ABSTRACT
A consortium is a partnership structure that is not a legal entity. In Turkish Law, consortiums are regulated under the provisions of the ordinary partnership agreement in the Turkish Code of Obligations No. 6098. In addition, the subject is also regulated in administrative procurement law under the Public Procurement Law No. 4734. What makes the structure of a consortium different from other partnerships is that although the partners are involved in the structure within the scope of certain areas of expertise and have no legal personality, the partners do not have joint and unlimited responsibility, they only have responsibility of the work in their own fields of expertise.
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.
I. INTRODUCTION
Under current economic conditions, public authorities often assign investments requiring large sums to private legal persons. However, being responsible for such large-scale investments as a whole or, in other words, under joint and several liability creates a heavy burden for the individual. For this reason, the concept of consortium, which is not a legal entity and in which the responsibility of partners is divided according to certain criteria, has emerged.
In this article, we examine consortiums within the framework of the ordinary partnership structure, evaluating in particular the element of undertaking a certain part of the work and the responsibility regime.
II. A DEFINITION OF THE CONCEPTS OF CONSORTIUM
It is appropriate to refer to the provisions of the Ordinary Partnership Agreement of the Turkish Code of Obligations (“TCO”) in order to define the concept of consortium. The ordinary partnership regulated in the TCO is a type of partnership that is not regulated in the law or explicitly stated in a contractual relationship. The structure of a consortium is basically a type of ordinary partnership, since it does not bear the distinctive characteristics of the types of partnership specified in the law1.
Since a consortium is essentially an ordinary partnership, the articles that are applicable to ordinary partnerships, specifically Article 620 and the following articles of the TCO, may also be applied to consortiums2. The point where consortiums diverge from the ordinary partnership, as explained below, is where the individuals come together to perform a work but each of them independently undertakes a part of the work and responsibility3.
A. The Relationship Between Consortium Structure and Ordinary Partnerships
An initial examination of the ordinary partnership structure is important in order to look at the differences from consortiums and the importance of the consortium structure. Article 620 of the TCO defines ordinary partnerships as follows:
“An ordinary partnership is a contract under which two or more persons undertake to combine their labor and property to achieve a common purpose.
If a partnership does not bear the distinctive characteristics of the partnerships regulated by the law, it shall be considered as an ordinary partnership subject to the provisions of this section.”4.
Under this provision, an ordinary partnership is a type of partnership in which two or more persons come together in the context of a common purpose and thereby form a partnership according to an ordinary partnership contract. For these reasons, an ordinary partnership is the simplest form of partnership. In addition, an ordinary partnership is a non-legal entity. For this reason, an ordinary partnership is a legal relationship that imposes on its partners or members the scope of joint and unlimited responsibility in the first degree. Since the ordinary partnership is not an independent subject of right, the partners are directly responsible for any debts arising from partnership transactions5. The responsibility of the partners in an ordinary partnership is their joint responsibility and, unless otherwise decided in accordance with the TCO, the partners have several responsibilities for liabilities with third parties arising from the partnership relationship6. At this point, it is important to note that Article 683/3 of the TCO, which regulates the liability regime of ordinary partnerships, is not a mandatory rule and partners can agree or otherwise. The main provision that allows the formation of a consortium structure is Article 638/3 of the mentioned TCO.
B. The Element of Adoption of a Particular Part of the Work in the Consortium Structure
Having examined the ordinary partnership structure and responsibility regime, we now explain the consortium structure. According to Barlas, in order to form a consortium, each of the individuals must undertake only a specific part of the work or works to be carried out7. According to this, the main characteristic of the consortium structure is the fact that the partners fulfill only a certain part of the work, even if the consortium is based on the ordinary partnership and therefore lacks legal personality. This element, as will be explained later, also affects the consortium's liability regime. There is consensus in the doctrine that the structure of a consortium contains the component of fulfilling a certain part of the work8. This element is also adopted within the scope of judicial decision9. The decisions of the Supreme Court of Appeals and the Council of State have not only correctly defined the consortium structure, but have also correctly analyzed the difference between the consortium structure and that of joint ventures, which is an another type of a partnership.
