ABSTRACT
The exclusive distributorship contract, which is not explicitly regulated under the Turkish legislation, is commonly used in practice. In accordance with the definitions in the doctrine and the decisions of the Court of Appeals, the exclusive distributorship contract is a sui generis contract whereby the exclusive distributor undertakes to increase the sales and the supplier undertakes not to sell the goods subject to the contract to other exclusive distributors within the area assigned to the exclusive distributor. The customer portfolio acquired by the exclusive distributor as a result of his/her activities during the term of the exclusive distributorship contract, is transferred to the supplier upon termination of the contractual relationship. Accordingly, the supplier continues to benefit from such customer portfolio created by the exclusive distributor. This situation leads to a justifiable compensation claim with respect to the exclusive distributor. Such compensation, which the exclusive distributor may claim from the supplier as a result of the fact that the supplier will continue to benefit from the customer portfolio created by the efforts of the exclusive distributor after the termination of the contract, is called “portfolio compensation”. The conditions under which the exclusive distributor may claim portfolio compensation are regulated in the Turkish Commercial Code Art. 122. In addition to these conditions regulated under the law, the exclusive distributorship contract should have been terminated by the exclusive distributor with justifiable cause or by the supplier without a justifiable cause. Therewith, since the provisions regarding the agency contracts are applied to the exclusive distributorship contracts by analogy, statute of limitations for the portfolio compensation shall be determined in accordance with the provisions regarding the agency contract.
I. INTRODUCTION
The portfolio compensation has been regulated under the Insurance Law No. 56841 before the entry into force of the Turkish Commercial Code No. 6102 (“TCC”)2. Besides, the portfolio compensation is recognized by the doctrine and the precedent decisions of the Court of Appeals3.
Although the exclusive distributorship contract, which is a basis of the portfolio compensation, is not specifically regulated under the Turkish legislation, the exclusive distributorship contract is a type of contract which has emerged in practice stem from the economic needs in the market and the freedom of contract principle. According to the exclusive distributorship contract entered into by and between the exclusive distributor and the supplier, the exclusive distributor undertakes to purchase the pre-determined or determinable goods from the supplier and to carry out the activities necessary to increase the sales of the goods. On the other hand, the supplier enters into an obligation to deliver the goods to the exclusive distributor and to provide a monopoly right to the exclusive distributor within the territory of the contract4.
The elements and the legal characteristic of the exclusive distributorship contract shall be analyzed within the scope of our article. The portfolio compensation, which can be requested by the exclusive distributor from the supplier in case the customer environment created by the exclusive distributor is transferred to the supplier upon termination of the contract, and the conditions which should be met in order to claim such compensation, as regulated under Art. 122 of the TCC shall be demonstrated in our article.
In order for the exclusive distributor to claim portfolio compensation, which is also referred to as “claim for equalization” or “customer compensation” in the legislation and in the doctrine5. the conditions of significant benefit, loss of pay and conformity with equity should be met. In addition to this, the exclusive distributorship contract should have been terminated by the exclusive distributor with justifiable cause or by the supplier without a justifiable cause.
II. EXCLUSIVE DISTRIBUTORSHIP CONTRACT
As stated above, the exclusive distributorship contract, which is not regulated under the Turkish legislation, is defined by the doctrine and the decisions of the Court of Appeals as follows:
“The exclusive distributorship contract is a framework and continuous agreement, which regulates the legal relationship between a producer and an exclusive distributor so that the producer undertakes to send the products wholly or partially only to the exclusive distributor to sell them with monopoly rights in a particular geographic region, and in return the exclusive distributor undertakes to sell the products subject to the contract on its own behalf and engage in activities in order to increase the sales6.”
In this context, in accordance with the exclusive distributorship contract the exclusive distributor undertakes to purchase the pre-determined or determinable goods from the supplier and undertakes to operate necessary activities in order to increase the sales of the goods. On the other hand, the supplier undertakes to deliver the goods and to provide a monopoly right to the exclusive distributor within the territory of the contract7.
