ABSTRACT
The concept of force majeure is not defined in the Turkish Code of Obligations or any other statutes, but the context has been evolved around the judicial decisions and legal opinions of the scholars. However, it would not be claimed that the Turkish Court of Cassation has adopted a stable approach in application of the term. According to the Turkish Court of Cassation, economic crises and financial difficulties as a result of these economic crises cannot be regarded as a force majeure events so that the element of unpredictability of force majeure does not exist as for the economic crises. Yet according to the decision of the Turkish Court of Cassation numbered 2017 / 152821 K. 2017/1552, the very subject of this article, the Turkish Court of Cassation has discussed the case of impossibility in financing of a project which requires large-scale financial investment as a result of economic crisis within the scope of force majeure unlike its general approach.
I | INTRODUCTION
In recent years, Turkish Lira has experienced losses in value against foreign currencies and rapid fluctuations and thus the Project which requires large-scale financial investment in foreign currency are affected negatively. That has been raised some concerns about the realization of these projects. At this point, the depreciation of Turkish Lira against the foreign currencies and its effect on the markets has become an issue that needs to be considered from that point: whether the debtor shall be released from its obligations in such circumstances or whether the contract shall be adapted to changing circumstances.
In this study, the approach of the Turkish Court of Cassation regarding the concept of force majeure has been evaluated under the decision of the General Assembly of Civil Chambers of the Turkish Court of Cassation, numbered 2017 / 152821 K. 2017/1552, which differs from the general approach of the Court was examined.
II. THE TERM OF FORCE MAJEURE
A. Efforts to Define the Concept of “Force Majeure”
The concept of force majeure has been clarified in the Turkish Code of Obligations or any other statute. In the doctrine external events which are generally impossible to be avoided or be disposed of objectively are evaluated as a force majeure1. According to many scholars in the doctrine, including notable scholar Fikret Eren, the notion of force majeure has been a relative concept, not determined. This approach makes it difficult to define the context of force majeure. Accordingly, it may not be possible for events of certain nature to be considered as force majeure at all times. For example, the similar circumstances may be characterized otherwise according to existing conditions, legal relations, type of activity and type of person in charge2. It may not be necessary a single event defined as a force majeure. Multiple events may also constitute a force majeure event. An event may not be considered a force majeure or not as per the circumstances and the time period in which such event occurs3.
A force majeure event shall lead to a breach of a norm or liability inevitably. In terms of the relevant concept, the notion of inevitableness involves the notion of irresistibleness and unavoidability with respect force majeure. In this context, in spite of all the measures taken, all opportunities and ways possessed, the results of the event that caused the force majeure shall not have been prevented. Turkish Court of Cassation defines the force majeure as an unexpected event that occurs externally and also outside of the will of the debtor, which prevents the execution of the debt and which cannot be prevented despite the measures to be taken by anyone4. In considering the approach of the doctrine and the practices, the force majeure conditions may be expressed as extraordinary events that occurs out of business and activity cannot be predicted and withstand, which inevitably lead to a violation of the general norm or liability.
Force majeure has been defined in various Turkish Court of Cassation decisions. The General Assembly of Civil Chambers of the Turkish Court of Cassation, in a decision dated 1966, expressed the force majeure as follows:
“If needed to describe the force majeure, the force majeure is an event that is not possible to be taken into consideration in advance and consequently to be eliminated and stems from an external factor. This event may come from a natural force (such as a storm, waterfall, flood) or from a third person’s act (like in tort) or a formal ban5.”
In another decision of Turkish Court of Cassation, force majeure has been defined “generally non-detectable and irresistible case (…)”. In another decision, force majeure has been expressed as an unexpected event that occurs externally and also outside of the will of the debtor, which prevents the execution of the debt and which cannot be prevented despite the measures to be taken by anyone6.
According to the above-mentioned decision of the 13th Chamber of Turkish Court of Cassation, numbered E. 2009/8727 K. 2010/101, the debtor cannot be held liable for his failure to fulfill his obligations due to the fact that the debtor cannot “wait“ or “prevent” and to be attributed to him.
