Turkey: Commercial Agents And Agency Contracts Under The New Turkish Commercial Code

Last Updated: 31 October 2012
Article by Dalin Midyat

I. Introduction

The new Turkish Commercial Code ("NTCC") will enter into force as of July 01, 2012. Although the provisions regarding the commercial agents ("agents") are in parallel with the current Turkish Commercial Code ("TCC") in general, the NTCC has introduced some important novelties in order to harmonize the agency provisions with the Council Directive 86/653/EEC1. In this article, these novelties will be briefly examined.

II. Commercial Agents

It is stipulated in the TCC that an agent is both entitled to file a lawsuit on behalf of the principal and be a party to the lawsuits filed against the principal. The NTCC has retained this provision in Article 105; however, it has partly removed the mandatory character of it by adding that the provisions in the contracts contrary to this provision in terms of agents representing foreign merchants shall be null and void. In other words, agents representing foreign merchants can be sued on behalf of the principal; however, agents representing Turkish merchants can be released from this responsibility. It is also suggested in doctrine that this release must be made public to the third parties2. In the preamble, it is indicated that the purpose of this provision is to enable the third parties to file a lawsuit against a foreign merchant in the courts of Turkey. As the Turkish merchants' places of operation are already in Turkey, it is unnecessary to file a lawsuit against their agents. In addition, it is emphasized in the preamble that an agent does not undertake any liability of his principal's debts. For this reason, the NTCC has added that the decisions of the lawsuits filed against the principals in the courts of Turkey cannot be enforced against their agents.

The NTCC has made a significant change regarding the liability of the principal to the third parties when the agent exceeds his authority. Pursuant to the TCC, if the agent concludes a contract with a third party by exceeding his authority, the principal shall be liable for that transaction unless he immediately informs the third party that he does not approve such contract. After receiving considerable criticism, a different mechanism has been introduced in the NTCC: If the principal does not approve the contract immediately, he shall not be liable for such contract. In this case, if the principal remains silent, the agent shall bear the liability arising from the contract. It appears that the NTCC has established a system that protects the principal rather than the bona fide third party3.

The right to remuneration ("commission") of the agent has been regulated in a more detailed manner in the NTCC. Pursuant to Article 113/1, in addition to the transactions performed directly by the agent, he shall be entitled to commission for the transactions made with the new customers gained by the principal as a result of the agent's efforts during the period covered by the agency contract. Therefore, the agent is not required to conclude a contract in order to receive a commission. If, for instance, he negotiates and then convinces a customer to conclude a contract with the principal, he shall be entitled to commission. Furthermore, the exclusive right of the agent has been maintained in Article 113/2; however, it is also stated that the exclusivity can be granted for a group of customers instead of a specific geographical area. Moreover, according to Article 113/3, the agent shall be entitled to commission on transactions concluded after the agency contract has terminated (i) if the transaction is mainly attributable to the agent's efforts during the period covered by the agency contract and if the transaction was entered into within a reasonable period after that contract terminated; or (ii) if, in accordance with the conditions mentioned in Articles 113/1 and 113/2, the order of the third party reached the principal or the agent before the agency contract terminated. Finally, the term of "collection commission" has been introduced to Turkish Law (Article 113/4). In general, collection of the fees indicated in the contract is not the agent's duty. Accordingly, if the collection is not a part of the agency contract, the agent shall be entitled to receive the collection commission if the principal instructs him to collect the fee.

Article 114 regarding the due date of the commission has also been regulated in detail. Unless otherwise agreed, the commission shall become due as soon as and to the extent that either the principal or the third party has executed the transaction. When the principal has carried out the transaction, the agent shall be entitled to receive a reasonable advance payment at the latest on the last day of the following month. In any case, the agent shall be entitled to commission as soon and insofar as the third party has executed his part of the transaction. The right to commission shall be extinguished if it is established that the third party will not execute the contract. In this case, the commission shall be refunded. The agent shall be entitled to commission even if it is determined that the principal will not execute the contract in whole or in part, as he should have. However, if it is ascertained that the contract will not be executed due to a reason for which the principal is not to blame, the commission shall be extinguished. For instance, the destruction of the principal's production facilities by force majeure is a reason for which the principal is not responsible.

The date of payment of commission is regulated in Article 116. Pursuant to Article 116/1, the commission must be paid to the agent within 3 months after it arose and at the latest on the termination date of the contract. Moreover, in case the agent requests the principal to provide him all the information regarding the significant matters in respect of the due date and calculation of the commission, the principal is obliged to do so, as stated in Article 116/2. Finally, according to the TCC, the parties can determine different conditions regarding the date of payment; however, it is clearly specified in Article 116/3 that agreements to derogate from paragraphs 1 and 2 to the detriment of the agent shall not be permitted. In other words, the NTCC has regulated this provision as a unilateral mandatory provision in favor of the agent.