As can be understood from this definition mentioned in the doctrine and in the Court of Appeals decisions, exclusive distributorship contracts constitute two different pairs of performance. The first pair of performance is that the supplier gives the exclusive distributor the exclusive right to sell the goods subject to the contract in the subject matter territory, while the exclusive distributor increases and develops the sales of the goods in the territory of the contract8. The second pair of performance is that the supplier undertakes to deliver the goods to the distributor, and in return, the exclusive distributor undertakes to accept the goods and to pay the price of the goods subject to the contract9. As can be observed, the exclusive distributorship contract comprises of two separate pairs of performance that have not been partially regulated in the legislation. Because of its mentioned characteristics, the exclusive distributorship contract is considered among the nameless and sui generis (unique characteristic) contracts10.
Like every distribution contract, the exclusive distributorship contract is a contract that forms a continuous debt11. Bestowing the exclusive right to sell the goods in the territory to the exclusive distributor, the inability of the supplier to directly sell goods in the territory of the contract and to send goods to the other sellers in the territory of the contract other than the exclusive distributor are the essential elements of a the exclusive distributorship contract12. In addition, it is also one of the elements forming a basis for the exclusive distributorship contract that the exclusive distributor undertakes to buy the goods to be sold in the territory of this contract from the supplier and sell the goods to its own customers on its own behalf and all the risks belong to the exclusive distributor13. Thus, unlike other independent sellers, the exclusive distributor becomes a part of the distribution network of the supplier, with whom it has entered a continuous debt relationship.
Another element that enables the exclusive distributor to integrate into the distribution network of the supplier is that the exclusive distributorship contract is a framework contract that contains the rules that have to be followed by the parties in the distribution of the goods14. In this context, even if it is not explicitly agreed, another issue that will arise spontaneously from the contract is that the exclusive distributor undertakes to increase the distribution and sales of the goods subject to the contract15. This is because the increase in distribution and sales will serve the interests of both the exclusive distributor and the supplier.
In case any dispute arises between the parties, resulting from the exclusive distributorship contract, firstly the intentions of the parties which are set out in the contract will be assessed, and if such arrangement is not provided, then the comparison method shall be applied to the dispute. In other words, framework nature of this contract which has a synallagmatic characteristic and which creates a continuous debt relationship will be assessed. Moreover, the similarities between some elements of the exclusive distributor contract and the elements of sales, agency and ordinary partnership contracts will be assessed and it will be possible to reach the rules of law which will be applied with the method of comparison16.
At this point, we would like to point out that taking into account the legal and economic benefits that the parties have acquired the legal relationship between a supplier and the exclusive distributor in an exclusive distributorship contract has similarities with an agency agreement17. In this context, it is also possible that the provisions governing the internal relationship between the agency and the client may also apply to the legal relations between the exclusive distributor and the supplier with the method of comparison, to the extent that these provisions fall within the scope of the agreement18. As a matter of fact, Article 122 of the TCC is the article that regulates the equalization claim, which can be applied in the event of termination of the agency agreement, and it is set forth in paragraph 5 of the relevant article, “This provision shall also apply to the termination of the continuous contractual relations which grants a monopoly right such as the exclusive distributorship and so forth, unless it is inequitable”. In this context, in exclusive distributorship contracts, the provision of Article 122/5 of the TCC shall be applied in respect of portfolio compensation, which is in fact an equalization claim.
