Turkey: Non-Compete Obligation Of The Commercial Agent

Last Updated: 27 February 2015
Article by Naciye Yilmaz

Introduction

Non-compete obligation of the commercial agent is assessed under two headings under Turkish Law. Firstly, we address the non-compete obligation of the agent during the term of the agency agreement. Pursuant to Article 104 of Turkish Commercial Code numbered 6102 ("TCC"), entitled "Exclusivity", an agent should not act on behalf of different principals who work within the same geographical area or territory, and who are in competition with each other. This obligation results from the agent's duty of loyalty. Secondly, there are non-competition agreements which cover the period subsequent to the termination of the agency agreement. Non-competition agreements are regulated under Article 123 of the TCC. According to the legislative justification of the TCC, the ratio legis of the relevant disposition is protection of agents against non-competition agreements that are usually concluded upon the request and under pressure of the principal, by introducing the time and subject limitation, the written form requirement and compensation requirement for the prohibition of competition.

Non-Compete Obligation during the Term of the Agency Agreement

The right to exclusivity regulated under Article 104 of the TCC is qualified as either "monopoly right" or "exclusivity" by doctrine, and in practice. The TCC adopts the "one agent - one principle" rule1, even though the parties are free to agree otherwise. The non-compete obligation of the agent during the term of the agency agreement is known as the monopoly right of the principal. This monopoly right of the principal means that unless otherwise agreed in writing, as per the duty of loyalty of the agent, the agent shall not act on behalf of several competing commercial enterprises that are located in the same geographical area or territory. Within this framework, we see that the non-compete obligation of the agent is limited with time, scope and area.

With respect to the wording of Article 104 of the TCC, various scholars defend that "competitors" should be interpreted in the strictest sense, and be understood as "competitors active in the same commercial fields of activity2." In other words, an agent can act on behalf of several commercial enterprises active in different commercial fields of activity. The fact that agents are independent commercial auxiliaries is one of the reasons why an agent can act on behalf of several commercial enterprises. Geographical limitation is determined in accordance with agreement between the parties. In addition, exclusivity can be provided for a specific product or group of customer so long as it is determined for a certain geographical area or territory.

The agent may act on behalf of competing commercial enterprises provided that the principal gives its consent, accordingly. Written form is a validity condition for this agreement. However, within the scope of the agent's obligation to protect its principal's interests, which is one of the of the agent's duties of loyalty, even though the agent is allowed to compete through an agreement, the agent should not harm the principal's interests3. In such a case, an abuse of the right to compete shall be in question4. In other words, the fact that the agent is released from a non-compete obligation by an agreement does not mean that the agent is also released from its other legal obligations against the principal. In any event, the agent is obliged to protect its principal's interests.

Breach of Non-Compete Obligation

A non-compete obligation is a liability for an agent since he/she cannot establish an agency relation with the competitors of the principal. Any non-compliance with this liability either may result in compensating the principal, or may cause in the principal to terminate the agency agreement5.

Non-Competition Agreements

Article 123 of the TCC regulates the contractual non-compete obligation for the period subsequent to the termination of the agency agreement. In principle, parties are free to continue working together after the termination of the agency agreement. However, non-competition agreements are used to be executed for the purposes of the protection of trade secrets shared during the term of work between the parties, the loyalty obligation of the agent, and the avoidance of any conflict of interest. Under Turkish legislation, the provision regulating the latest agreement for the first time in the TCC originates from the German Commercial Code. Before the adoption of the TCC, the provisions pertaining to the service contract under the abolished Code of Obligations numbered 818 were applied when necessary to the agency agreements, and the non-competition agreements were also treated accordingly6.

Pursuant to Article 123 of the TCC, the agreement by which the agent's conduct of business is restricted after the termination of the contractual relationship between the parties shall be made in writing. In addition, the principal must deliver a signed document comprising of the terms and conditions of the non-competition agreement to the agent. Written form is required for the validity of this agreement7.

Scope of Application

Subject of the non-competition agreement is the limitation of the agent's activities with a non-compete obligation for the agent. The wording of the relevant article refers to "restricting the activities of the agent after the termination of agency agreement." Therefore, scope of the non-compete obligation is determined in accordance with the agent's activities conducted for the principal8. Thus, the scope of the non-compete obligation shall be determined primarily according to the provisions of the agency agreement. However, the expression, "activities of the agent" shall be strictly interpreted, and the agent shall be allowed to continue its activities in other fields. There is a tendency to broadly interpret this expression, in practice. Therefore, it is defended that the scope of the below-mentioned compensation should also be broader9.

