Abstract

In a number of the jurisdictions, including Turkey, any representative needs to have a special authority to enter into an arbitration agreement on behalf of the principal (TTC Art 504/3). It is not rare that, in respect of the international commercial contracts, the representative lacks the required special authority to sign the arbitration agreement under the applicable law. Once the arbitration commences, the principal (respondent) objects to the tribunal jurisdiction based on the representative’s lack of special authority. In many instances, the international arbitral tribunals reached the conclusion that the arbitration agreement is valid and binding on the principal as the principal’s behaviors during the contract negotiations, thereafter and in arbitration proceedings violate the good faith principle. Once the tribunal decides that they have the jurisdiction, they issue an award on the merits. The unsuccessful principal does not comply with the award voluntarily, and either starts annulment proceedings in the seat of arbitration or resists in the enforcement proceeding based on the invalidity of the arbitration agreement because of the lack of the special authority. The state court should first determine the law applicable to the representation. The Turkish Supreme Court, in a number of cases, applied Turkish law to representation, and refused the enforcement of the award based on the grounds that the arbitration agreement is invalid because of the lack of the special authority. In its recent cases, the Supreme Court enforced the awards based on the fact that the principal did not raise the lack of authority argument in the course of the arbitration proceedings. The Supreme Court concluded that raising the special authority argument for the first time in the enforcement proceedings before the Turkish courts is against the good faith principle. Turkish law well recognizes the apparently authority. Therefore; the principal may be bound by the arbitration agreement if the conditions of the apparent authority have been met.

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