III. CONCEPT OF PORTFOLIO COMPENSATION AND CONDITIONS TO BECOME ENTITLED TO PORTFOLIO COMPENSATION
A. Portfolio Compensation
The term “portfolio” in the concept of the portfolio compensation, is used in the meaning of customer portfolio which was acquired by the exclusive distributor as a result of its activities. As long as the contract executed between the exclusive distributor and the supplier remains valid, both the exclusive distributor and the supplier benefits from this customer portfolio which was acquired by the exclusive distributor. However, upon termination of the exclusive distributorship contract, the customer portfolio acquired by the exclusive distributors will be transferred to the supplier and the supplier will continue to carry interests from this customer portfolio which he has had without any efforts19. Portfolio compensation has arisen from the idea of equalization of the earnings of the supplier through the exclusive distributor20. In this regard, as per Article 122/1 of the TCC;
•In case that the supplier will continue to gain significant benefits from the new customers that the exclusive distributor provided even after the termination of the contract,
• In case that the contract is terminated and the exclusive distributor loses the right to claim remuneration the exclusive distributor would have obtained, if the contractual relationship had continued, due to the businesses done or to be done with the customers that were contributed to the organization by the exclusive distributor,
• Where the compensation claim is equitable by taking into consideration of the characteristics and conditions of the concrete case,
the exclusive distributor is entitled to claim a compatible amount of compensation from the supplier within one year from the date of termination of the contract on condition that the contract is terminated in such a way which enables the exclusive distributor to claim compensation pursuant to Article 122/3 of the TCC. At this point, it should be stated that, all the above mentioned conditions should be met in order for the exclusive distributor to claim portfolio compensation from the supplier21. These conditions will be comprehensively examined below.
B. Conditions to Become Entitled to Portfolio Compensation
1. Supplier to Gain Significant Benefit
The first condition which needs to be met in order for the exclusive distributor to claim portfolio compensation is that the supplier should continue to gain significant benefit from the business relationships established by the exclusive distributor even after the termination of the contract22. Supplier’s benefit from this situation is the profit it will be making in the future23. This benefit shall be deemed to have been obtained if the supplier continues to benefit from the customer portfolio that the exclusive distributor established, even after the termination of the contract24. The exclusive distributor’s right and obligation to sell the supplier’s goods and to increase the sales in the territory of the contract will cease upon termination of the contract and the supplier may continue to benefit from the customer portfolio by making the sales on its own in such territory or by appointing another exclusive distributor to the relevant territory. At this point, it can be accepted that the supplier has gained significant benefit.
2. Exclusive Distributor’s Loss of Pay
Another condition that needs to be met in order for the exclusive distributor to claim portfolio compensation is that the exclusive distributor should lose its right to claim remuneration due to the termination of the contract. In case the exclusive distributor loses the remuneration it would have gained in return for the businesses done or to be done with the customers that were contributed to the organization by the exclusive distributor, due to the termination of the contract, it is accepted that the condition in question has been met.
3. Conformity with Equity
As explicitly set out in the provision of the law, the last condition which needs to be met in order for the exclusive distributor to claim compensation is that the compensation should be in conformity with equity. When all characteristics of the concrete case are analyzed, it should be equitable to pay portfolio compensation to the exclusive distributor. Portfolio compensation shall not be ruled in favor of the exclusive distributor unless this condition is met25. In other words, even though all the above mentioned conditions have been met in the concrete case, the exclusive distributor’s right to claim portfolio compensation shall not arise unless the condition of conformity with equity is met.
Although it is stated in the precedent decisions26 of the Court of Appeals and the law that the payment of portfolio compensation is for the equity, it is debated in the doctrine as to which criteria should be met in order for the exclusive distributor’s claim for compensation to be equitable,27 While making an inspection of conformity with equity, the entire contractual relation, the reasons of termination and the benefits and the losses of the parties due to the termination of the contract shall be assessed28. For instance, the failure of the exclusive distributor with regard to the distribution and selling of the products, the selling of the goods of a competitor firm and the investment made shall be taken into consideration during the inspection of equity. In the decisions of the Court of Appeals, the determination as to whether the condition of equity is met has been left to the expert review29.
In this regard, the judge will give a decision as to whether or not the portfolio compensation shall be paid by interpreting the entire contractual relation, the reasons of termination, whether the parties have fault, duration of the contractual relation and the developments in the customer portfolio in accordance with the characteristics of the concrete case30. Furthermore, equity may affect the compensation amount to be assessed and cause a decrease in the amount31.