Article 120 titled "The Liabilities of the Principal" is new. Pursuant to Article 120/1, the principal is liable to (i) provide the agent information regarding the goods, (ii) inform him the necessary details to fulfill the agency contract and warn him especially when the principal foresees that the volume of contract that the principal will be able to conclude or perform will be significantly lower than the agent had reason to expect, (iii) notify the agent within a reasonable period whether he accepts to carry on the transactions or whether he has executed the transaction, (iv) pay him a commission and (v) pay him an interest in respect of the commission, advance payment and extraordinary expenses. It is specified in Article 120/2 that, as in Article 116/3, terms contrary to this provision to the detriment of the agent shall be null and void.

The most significant novelties introduced by the NTCC are the ones regarding the termination of the agency contract. It is stated in Article 121/2 that an agency contract for a fixed period which continues to be performed by both parties after that period has expired shall be deemed to be converted into an agency contract for an indefinite period. Furthermore, in Article 122 titled "equalization claim", the NTCC has regulated the goodwill compensation (also called "portfolio compensation" or "clientele compensation") which has already been recognized by the Supreme Court since 19964. Pursuant to Article 122/1, after termination of the agency contract, the agent shall be entitled to request an adequate compensation from the principal, if (i) the principal continues to derive substantial benefits from the new customers acquired by the agent, (ii) the agent, due to the termination of the agency contract, has lost his right to request his commission arising from the transactions performed or to be performed within a short period with the new customers acquired by the agent that he would otherwise be entitled to if the agency contract has not been terminated, (iii) the payment of this compensation is equitable having regard to all the circumstances. Article 122/3 has established the fourth criterion that the agent shall not be entitled to the compensation where the principal has terminated the agency contract because of default attributable to the agent; or where the agent has terminated the agency contract, unless such termination is justified by circumstances attributable to the principal. In addition, Article 122/2 provides that the amount of the compensation may not exceed a figure equivalent to a compensation for one year calculated from the agent's average annual remuneration over the preceding five years. If the contract goes back less than five years the compensation shall be calculated on the average for the period in question. Moreover, the claim of equalization cannot be subject to a waiver in advance. However, it is specified in the preamble that after the agency contract is concluded, the waiver of the agent shall be valid, unless there is a deception or circumvention of law related to it. Finally, Article 125/5 determines the scope of this provision and states that, unless deemed inequitable, this provision shall be applicable to the termination of the exclusive distributorship agreements and other similar permanent contracts providing monopoly rights.

Finally, the NTCC has introduced the restraint of trade clause ("non-competition clause"). Pursuant to Article 123, an agreement restricting the business activities of an agent following termination of the agency contract must be concluded in writing and a document containing the agreed terms signed by the principal has to be supplied to the agent. Furthermore, the agreement may not exceed two years from termination of the contractual relationship and it must relate only to the geographical area or group of customers allocated to the agent and to the kind or goods in respect of which the agent is to procure or conclude business for the principal. The principal must pay to the agent reasonable compensation for the duration of the restriction on competition. Moreover, the principal may waive the restriction on competition at any time in writing before the end of the contractual relationship; this will result upon the expiration of six months from such a declaration in his being relieved of the obligation to pay compensation. If one of the parties terminates the contractual relationship for good cause by reason of fault on the part of the other party, he may free himself of the restriction upon competition by written declaration within one month of termination. Article 123/4 is another unilateral mandatory provision which states that agreements to derogate from this provision to the detriment of the agent shall not be permitted.

It should be noted that Article 123, the restraint of trade clause, shall be applicable for agency contracts made before the commencement of the NTCC and still under way5.

III. Conclusion

The NTCC has modernized the agency provisions by harmonizing them with the Council Directive 86/653/EEC. It has regulated the agency provisions in a manner to provide a better protection for the commercial agents. In this respect, it has set forth unilateral mandatory provisions in favor of the agents, determined the liabilities of the principal in detail and introduced new provisions regarding considerable matters such as equalization claim and restraint of trade. It appears that the NTCC will be a more sufficient source for the resolution of the disputes between the commercial agents and the principals.

Footnotes

1 Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents.
(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31986L0653:EN:HTML)

2 Yard. Doç. Dr. Ali Paslı (taken from "Kendigelen, A., Turkish Commercial Code - Changes, Novelties and Preliminary Determinations, p. 86 [Türk Ticaret Kanunu - Değişiklikler, Yenilikler ve İlk Tespitler – in Turkish], XII Levha Yayınları, İstanbul 2011")

3 Kendigelen, A. p. 88

4 11th civil chamber of the Court of Cassation (the Supreme Court), decisions dated 10.05.1996 and numbered 1996/3335; dd. 20.06.1996, no. 1996/4544; dd. 25.12.1996, no. 1996/9192.

5 Article 14 of the Code on effectiveness and enforcement of Turkish Commercial Code Law No. 6103

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