According to the regulations concerning the force majeure, the Article 136 of Turkish Code of Obligations, headed Impossibility of Performance may be followed that this article includes force majeure by the reason of that the case leading force majeure makes performance impossible. The notion of force majeure shall be analyzed within the scope of Article 136 because the case interpreted as force majeure leads impossibility of performance7. The point that emphasized in this context is is the objective or subjective situation of impossibility. On the other hand, there is an opinion in doctrine that only objective conditions of impossibility fall within the scope of Article 136. However, in view of the inflexibility of the debts to the individual, the impossibility of performance in both views above can be evaluated within the scope of Article 136 of the Turkish Commercial Code8.
Accordingly, the establishment of the contract and the subsequent occurrence of an event must make it impossible to performance permanently. The impossibility of performance ends an existing contract or debt. In this sense, force majeure is considered as one of the causes ending debt.
B. Foreseeability and Force Majeure
Upon the considerations above mentioned, it can be seen that the most important factor as to evaluate an event within the scope of a force majeure concept is predictability. In this case, question regarding an economic crisis in Turkey is a predictable event or not will be on agenda. After the economic crisis in 2001,Supreme Court held that it is impossible to characterize economic crisis in Turkey as a force majeure event since economic crises do not occur suddenly ”and” do not include instantaneity factor, so that they have not been considered as unpredictable.
“It is a fact that devaluation and economic crises does not occur suddenly, but occurs after certain economic distress in the market. As a matter of fact, the economic crisis occurred in November 2000 three months later than the facility agreement and shortly after that, economic crises dated February 2001 has occurred. In this respect, the unpredictability which is the one of the conditions of adaptation has not taken place in our case9.”
In E. 2015/1454 K. 2017/1674 numbered decision of 23rd Law Department of Supreme Court, justified the plaintiff against the explanation of the defendant’s representative regarding economic crisis as a force majeure. In a decision of the Supreme Court, defendant attorney demanded rejection of the case by claiming that when force majeure conditions considered, plaintiff’s status cannot be deemed as force majeure, plaintiff should be prudent and act cautious, due to being a trader according to Article 20 of the Turkish Commercial Code (“TCC”), economic crises cannot be considered as force majeure according to Article 117 of the Turkish Obligation Code since it is not an objective case for all companies10. The Supreme Court has justified the defendant’s attorney. According to Article 18 of TCC “Each trader should act as a prudent business man regarding his actions related with his businesses.” It is indicated that trader should foresee economic crises as a result of being a prudent business man, and acting cautious is his/her obligation.
It can be followed that Supreme Court indicates frequently that economic crises are not an unpredictable event or an intensive event which may constitute a force majeure event. In this context, the economic crisis in Turkey does not considered as an unpredictable issue. Therefore, it is not deemed as a force majeure. In the recent decision dated 2017 / 15 2821 K. 2017/1552 of the Court of Cassation, an expert report was obtained after the remittitur. In the expert report dated 17.11.2009 issued by legal expert Ufuk Bayazıt and Ergün Dölek Public Legislation Director of the Central Bank of Republic of Turkey states that economic crises in Turkey is not an unpredictable event since trader should have solved the source procurement issue as a prudent trader or in case of having enough cash it is possible to import machines with payment methods such as sight letter of credit or cash import from banks, there were problems about importing credits due to economic crises, some delays occurred due to contractor.11 As can be seen from the expert report, it is once again emphasized that the characterize of economic crisis is not unexpected and therefore not unpredictable.
C. Force Majeure and Impossibility of Performance
If the performance becomes impossible as a result of an event which may be considered as a force majeure, the impossibility which the debtor shall not be liable for will be the next impossibility. According to the Code of Obligations Article 136, which regulates the results of this: “(I)f the performance of the debt becomes impossible due to reasons that the borrower cannot be held responsible, the debt ends.” The debtor whose debt ends due to impossibility shall be obliged to give back the deed according to unjust enrichment provisions which taken by the other party of the agreement and loses the right to demand the deed which has not been given to him yet. The cases which the damage before the execution of the debt is charged to the creditor are excluded from this provision. Thus, the debtor who is the debtor of the deed which becomes impossible due to force majeure, shall get rid of his debt without paying any compensation whereas, as a rule, the debtor shall lose the right to demand the deed and be obliged to return the acts performed to it12.
D. Regulations Concerning Contracts within the Scope of Force Majeure
It is stated above that the provisions regarding force majeure in Turkish Law are not mandatory. Accordingly, it may be agreed in the contract that party or parties may assume the risks which are arising from force majeure. At the same time, it is also possible to decide on which events or situations will be covered by force majeure or not13. It is possible to limit the concept of force majeure by the open will of the parties. For example, if special force majeure events are counted and if it is agreed that the consequences of the record are intended to occur only if these events shall obstacle the performance, an obstacle which except from the indicated events, even it is an obstacle which does not require liability of debtor according to legislation, debtor cannot escape from the liability by asserting the force majeure record14. However, as the nature of the force majeure cannot be defined by its nature since it can only be formed by abstract terms and requires the examination of each concrete event feature. It can be discussed whether it is possible to limit an unidentified concept with a contract. Indeed, the Supreme Court stated in a decision that the force majeure conditions were not limited to those specified in the contract:
“Article 27 of the contract indicates the force majeure events that will affect the term. Among these reasons, government discretionary act were also included. It would not be right to limit the force majeure events with the cases listed in mentioned article, even though price adjustments in February 2001 cannot be regarded as discretionary act of the government indicated in Article 27 of the contract15.”
However, given the fact that the provisions on force majeure in Turkish Law are not mandatory, it may be claimed that there is no obstacle to determine the events by parties that will make the debt related to the concrete event impossible in the framework of the freedom of contract. The principle of freedom of contract refers to the ability of people to execute contracts, how they would like to do so within the boundaries of the law16. The principle of freedom of contract includes the freedom to conclude contracts and to determine the content of the contract together with the limitations contained in itself. While the parties can specify the reasons for the termination of the contract or debt without specifying them as force majeure and it is possible to determine the conditions of execution of the contract in this direction it can be claimed that it may be possible for the parties to narrow or determine the events that may be considered force majeure by contract. In this context, force majeure clauses that are regulated in line with the mandatory law and ethics shall be valid and bind the parties. As it can be followed from the decisions of the Supreme Court numbered E. 2017 / 15-2821 K. 2017/1552 and the 23rd Law Department of the Supreme Court numbered E.2015/9406 K. 2017/2044 it may be claimed that the Supreme Court does not have a stable perspective regarding mentioned issue.
In some of its decisions, the Supreme Court recognized the arrangements on which events or circumstances would be deemed as force majeure17.
The parties may decide the limit the concept of force majeure. For instance, if special force majeure events are counted one by one and if it is determined that only the consequences foreseen in the record will take place in the consequences of the recording, even if an obstacle other than the aforementioned events is an obstacle which does not require the liability of the debtor under legislation, the debtor cannot be relieved from the responsibility by asserting the force majeure record18. In cases where the concept of force majeure is not limited by contract, special reasons may be applied to determine the scope of the concept. If there are different kinds of events for special reasons, then special reasons will have an expanding function in terms of force majeure concept. In this case, any event which does not require the liability of the debtor under the legislation or contract may constitute a force majeure19.
However, the event indicated as force majeure should prevent the performance of debt should occur in order to the results to be realized foreseen in the force majeure clause. The incident determined as a force majeure should be an appropriate reason not to fulfill the debt. In other words, there shall be an appropriate causal link between the force majeure event and non-performance of the debt. Although the force majeure has been realized, if the debt may not be executed for any other reason, the debtor shall not be able to relieved from the responsibility by asserting the force majeure clause.
III. THE APPROACH OF THE SUPREME COURT ABOUT THE EVALUATION OF THE ECONOMIC CRISES AS FORCE MAJEURE
The Supreme Court’s approach to economic crises (particularly in the 2001 crisis and its subsequent decisions) was that economic crises may be foreseen. Therefore, the Supreme Court does not accept economic crises as a sufficient ground for adapting, The Court have not considered economic crises as force majeure which is a narrower concept than unforeseen circumstances that could lead to adaptation of contract unless there is a contractual arrangement. The position of the Court of Cassation regarding economic crises and the inability to find financing shall be analyzed through the decisions of the Court of Cassation mentioned below.
A. The Evaluation of Economic Crisis
The Supreme Court upheld the decisions of the local court in which the economic crisis was not considered as a force majeure event:
“The attorney of the defendant demanded dismissal of the action, by claiming that lease receivable is not due to economic crises defined as force majeure, the amount of receivable can be determined by trial and levy denial compensation cannot be demanded. The defendant’s force majeure defense is not in place, the rent fee which is determined by the contract must be paid to the plaintiff, partially acceptance of the action due to the rent receivable is not liquid because the amount has not been determined in advance by the parties; the cancellation and the continuation of the follow-up over the aggregated amount 25.671,58 Turkish Liras, the request for overdue and the denial of the request for levy denial compensation has been decided by the Court. The decision was appealed by the attorney of the plaintiff. Rejection of all appeals by the plaintiff attorney and approval of the provision which is in accordance with the procedure and the law20.”
“The plaintiff demanded from the court to decide to cancel the tender by claiming that after his participation to the bean tender which commenced by defendant, default of delivery of the goods subject to tender has occurred due to economic crisis and excessive increase in bean prices which is also a force majeure event. The court decided to dismiss the action; sentence has appealed by defendant. (…) 78.305.000 figures which are written in the sentence paragraph of the appealed decision shall be removed from the decision and shall be written 5.245.600.000 instead of those and the decision to be approved in this way21.”
This aapproach has also been followed in the pre-2001 decisions of the Supreme Court:
“If the inflationary incidents and the economic measures to be taken by the Government are not counted as coercive reasons in the contract signed by the plaintiff and in the contract signed by the defendant, the defendant trader who in principle, has to act as a prudent businessman, cannot avoid the performance of the obligations by assuming excessive difficulty in raising prices22.”
In the following decision of the Supreme Court, the link between the contractual decision and the force majeure concepts was provided:
“The plaintiff claimed that there were difficulties in the importation of the materials to be used in the production Due to the price adjustments in February 2001, and that the duration was extended for this reason. The in crease occurred in 2001 February in foreign exchange prices accepted as devaluation in Council of Ministers Decrees’ published in the Official Gazette dated 05.04.2001 and 2001/2 numbered duplicate dated 28.10.2001. It is obvious that devaluation decisions will have a significant impact on economic activities. However, since the price of the contract between the two parties is determined in foreign currency and generally the price increases are not included in the contracts where the price in foreign currency is determined, this issue cannot be considered as a force majeure by oneself23. Until the decision dated 2017 the Court of Cassation has not been considered economic crises as a mere force majeure.
B. Turkish Court of Cassation, Decision Numbered E. 2017 / 152821 K. 2017/1552
Although economic crises have not been considered force majeure perse by the Court of Cassation until the its decision dated 2014 regarding a thermal power plant Project, stated that projects requiring a large amount of investment were carried out through borrowing, although cash payment was an alternative, it was not commercially rational:
“In the court experts committee report, on which the decision of the court grounded, dated 12.04.2011 and written by Prof. Dr. Hakan Üzeltürk of Galatasaray University Law Faculty, a Prof. Dr. From Marmara University Faculty of Economics and Administrative Sciences. And Asst. Prof. Dr. İrfan Akın of Istanbul University Law Faculty; it is opined that considering the high cost of machinery, current risks in the commercial life of our country, procurement processes carried out by the public and the multi-component decision making process of the public, that the claimant consortium waiting the agreement with the respondent to be finalized should be deemed as an act of prudent merchant, therefore, it is not possible to the claimant consortium to be held responsible for the delay. the opinion that the plaintiff consortium could not be held responsible for the delay. In the same experts committee report, it is stated that the only reason for ECGD’s suspension decision for credit insurance is the economic and political uncertainty in Turkey after the February 2001 crisis; although the amount of credit guarantee given by ECGD to 7 companies in the Turkey is 84.90 million pounds, no company is granted loan guarantee from Turkey in 2001 and no bank in Turkey is accepted as guarantor in 2001; the main reason behind ECGD’s credit suspension is the February 2001 crisis and that the claimant consortium has no contribution to the process of this decision. It is clear that characterizing a firm as incautious for not purchasing the machinery worth USD 85,000,000.00 with cash payment in January 2001 would contradict the reality of business life. It is seen that prepayment is an alternative and not a commercial and rational alternative, which will allow the borrowing to be overcome with the least damage in this way by extending it to time with external financing in the projects of this scale. On the other hand, there is no record of the plaintiff consortium violating its obligations under the ECDG24.”
The Supreme Court also stated that
”In the Article 10 of the contract executed between the parties it is stated that; extension of time can be given due to force majeure events except the reasons arising from the contractor and the reasons arising from the business owner administration, when the delay caused by the contractor for the first 30 day delay of USD 1,000.00 / MW, for the second 30 day delay 1.250,00 USD/MW and the third 30 day delay 1.500,00 USD/MW delay penalty will be applied, the delayed periods will be deducted from the actual period of service to be paid to the contractor, the penalty period can not exceed 90 days. (...)”
“An agreement has executed with this company on 13.01.2001 regarding the 05.12.2000 dated offer which has offered to all sides of the agreement by MAN B&W Diesel Ltd., in order to provide the necessary equipment for the deployment of the mobile stations of the plaintiff contractor consortium and it is understood from the sent (…) correspondences to contractor consortium by exports Credits Guarantee Department – ECGD which shall provide export credit in UK after this agreement upon the emergence of economic crisis on 19.02.2001 in Turkey; decision has made as to review the risk assessment of Turkey and status of Türkiye İş Bankası as the grantor bank, Akbank and Yapı ve Kredi Bankası shall be reviewed. It is understood that, by making amendments in the projects upon this delay resulting from the ECGD’s approach (…), by making agreement with the German Export Credit Guarantee Organization HERMES to guarantee the credit from the German Landesbank Baden-Wuerttemberg Bank in the HERMES guarantee; therefore, plant was commissioned with 203 days delay. The delay in ECGD is not due to the failure of the contractor’s performance regarding its obligations, but due to the economic crisis of our country occurred in February 2001. Moreover, the business owner knows that the financing will be provided from abroad. In this context, the business owner accepted the project amendment upon the request of the plaintiff company due to the difficulties arising from the financing procurement, and he took over and used the production in accordance with this amendment. Therefore, it is acknowledged by our department that contractor consortium does not have any default regarding the delay.” expressed. It was also stated that this decision was acknowledged by the Court of Cassation25.
Nonetheless it has been clarified in the abovementioned decision of the Supreme Court giving extension of time due to failure to provide financing is convenient. It should be pointed out as to demonstrate features of this event that all of the banks to be rejected as a grantor in Turkey, in the 2001 February economic crisis which is the subject of the case, was indicated in expert’s report. In order to evaluate whether changes in economic indicators in our country shall constitute a force majeure, whether it is impossible to provide financing or should not be examined within the scope of this. Because, as mentioned above, only the events which the debt exactly becomes impossible constitutes force majeure event.
IV. CONCLUSION
As the Turkish Court of Cassation does not regard the economic crises as unpredictable, it does not deem economic crises within the scope of force majeure. Yet, the decision of the General Assembly of Civil Chambers numbered E. 2017 / 15-2821 K. 2017/1552 stated that provision of project finance for large-scale projects with external financing means is rational, therefore, the company performing the Project shall not be obliged to foresee within his obligation to act as a prudent merchant, the financing would be impossible as a result of crisis. In this context, the contractor shall not have any fault in the provision of financing becoming impossible. In such cases where the financing became impossible due to economic crisis and the debtor cannot be objectively expected to foresee this impossibility, the debtor shall be released from its obligations. Events which may constitute a force majeure shall be evaluated as per the specifics of the case at hand and so that whether the debtor may or may not be released from its obligations.
BIBLIOGRAPHY
CEMAL ŞANLI, Uluslararası Akitlerin Hazırlanması ve Uyuşmazlıkların Çözüm Yolları, 5th Edition, Istanbul, 2013
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KEMAL OĞUZMAN, TURGUT ÖZ, Borçlar Hukuku Genel Hükümler Volume 1, 16th Edition, Istanbul, 2018
SELAHATTIN TEKINAY, SERMET AKMAN, HALUK BURCUOĞLU VE ATTILA ALTOP, Tekinay Borçlar Hukuku Genel Hükümler, İstanbul, 7th Edition, 1993
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MEHMET KÖSOĞLU, Uluslararası Ticari Sözleşmelerde Mücbir Sebep ve Aşırı İfa Güçlüğü/Hardship Klozları
FOOTNOTE
1 Cemal Şanlı, Uluslararası Ticari Akitlerin Hazırlanması ve Uyuşmazlıkların Çözüm Yolları, İstanbul, 5th Edition, 2013
2 Fikret Eren, Borçlar Hukuku Genel Hükümler, 2015, Ankara, 18th Edition, p. 559.
3 Selahattin Tekinay, Sermet Akman, Haluk Burcuoğlu ve Atilla Altop, Tekinay Borçlar Hukuku Genel Hükümler, 1993, İstanbul, 7th Edition, p.1004.
4 13th Department of Supreme Court, numbered E. 2009/8727 K. 2010/101, dated 18.1.2010.
5 Court of Cassation, numbered E. 1965/844 K. 1966/313, dated 7.12.1966.
6 13th Department of Supreme Court, numbered E. 2009/8727 K. 2010/101, dated 18.1.2010.
7 8th Department of Supreme Court, numbered E. 2014/6935 K. 2014/18281, dated 14.10.2014.
8 Kemal Oğuzman - Turgut Öz, Borçlar Hukuku Genel Hükümler Part - I, p. 556.
9 11th Department of Supreme Court, numbered E. 2003/13877 K. 2004/8181, dated 13.9.2004.
10 11th Department of Supreme Court, numbered E. 2015/8068 K. 2014/16238.
11 Court of Cassation, numbered E.2017/15-2821 K. 2017/1552-5.
12 Şemsi Barış Özçelik, Union of Turkish Bar Associations Journal 2016 (123), p. 309.
13 Mehmet Kösoğlu, Uluslararası Ticari Sözleşmelerde Mücbir Sebep ve Aşırı İfa Güçlüğü/Hardship Klozları, 2010, p.18.
14 Şemsi Barış Özçelik, Borçlunun Sorumlu Olmadığı Sebeplerle Borcun İfa Edilmemesi ve Mücbir Sebep Kayıtları, 2009, p. 146.
15 Court of Cassation, numbered E. 2017/15-2821 K. 2017/1552, dated 6.12.2017.
16 Halis Ayhan, Uluslararası Antlaşmalar Hukukunda Şartların Esaslı Değişikliği İlkesi, 2018, p. 125.
17 23rd Department of Supreme Court, numbered E. 2015/9406 K. 2017/2044, dated 6.7.2017.
18 Şemsi Barış Özçelik, Borçlunun Sorumlu Olmadığı Sebeplerle Borcun İfa Edilmemesi ve Mücbir Sebep Kayıtları, 2009, p. 147.
19 Şemsi Barış Özçelik, Borçlunun Sorumlu Olmadığı Sebeplerle Borcun İfa Edilmemesi ve Mücbir Sebep Kayıtları, 2009, p. 147.
20 23th Department of Court of Cassation Decision Number E. 2012/5037, KÇ 2013/71, Date: 15.01.2013.
21 13th Department of Supreme Court, numbered E. 2002/8464, K. 2002/10626, dated 14.10.2002.
22 13th Department of Supreme Court, numbered E. 1996/3653 K. 1996/3920, dated 16.4.1996.
23 Court of Cassation, numbered E. 2017/15-2821 K. 2017/1552, dated 6.12.2017.
24 Court of Cassation, numbered E. 2017/15-2821 K. 2017/1552 dated 6.12.2017.
25 Court of Cassation, numbered E. 2017/15-2821 K. 2017/1552 dated 6.12.2017.