Brand recognition of the product subject to the exclusive distributorship contract becomes another issue within the framework of the principle of equity32. In our opinion, brand recognition will not cause the rejection of the claim for portfolio compensation. However, the facilitating effect of the brand to the sale of a product or the service cannot be denied33. Hence, the effect of brand recognition to portfolio compensation should be evaluated in the light of principle of equity and should serve a function in the determination of the compensation amount.
4. Termination of the Exclusive Distributorship Contract Resulting in Portfolio Compensation
The way of termination of the exclusive distributorship contract has importance for the exclusive distributor in order to gain a right to claim portfolio compensation. The reason is that in order for the exclusive distributor to be entitled to portfolio compensation, the exclusive distributorship contract should have been terminated in a way which gives the right to claim portfolio compensation. In this regard, Article 122/3 of the TCC stipulates that in the event that the exclusive distributorship contract has been terminated without justifiable cause by the supplier or with justifiable cause by the exclusive distributor, the exclusive distributor can claim portfolio compensation.
Nevertheless, in the event that the exclusive distributor has terminated the contract without a justifiable cause or the exclusive distributor caused the supplier to terminate the contract due to its faulty actions, the exclusive distributor cannot claim portfolio compensation. Moreover, whilst the exclusive distributor can claim portfolio compensation from the supplier who will continue to benefit from the customer portfolio upon termination of the contract, if there is a mutual rescission of the contract (i.e. contract between the exclusive distributor and the supplier to terminate the contract), the exclusive distributor will not be entitled to claim portfolio compensation34.
C. Prohibition of Waiver, Upper Limit and Period of Prescription Regarding Portfolio Compensation
Pursuant to Art. 122/2 of the TCC, an upper limit is stipulated for the exclusive distributor to claim portfolio compensation from the supplier. In accordance with this provision, the amount of portfolio compensation cannot exceed the supplier’s annual commission or average of other payments which is the result of supplier’s activities for the last five years. In the meantime, if the contractual relationship has lasted less than 5 years, then the average amount over the course of the activity shall be taken as the basis.
There cannot be a waiver of portfolio compensation in advance according to Art. 122/4 of the TCC. In this context, the clauses which regulate the abolishment or limitation of the claim for portfolio compensation before the termination of the exclusive distributorship contract shall be void35. Art. 122/4 of the TCC sets forth the period as to when the portfolio compensation can be claimed regarding the exclusive distributorship contracts and such period is regulated as one year starting from the termination of the exclusive distributorship contract. The claim for portfolio compensation should be raised against the supplier within one year following the termination of the contract. This right cannot be exercised after this period of time36.
IV. CONCLUSION
The exclusive distributorship contract is not regulated under the Turkish legislation and it is a type of contract which has emerged stem from the economic needs in the market and the freedom of contract principle, as a sui generis contract, whereby the exclusive distributor undertakes to purchase the determined goods from the supplier and to carry out the activities necessary to increase the sales of the purchased goods and in return the supplier enters into an obligation to deliver the goods to the exclusive distributor and to provide a monopoly right to the exclusive distributor within the territory of the contract. After the termination of the contract, the supplier will continue to benefit from the customer portfolio which the exclusive distributor created during the activities carried out within the exclusive distributorship contract. Since the supplier continues to benefit from the customer portfolio, which was created as a result of the exclusive distributor’s efforts, after the termination of the contract, this fact ascertains a justifiable legal claim in the exclusive distributor’s perspective. This legal claim is called “portfolio compensation” and the conditions which should be met in order to claim such compensation are regulated under Art. 122 of the TCC. Since the provisions regarding the agency contracts are applied to the exclusive distributorship contracts by analogy, the statute of limitations for the portfolio compensation are determined in accordance with the provisions of agency contracts. In this context, the portfolio compensation can be claimed within one year following the termination of the contractual relation according to Art. 122/4 of the TCC. Hence, in order for the exclusive distributor to claim portfolio compensation, the exclusive distributorship contract should have been terminated by the exclusive distributor with justifiable cause or by the supplier without a justifiable cause.