The time limitation for the agreement is set forth by law. Pursuant to Article 123 of the TCC, non-competition agreements should be concluded for a maximum of two years, starting from the termination of the agency agreement. This two-year period is definite and shall neither be extended, nor shall it be suspended or interrupted. The agreements stipulating a non-compete obligation for a period longer than two years shall be deemed partially null and void, and the restriction shall ipso jure not procure any effect after the termination of this two-year period10.

Timing of the Non-Competition Agreements

As stated in Article 123 of the TCC, the timing of non-competition agreements is essential. As a result of the purpose regarding the protection of the agent, non-competition agreements shall only be concluded along with the agency agreement, or during the term of the agency agreement. However, it is unclear whether the non-competition agreements concluded after the termination of the agency agreement fall within the scope of Article 123 of the TCC. However, principals may require the agents, during the term of the agency agreement, to conclude future-dated non-competition agreements, and eliminate the protection laid down in Article 123 of the TCC. In order to eliminate this outcome, some scholars argue that Article 123 of the TCC should also be applied to the non-competition agreements concluded after the termination of the agency agreements11. Moreover, pursuant to Article 14 of Law numbered 6103 on the Entry into Force and Application of the Turkish Commercial Code, non-competition agreements concluded before the entry into force of the TCC, and still in force on 01.07.2012 (which is the date of entry into force of the TCC) are within the scope of Article 123 of the TCC.

Compensation for Non-Compete Obligation

Pursuant to Article 123/1 of the TCC, the principal shall compensate the agent for valid non-competition agreements. The lawmaker does not provide a specific amount here, but refers to an "adequate compensation." The obligation of compensation payment arises directly out of the law, and does not need to be stated specifically in a non-competition agreement.

The amount of the compensation shall be determined, considering the objective conditions. However, it must be mentioned that in any case the compensation shall not exceed the value of the contract12. Various of the scholars state that the compensation as related to a non-competition agreement should be determined considering the calculated goodwill compensation, and according to the average commission/remuneration of the agent for the last five years corresponding to the period of non-competition, since the agent is prevented from acting on behalf of other competing enterprises in the same territory13.

Pursuant to Article 123/2, the principal may renounce the non-competition agreement until the termination of the agency agreement. In that case, the principal is released from its obligation to compensation payment for non-competition after six months as of the date of the declaration related to the renouncement of the latest.

Invalidity

Article 123 of the TCC regulating the non-compete obligation is mandatory; therefore, any disposition to the detriment of the agent is null and void. The right for an adequate compensation is also deemed mandatory, that is why any disposition providing non-adequate and low compensation is deemed null and void, as well.

Conclusion

In conclusion, the non-compete obligation of the agent may be determined for the period of agency agreement, or after termination of the agency agreement. The non-compete obligation of the agent provided in Article 104 of the TCC is set forth in order to protect the agent considering the subject, time and geographical limitations. However, under Turkish Law, an agent's non-competition with its principal is the rule; otherwise, shall be only agreed upon in writing. The non-compete obligation for the period after the termination of the agency agreement is provided by non-competition agreements. Such agreements are also concluded in writing, and a signed copy that included the terms of the related agreement by the principal should be delivered to the agent. Non-competition agreements shall be concluded for a maximum of two years, and considering the purpose of the provision, it is more appropriate to state that such agreements shall be concluded along with the agency agreement or during the period of agency agreement. As mentioned in detail, above, since non-competition agreements are synallagmatic, the principal shall adequately compensate the agent in exchange for its non-compete obligation, if any.

Article of December 2014

Footnotes

1 Kaya, Arslan; Türk Ticaret Kanunu Şerhi, Birinci Kitap Yedinci Kısım: Acentelik, Beta Yayınları, 2013, p. 42.

2 Kaya, Arslan; p. 42.

3 Poroy/Yasaman, Ticari İşletme Hukuku, Vedat Yayıncılık, 2012, p. 251.

4 Kayıhan, Şaban; Türk Hukukunda Acentelik Sözleşmesi, Seçkin Yayınları, 2011, p.108.

5 Kaya, Arslan; p. 45.

6 Göksoy, Yaşar Can, 6102 Sayılı Yeni Türk Ticaret Kanunu'na Göre Acentenin Sözleşme Sonrası Rekabet Yasağı Anlaşması, Dokuz Eylül Üniversitesi Hukuk Fakültesi Dergisi Cilt:12, 2010, p. 896.

7 Poroy/Yasaman, p. 262.

8 Kaya, Arslan; p. 292.

9 Kaya, Arslan; p. 292.

10 Kaya, Arslan; p. 293.

11 Göksoy, Yaşar Can, p. 900.

12 Kaya, Arslan; p. 296.

13 Poroy/Yasaman, Ticari İşletme Hukuku, Vedat Yayıncılık, 2012, p. 262.

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
 
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
 
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