C. Differences between Consortiums and Joint Ventures Regarding Structure and Responsibility Regime
At this point, it is worth explaining the differences between the structure of consortiums and of joint ventures, which are often either seen as synonymous or their differences are insufficiently explained. A Joint Venture is a special type of cooperation and is established by at least two persons for the purpose of obtaining profit from an activity and has no legal personality. A joint venture is a special cooperation undertaken by more than one real person or legal entity in order to make a profit from a particular continuous job or activity, and, as it is not a legal entity, the partners have joint and several liability of any risk caused by the partnership’s actions10. A joint venture is an ordinary partnership where multiple independent individuals come together in order to achieve a particular job and gain a profit from the work in question and each of the independent persons has a joint responsibility11. Unlike in a consortium, members of a joint venture are jointly and severally liable for the overall fulfillment of the work undertaken, the general provisions of the TCO, and the completion of the entire work jointly and severally according to the agreement between the joint venture and the contractor, even if the work is not within the scope of a partner's area of expertise12.
It should be noted that there are also significant differences between a joint venture and a consortium in terms of the responsibility regime. The responsibility of the partners constituting a consortium is discharged and disposed on the basis of mutual responsibility for the whole work, since the partners’ commitment is only that part of the work which is undertaken by that partner in the agreement with the person who has been promised the work13. Moreover, there is a difference between a joint venture and a consortium in terms of the profit/gain component. Although consortiums are often established within the framework of economic life and with the aim of gaining profit, profit/ gain is not a characteristic feature in consortiums that are not established for this purpose. As Barlas has pointed out, although a consortium’s principle common purpose is economic, the purpose doesn’t have to be about gaining profit and sharing the earnings. Vote consortiums are examples of this14.
In terms of the responsibility regime, the partners of a joint venture undertake the whole work and are bound by joint and several responsibility. In the consortium structure, both the scope and responsibilities of the partners are different. The partners of a consortium may only be responsible for that part of the work that they have committed to in the context of their expertise. Unlike an ordinary partnership, in consortiums the joint responsibility institution in contracts with a third person as a whole alters only in the sense that the partners are only responsible for those parts they are undertaking. If this issue, which is one of the most fundamental structural elements of consortiums, does not take place in this legal relationship, then no consortium will be established and the partnership will become a joint venture or an ordinary partnership where the responsibility regime is constituted as jointly and severally15. As explained above, the responsibility regime in consortiums is to be responsible for the partners in their own areas of expertise and within that part of the work they have undertaken. However, the Supreme Court has adopted approaches that are not fully compatible with the consortium structure in some cases. For example, the 15th Civil Chamber of the Supreme Court ruled in its case law that: “While the contractor JSC and the real person Ş form a consortium together with the protocol specified by the consortium as being responsible for the whole work, the court lacks the reasoning for ruling that the JSC is responsible for a part of the work, and Ş is responsible for the other part of the work.”16. The Court misinterpreted the rules on consortium contracts which state that the consortium is responsible for the whole work. Although the consortium is responsible for the whole work, it does not mean that the partners are responsible for any work that exceeds that part of the work to which they were committed. In the structure of consortiums, any related business is undertaken in the name of the consortium, but the responsibility for the work that is undertaken does not lie with the consortium but with the partners.
