to which its] principal [is a party] is legally null and void..." approved the dismissal of a local court's decision that declared there was no authority to review a dispute due to the existence of an arbitration agreement. Scholars also believe that a lack of authority relates to public policy that needs to be assessed ex officio by arbitrators or local courts and that arbitration agreements or arbitration clauses in other agreements executed by unauthorized representatives (for example agents without specific authority) should be deemed invalid.

In this regard, an arbitral award rendered under such arbitration agreement may be annulled, or its enforcement may be refused. The invalidity of the arbitration agreement, or incapacity, is among the reasons specified under Art. V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) for refusing recognition and enforcement of an award. Under Turkish law, lack of authority is not the equivalent to a lack of capacity, and it gives the principal the right not to be bound by an act that is realized by an unauthorized representative. Nevertheless, a lack of authority is regarded as incapacity in commercial arbitrations, and within the scope of Art. V/1/a of the New York Convention. Additionally, pursuant to Art. V/2/b of the New York Convention, the recognition and enforcement of an award that would be in violation of public policy may also be denied.

Nevertheless, a party who fails to assert any objection regarding lack of authority throughout the arbitral proceedings, bringing the matter to the attention of the judges at the enforcement stage of an award, may be deemed as an abuse of its rights. In fact, a Supreme Court 11th Civil Chamber ruling dated 09.04.2004 and no. 6774/3751 declared such objection asserted for the first time at the enforcement stage to be in violation of the good faith principle, and overruled the local court's enforcement decision.6

Moreover, there is an inclination towards the apparent authority theory in the practice of arbitration. Accordingly, if a party created the appearance of authority of its representative, leading the counter-party to believe in such authority, such party may be bound by the arbitration agreement of its unauthorized representative. In addition, it is argued that the "public policy," the violation of which is among the reasons to refuse enforcement under the New York Convention, should be construed in a narrow, strict, and exceptional manner, accepting supranational, international, and fundamental principles of law, as public policy. It is also accepted in the practice of international arbitration that a party may not be disadvantaged, due to a lack of specific authority of its counterparty under the laws applicable to it, and that such limitations governing authority under local laws shall not be given effect to in international arbitration.

In assessing the consequences of a lack of specific authority, the separability principle must also be underlined. Accordingly, even if the arbitration agreement is in the form of an arbitration clause in another agreement, the underlying contract, and the arbitration agreement/clause, are considered to be separate, severable and autonomous. Therefore, the invalidity of the underlying agreement will not necessarily impact the validity of the arbitration agreement. The same principle applies if the arbitration agreement is invalid, then the underlying agreement may continue to be valid and in force.

The lack of specific authority will result in the invalidity of the arbitration agreement due to the provisions of Turkish law assessed above. Nevertheless, if no specific authority is required for the execution of the underlying agreement, it will continue to bear effect, except for its arbitration clause.

Conclusion

The CPC and the TCO require the granting of specific authority to voluntarily appointed representatives, in order for such representative to execute an arbitration agreement on behalf of their principals. Specific authority is not required for commercial representatives, who are accepted as the alter ego of a merchant. The bodies of a legal entity are not regarded as representatives or proxies, as they act as, and on behalf of, the legal entity itself. Nevertheless, if a representative is voluntarily appointed, this requirement shall apply.

If an arbitration agreement is concluded by a representative in the absence of such specific authority, it shall be deemed null and void, as accepted in Supreme Court rulings. Any arbitration award rendered under such agreements may be annulled, or their recognition or enforcement may be refused. Nevertheless, alleging lack of authority at the enforcement stage, after participating in arbitral proceedings, without presenting any such objections, will be deemed to be an abuse of a right.

If the arbitration agreement is executed in the form of an arbitration clause in another agreement, the same principal shall apply. Nevertheless, the invalidity of the arbitration clause shall not affect the validity of the main agreement, as the arbitration clause is considered to be a separate and autonomous agreement.

Article of December 2014

Footnotes

1.Official Gazette 4 February 2011, No. 27836. The TCO entered into force on 1 July 2012.

2.Official Gazette 4 February 2011, No. 27836. The CPC entered into force on 1 October 2011.

3.The Former CO to which Art. 72 CPC refers was abrogated by and replaced with the TCO.

4.Official Gazette 14 February 2011, No. 27846. The TCC entered into force on 1 July 2012.

5.www.kazanci.com (accessed on 5 January 2015).

6.Supreme Court 11. Civil Chamber ruling dated 09.04.2004 and no. 6774/3751, Nuray Ekşi, Milletlerarası Deniz Ticaret alanında "Incorporation" Yoluyla Yapılan Tahkim Anlaşmaları, İstanbul 2010, p. 69, 70.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Erdem & Erdem Law
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Erdem & Erdem Law
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions