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I. Definition of an Agent
An agent is defined under Article 102 of the Turkish Commercial Code (the “TCC”) as follows: “An agent is a person who, without occupying a dependent legal position in relation to an undertaking, such as that of a commercial representative, commercial agent, sales clerk or employee of the undertaking, makes it their profession, under an agreement, to act as an intermediary in contracts concerning a commercial undertaking or to conclude such contracts on behalf of that merchant within a specified place or territory on a continuous basis.” As is clear from this definition, an agent is not an auxiliary dependent on the merchant, but an independent commercial auxiliary operating under its own trade name in the field of agency.
II. Relationship Between the Agent and the Commercial Undertaking
The relationship between an agent and a commercial undertaking is continuous. However, continuity does not mean that the intermediary activity must continue indefinitely or that the agreement must have a long term; rather, the parties must intend their business relationship to be continuous. Agents may act as intermediaries in contracts to be concluded by merchants with third parties. However, pursuant to Article 107 of the TCC, an agent may not conclude contracts on behalf of its principal without specific written authority. Where such specific written authority is granted, the instrument of authority must be registered and announced.
Through their agency activities, agents create a customer base for their principals and strengthen existing customer relationships. This customer base (portfolio) created by the agent provides an economic benefit to the principal. Where the agency agreement is terminated and the conditions for equalisation are satisfied, the merchant may continue to benefit from the portfolio created by the agent, while the agent may lose its entitlement to remuneration. For this reason, it is considered equitable to make a payment to the agent in consideration of the portfolio created through its efforts during the term of the agreement.
III. Termination of the Agency Agreement and the Equalisation Claim
Pursuant to Article 122/1 of the TCC, where an agency relationship is terminated and the conditions set out below are cumulatively satisfied, the agent may claim appropriate compensation from the principal. Before setting out these conditions, it should be noted that, according to the prevailing view under Turkish law, an equalisation claim is not compensation in the classical sense, but consideration intended to restore the balance between the parties following the termination of their agreement. The principal reason why the prevailing view in legal doctrine does not characterise an equalisation claim as damages is that fault on the part of the principal is not required.
The first condition is that the principal continues to derive substantial benefits, after termination of the contractual relationship, from new customers brought in by the agent. In this context, “new customers” means customers introduced to the principal by the agent after the agency agreement was entered into. An equalisation claim may also be characterised as a balancing payment arising upon termination of the agreement. Termination of the agreement need not be based on fault for an equalisation claim to arise.
A further condition is that, as a result of the termination of the contractual relationship, the agent loses its entitlement to remuneration that it would have received had the relationship continued in respect of transactions already concluded or to be concluded within a short period with customers introduced to the undertaking by the agent. Finally, the TCC provides that the agent may claim appropriate compensation from the principal where, having regard to the circumstances of the particular case, payment of such compensation is equitable. All three conditions set out in Article 122/1 of the TCC must be satisfied cumulatively. If any one of them is absent, no equalisation claim arises.
Another matter to be considered in connection with an equalisation claim is the manner in which the agreement was terminated. The agent may not claim equalisation where it terminated the agreement without any conduct on the part of the principal that would justify termination, or where the principal terminated the agreement for just cause attributable to the agent’s fault.
IV. Amount of Equalisation and Assertion of the Claim
As a rule, an equalisation claim may not be waived in advance. Where the agency relationship is terminated and the conditions for equalisation are satisfied, the agent must assert its claim within one year of the termination of the contractual relationship (Article 122/4 of the TCC). The compensation may not exceed the average annual commission or other payments received by the agent during the preceding five years. If the contractual relationship lasted for less than five years, the average for the duration of the relationship is taken into account (Article 122/2 of the TCC). In determining the amount of equalisation, both the agent’s loss of remuneration and the benefits that the principal will continue to derive from the portfolio following termination of the agency relationship must be considered.
The annual average referred to in Article 122/2 of the TCC is not the equalisation amount automatically payable, but the upper limit of the calculated amount. The amount payable in a particular case is determined by reference to the principal’s continuing benefit, the remuneration lost by the agent and equitable considerations.
V. Scope of Application
The TCC provides that, unless inequitable, Article 122 also applies upon the termination of exclusive distributorship agreements and other continuous contractual relationships granting a similar monopoly right (Article 122/5 of the TCC).
Accordingly, the long-term nature of an exclusive distributorship or similar agreement is not sufficient, by itself, for this provision to apply. It must also be assessed whether, following termination, the supplier continues to benefit from the customer base created by the other party.
VI. Conclusion
The equalisation claim is intended to remedy the imbalance between the principal’s continued benefit from the customer base introduced by the agent after termination and the agent’s loss of remuneration. However, the claim does not arise automatically: the conditions under Article 122 of the TCC must be cumulatively satisfied in the particular case, the claim must be equitable and it must be asserted within the one-year period.
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.