BIBLIOGRAPHY
Arslan Kaya, Türk Ticaret Kanunu Şerhi, Acentelik, Beta Yayınevi, İstanbul 2013.
Cemile Demir Gökyayla, Milletlerarası Özel Hukukta Tek Satıcılık Sözleşmeleri, Seçkin Yayıncılık, Ankara, 2013.
Hasan İşgüzar, Tek Satıcılık Sözleşmesi, Dayındarlı Hukuk Yayınları, Ankara, 1989.
Hatice Kurban Koçer, Yeni Türk Ticaret Kanunu’na Göre Tek Satıcının Denkleştirme İstemi, İstanbul Barosu Dergisi, 2012, Cilt: 86.
Ömer Teoman, Yaşayan Ticaret Hukuku, C.1, Hukuki Mütalaâlar, K.15, 2012-2013, Vedat Kitapçılık, 2014.
Özge Ayan, Acentenin Denkleştirme Talep Etme Hakkı, Ankara, 2008.
Reha Poroy, Hamdi Yasaman, Ticari İşletme Hukuku, Vedat Kitapçılık, İstanbul 2015.
Tuğba Toksöz, Tek Satıcılık Sözleşmelerinde Portföy Tazminatı, İstanbul Üniversitesi Sosyal Bilimler Fakültesi, Özel Hukuk Anabilim Dalı, 2015.
Ünal Tekinalp, Türk Hukukunda Acentenin Portföy Akçası Talebi, Prof. Dr. Ali Bozer’e Armağan, Banka ve Ticaret Hukuku Araştırma Enstitüsü Yayınları, Ankara, 1998.
FOOTNOTE
1 Official Gazette dated 14.06.2007 and numbered 26552.
2 Official Gazette dated 14.02.2011 and numbered 27846.
3 Yargıtay H.G.K., T. 23.11.2011, E. 2011/11-552, K. 2011/686. Yargıtay 11. H.D. T. 26.05.1992, E. 1990/8223, K. 1992/7964.
4 Tuğba Toksöz, Tek Satıcılık Sözleşmelerinde Portföy Tazminatı, İstanbul Üniversitesi Sosyal Bilimler Fakültesi, Özel Hukuk Anabilim Dalı, 2015, p. 4.
5 Ibid. s. 29. Ünal Tekinalp, Türk Hukukunda Acentenin Portföy Akçası Talebi, Prof. Dr. Ali Bozer’e Armağan, Banka ve Ticaret Hukuku Araştırma Enstitüsü Yayınları Ankara 1998, p. 4.
6 Hasan İşgüzar, Tek Satıcılık Sözleşmesi, Dayındarlı Hukuk Yayınları, Ankara 1989, p. 14. Reha Poroy, Hamdi Yasaman, Ticari İşletme Hukuku, Vedat Kitapçılık, İstanbul 2015, p. 280. Arslan Kaya, Türk Ticaret Kanunu Şerhi, Acentelik, Beta Yayınevi, İstanbul, 2013, p. 255. Yargıtay H.G.K T. 23.11.2011, E. 2011/11-552, K. 2011/686. Yargıtay 11. H.D. T. 25.06.1992, E. 1990/8223, K. 1992/7964. In the mentioned decision of the Court of Appeals, “producer” was used as definition for the party who supplies the goods in the exclusive distributorship contract. However, a party of the contract does not need to be a producer. It is possible that the sellers who are in different levels of distribution relationship can be a party to the exclusive distributorship contract, even though they are not producers. Therefore, instead of “producer” expression in the definition, it is seen that the expression of “supplier” is used in the doctrine.