III. THE CONSORTIUM AGREEMENT A SALE LEGAL PROCESS THAT CONSTITUTES A CONSORTIUM
Consortium structure is the result of a consortium agreement, in other words, the consortium relationship is based on a contract17. A consortium agreement can be concluded within the framework of the freedom of contract, which comes within the limits of the non-mandatory provisions determined by the ordinary partnership agreement provisions under the TCO. As Barlas states, except for any mandatory provisions, the provisions of a consortium agreement concluded between parties must be prioritized and the arrangements contained in the law are only applied as a complement to the matters not regulated in the contract, according to Article 620 of TCO18. A consortium agreement may be concluded between both real persons and legal entities. As Gezer observes, considering consortium types, it would not be accurate to say that only commercial enterprises can form a consortium, because the parties to a consortium agreement may be natural persons as well19. A consortium agreement should also be examined within the structure of the framework requirements as to form. Because consortiums formed as a result of a consortium contract are generally engaged in large-scale economic activities, the validity of the legal relationship is important. Even though a consortium agreement does not require a requirement as to form, if the companies are willing to execute a commercial enterprise and they wish to register this business in the trade registry, the consortium agreement, regardless of the consortium's validity, should be made officially in writing20.
IV. QUALIFICATION OF THE CONSORTIUM STRUCTURE ACCORDING TO THE OUBLIC PROCUREMENT LAW AND THE INSTITUTIONS TAX GENERAL COMMUNIQUÉ
The consortium structure is not only classified under the TCO but also under the Public Procurement Law21 and the Corporate Tax Communique, which are covered by public law legislation. In Articles 4 and 14 of the Public Procurement Law, arrangements are made regarding consortiums. Article 4 of the Public Procurement Law considers consortiums as joint ventures. According to this: “Joint Venture: (Amended: 30/7/2003- 4964/3 art.) refers to joint ventures or consortiums established by the agreement of more than one natural or legal person to participate in a tender.” Article 14 of the Public Procurement Law describes both consortiums and the main differences between joint ventures. Article 14 of the Public Procurement Law provides: “Joint ventures may be formed by more than one real or legal person as a joint venture or as a consortium. The members of a joint venture, together with their rights and responsibilities, work together to make the whole work together, and the members of a consortium partner in order to separate their rights and responsibilities and to carry out the relevant parts of the work. A joint venture partnership can bid on any tender. However, the contracting authorities indicate in the tender document whether a consortium can participate in the tender if the job requires different expertise. At the tender stage, an agreement is requested between the business partnership that they make a joint venture or a consortium. In joint venture agreements, the pilot partner and consortium agreements are referred to as coordinator partners. If the tender remains a joint venture or a consortium, a notarized joint venture or a consortium agreement must be submitted before the contract is signed. In a joint venture agreement and contract, the real or legal persons forming the joint venture are jointly and severally responsible for the fulfillment of the commitment, in a consortium agreement and contract, the real or legal persons forming the consortium, the part of the work and the coordination between them will be indicated through the coordinator partner in the fulfillment of the commitment.” Article 2.5.2 of the Corporate Tax General Communiqué Serial No 1 contains the following regulation: “…consortiums, where each partner has the responsibility to fulfill a certain part of the work, are excluded from the definition of joint venture. In such partnerships (consortiums), the work of each partner shall be clearly stated in the contract of undertaking. However, in case it is not stipulated in the contract of undertaking, the partnership shall be considered as a "consortium" in the event that the contract between the partners shall indicate that the individual work of the partner and contract shall be appointed by the employer administration.” As can be seen from the above regulations, within the scope of the Public Procurement Law and the General Communiqué on Corporate Tax No 1 consortiums, the rights and obligations of the parties and the partners who are responsible for the part they undertake are clearly distinguished. It should be noted that due to this distinction, in some cases the administration will state whether or not a consortium can participate in a planned tender.
