The Controlling Company's Fiduciary Duty Under Article 209 Of The Turkish Commercial Code

1. Introduction

Article 209 of the Turkish Commercial Code ensures that the controlling company is held liable even when it is not a direct party to the transaction in cases involving a corporate group. For the first time, we see fiduciary responsibility, which has acquired the status of a legal institution in Continental European law through case law and academic teachings, regulated by law in the Turkish Commercial Code. This provision is a concrete reflection of the principle of good faith in Article 2 of the Turkish Civil Code in the field of corporate law.¹

2. Purpose and Rationale of the Provision

Article 209 of the New Turkish Commercial Code, titled "Liability arising from trust," reads as follows: "The controlling company is liable for the trust inspired by the use of the group's reputation in cases where the group's reputation has reached a level that inspires trust in the public or consumers." Briefly referring to the rationale behind the article, in certain cases brought before German and especially Swiss courts, it has been stated by the courts that the controlling company in a group of companies may be held liable for the use of its reputation, even if it is not a party to the transaction. The Wibru/Swissair case is the most important precedent in this regard. The controlling company that does not object to the use of its reputation is liable to the public and consumers who rely on its financial strength and credibility and suffer damage.

3. Scope of Liability

The liability here is not a type of direct damage. The court ruled that it could not be concluded that Swissair had entered into a guarantee commitment in the sense of ensuring the fulfilment of the obligations incurred by the subsidiary. The claim of tort was also rejected because there was no unlawful act. On the other hand, the court stated that the parent company's conduct could give rise to a duty of care, similar to the liability for culpa in contrahendo, if the statements made by the parent company to the subsidiaries' business partners instilled confidence in them, a relationship similar to the legal special relationship arising between the parties during contract negotiations was established, and this relationship imposed a duty of disclosure and protection based on the principle of good faith on the parties.²

4. Conditions Necessary for Liability to Arise

German jurist Canaris systematized the fundamental conditions for liability based on trust. According to him, four basic conditions must be met for liability based on trust to arise: these are the fact relied upon, the fact relied upon being attributable to the person trusted, the person trusting being in good faith, and the trust placed being effective in the actions of the person trusting. In Turkish-Swiss law, in addition to these conditions, it is also required that the trust to be protected has arisen due to a legal transaction between the parties, that the consequences are predictable, and that the trust must be justifiable trust" Furthermore, there must be a causal link between the fault, the damage, and the fault-based conduct.

The general conditions for liability in good faith under Turkish Law can be summarized as follows:

• The existence of the relied-upon fact
• The reliance must have arisen due to a legal transaction between the parties
• The fact relied upon must be attributable to the person relied upon
• The trust must be in good faith and the trust must be "justified trust"
• The consequences of the trust for liability must be foreseeable
• The trustor's actions being influenced by the trust placed
• Fault (in cases where expectations are disappointed)
• Damage
• The existence of a causal link between the breach of trust and the damage.³

For liability under Article 209 of the Turkish Commercial Code to arise, the company in a dominant position must actively or implicitly use its own name, logo, or other identifying elements. The use of reputation involves using that reputation to instill trust in the target person or group, thereby persuading them to make the intended decision⁴ . Furthermore, it is not necessary for the company to have direct control in every case where liability may arise. In the Swissair decision, the company did not hold all or most of the shares of the subsidiary company, nor did it establish control through special circumstances such as preferred shares. Swissair had only a very small number of shares in the subsidiary, yet the company was still found liable.

The conditions for fiduciary responsibility must be clear and unambiguous. The fact that the company is in a well-known, reputable position should not be interpreted in a way that negates the liability of the subsidiary, which is the main party to the transaction. Those on the other side of the transaction should be aware that the main party to the transaction is a subsidiary and should determine their risks and conduct their research accordingly. In the Swissair case, the court stated that "no one can leave the protection of their own interests to the other party to the contract, and a person doing business with a subsidiary must assess the financial strength of that subsidiary and cannot directly attribute this risk or the entire commercial risk of the transaction to the parent company" (the "caveat creditor" principle).

The Community is the owner of the global reputation arising from trust. In other words, reputation does not belong to the partnership that is the flagship or locomotive of the community or to the community's holding company. For example, it is the reputation of the Koç Group or the Sabancı Group. It is not the reputation of Koç Holding A.Ş. or Sabancı Holding A.Ş. or Akbank A.Ş. or Arçelik A.Ş.⁵

Furthermore, in our opinion, it is not possible for specialized institutions with special reputations, such as banks, to benefit from this provision. This is because these institutions are legally required to pay attention to the intra-group or intra-family relationships of their customers with whom they enter into commercial relationships and to be able to distinguish between individuals.⁶

5. Conclusion

Article 209 of the Turkish Commercial Code reflects the principle of good faith in the Turkish Civil Code. Even though we have not encountered a court decision defining its scope in our country, according to German and Swiss doctrine and case law, it is a highly nuanced issue that cannot be left to the court's interpretation, as it must have clear boundaries and, when applied, must not override the fundamental principles of corporate law.

Footnotes

1 Ahmet Battal, Şirketler Topluluğunda Güvenden Doğan Sorumluluk, 2012, Volume: 18 Issue: 2, 245 - 254

2 Nilsson, G. O. (2009). Türk Ticaret Kanunu Tasarısı'na Göre Şirketler Topluluğu Hukuku. On İki Levha Yayıncılık

3 Nilsson, G. O. (2009)Türk Ticaret Kanunu Tasarısına Göre Şirketler Topluluğu Hukuku. On İki Levha Yayıncılık

4 Poroy, Tekinalp, Çamoğlu, Ortaklıklar Hukuku 2, pp. 2232–2235

5 Poroy, Tekinalp, Çamoğlu, Ortaklıklar Hukuku 2, N.2228 - 2231

6 Ahmet Battal, Şirketler Topluluğunda Güvenden Doğan Sorumluluk, 2012, Volume: 18 Issue: 2, 245 - 254

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