7 Cemile Demir Gökyayla, Milletlerarası Özel Hukukta Tek Satıcılık Sözleşmeleri, Seçkin Yayıncılık, Ankara, 2013, p. 30.
8 Ibid.
9 Ibid.
10 Ibid. s. 30-31., İşgüzar, s. 36., Toksöz p. 13-14.
11 Poroy/ Yasaman, p. 280.
12 Toksöz p. 22-25. Demir Gökyayla p. 8-9. Yargıtay H.G.K., T. 23.11.2011, E. 2011/11-552, K. 2011/686. Yargıtay 19. H.D. T. 05.03.2002, E. 2001/4568, K. 2002/1473. Yargıtay 19. H.D. T. 11.10.2011, E. 2001/2685, K. 2011/686. Additionally, Prof. Dr. Haluk Teoman stated that, notwithstanding the monopoly right, in case the supplier obtains important interests and being in conformity with equity after termination of the contract, the portfolio compensation can be claimed. See also. Prof. Dr. Haluk Teoman, Yaşayan Ticaret Hukuku, Hukuki Mütalaalar, Kitap 15: 2012-2013, Vedat Kitapçılık, İstanbul, 2014, s. 46.
13 Demir Gökyayla, p. 24.
14 Toksöz p. 20.
15 Ibid p. 21-22. Demir Gökyayla, p. 28.
16 Demir Gökyayla, p. 31.
17 A.g.e., p. 32.
18 Demir Gökyayla, s. 34. Toksöz, p. 16. Yargıtay 11. H.D. T. 15.01.1992, E. 1992/1959, K. 1992/96.
19 Toksöz, s. 29. Teoman, s. 46. Yargıtay 19. H.D. T. 04.05.2000, E. 1999/7724, K. 2000/3470.
20 Hatice Kurban Koçer, Yeni Türk Ticaret Kanunu’na Göre Tek Satıcının Denkleştirme İstemi, İstanbul Barosu Dergisi, 2012, Cilt: 86, Sayı:3, s. 2. Additionally, for the first decision of the Court of Appeals whereby the Court of Appeals ruled for the portfolio compensation, please see. Yargıtay 11. H.D. T. 20.06.1996, E. 1996/2084, K. 1996/4544.
21 Özge Ayan, Acentenin Denkleştirme Talep Etme Hakkı, Ankara, 2008. p. 145.
22 Yargıtay 11. H.D. T. 09.03.2015, E. 2014/16850, K. 2015/3124.
23 Demir Gökyayla, p. 270.
24 Yargıtay 11. H.D. T. 26.04.2016, E. 2015/11090, K. 2016/4662.
25 Demir Gökyayla, p. 277.
26 Yargıtay 19. H.D. T. 21.03.2008, E. 2007/9285, K. 2008/2759.
27 Ayan, p. 160-161. Demir Gökyayla, p. 254.
28 Demir Gökyayla, p. 279.
29 In accordance with the decision with T. 21.03.2008, E. 2007/9285 K. 2008/2759 of the 19th Civil Chamber of the Court of Appeals regarding this subject, “Since the determination of the portfolio compensation by taking into consideration of the customer portfolio provided by the exclusive distributor, the economic loss incurred by the claimant due to the unjust termination of the contracts and the other factors needs special and technical information, it is accepted in the precedent practices of our chambers that a report should be taken from the expert board with respect to the amount. The amount of the portfolio compensation which can be claimed by the claimant has been left to the discretion of the court even if the expert report which was obtained by the court stated, in parallel with the doctrine, that the portfolio compensation can be determined based on the claimant company’s,average of the earnings within the last five years, earnings of the last year and the average of the earnings of the last two years. Therefore, the court’s ruling in written form has not been deemed correct since the court should have given its decision by taking into account the options stated in the expert report upon assessing the required reasons and if the expert report is deemed insufficient the decision should have been given based on the result of the report to be obtained from the new expert board.’’
30 Kaya, p. 244.
31 Demir Gökyayla, p. 227.
32 Ayan, p. 192. Toksöz, p. 76.
33 Kaya, p. 246.
34 Ayan, p. 168.
35 Toksöz, p. 89.
36 Demir Gökyayla, p. 283.