V. CONCLUSION
The structure of a consortium is a form of partnership that takes place on the basis of an Ordinary Partnership Agreement within the framework of the provisions of the TCO. However, consortiums include only a part of the business to be fulfilled. Each partner undertakes a certain part of the work that is within the scope of the field of their expertise. As a result, the responsibility regime is that the partner will be solely responsible for their part of the work. The consortium structure formed by the consortium agreement can be established by both real and legal persons. The structure of the consortium is included in the Public Procurement Law and Communiqué No: 1 of the Corporate Tax Law. Undoubtedly, the differentiation of consortiums from ordinary partnerships in terms of responsibility regimes becomes more important in case of conflicts. Also if the intention is to establish a consortium relationship but the rights and responsibilities cannot be clearly revealed, it may result in a question as to whether or not the partners are responsible for any work they do not undertake. For this reason, as stated in our study, proper analysis of the partnership structure between the parties, especially in large projects, is important for partners not to become subject to any irreversible damage in the event of any dispute.
BIBLIOGRAPHY
HASAN PULAŞLI, Şirketler Hukuku Şerhi, Ankara 2018
HÜSEYIN GÜNER, ”Konsorsiyum Veya İş Ortaklığı Şeklinde Üstlenilen İhaleli İşlerde İlişkisizlik Belgesi Verilmesi”, E-Yaklaşım, September 2017
İSLAM GEZER, “Konsorsiyum Sözleşmesinin Tanımı, Özellikleri ve Ortak Girişimden Farkı”, Legal İş Hukuku, 2016, N.50
İSMAIL KAYAR, Ticaret Hukuku, Ankara 2017
KEMAL DAYINARLI, Joint Venture Sözleşmesi, Ankara 2007
MEHMET BAHTIYAR, Ortaklıklar Hukuku, Istanbul, 2019
MUZAFFER LEKESIZ, Konsorsiyum Sözleşmesi, Ankara 2016
NAMI BARLAS, Adi Ortalık Temeline Dayalı Sözleşme İlişkileri, Istanbul 2012
SONGÜL USTA, “Eser Sözleşmesinin Konusu, Özellikleri ve Tarafları”, Journal of İstanbul Bar, Vol. 84, N. 2010/6
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FOOTNOTE
1 Muzaffer Lekesiz, Konsorsiyum Sözleşmesi, Ankara 2016, s.59.
2 Nami Barlas, Adi Ortalık Temeline Dayalı Sözleşme İlişkileri, İstanbul 2012, s.280.
3 Mehmet Bahtiyar, Ortaklıklar Hukuku, İstanbul, 2019, s. 29
4 04.02.2011 dated, 27836 numbered Official Gazette (OG).
5 Barlas, p.101.
6 Ibid, p.101.
7 Ibid, p.243.
8 smail Kayar, Ticaret Hukuku, Ankara 2017, p.335; Hüseyin Güner, ”Konsorsiyum veya İş Ortaklığı Şeklinde Üstlenilen İhaleli İşlerde İlişkisizlik Belgesi Verilmesi”, E-Yaklaşım, September 2017, p. 27.
9 Supreme Court 15. CC, dated 27.06.2012, numbered E. 2012/2613, K.2012/4846; Council of State 4. C. dated 30.11.2000, numbered E. 1999/3414 K. 2000/4998.
10 Lekesiz, p.66; Hasan Pulaşlı, Şirketler Hukuku Şerhi, Ankara 2018, p.44.
11 Tamer Bozkurt, Şirketler Hukuku, Ankara 2018, p.62.
12 Kemal Dayınlarlı, Joint Venture Sözleşmesi, Ankara 2007, p.287.
13 Songül Usta, “Eser Sözleşmesinin Konusu, Özellikleri ve Tarafları”, Journal of İstanbul Bar, Vol. 84, No. 2010/6, p.3561.
14 Barlas, p.246-247.
15 Ibid, p.249.
16 Supreme Court 15. CC dated 26.05.1997 numbered E. 1997/1680 K. 1997/2741.
17 İslam Gezer, “Konsorsiyum Sözleşmesinin Tanımı, Özellikleri ve Ortak Girişimden Farkı”, Legal İş Hukuku, 2016, N.50, p.1028.
18 Barlas, p.258.
19 Gezer, p.1028
20 Barlas, p.246.
21 04.01.2002 dated, 24648 numbered OG.
