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Short-Term Rental Regulations in Turkey, airbnb

Short-Term Rental Regulations in Turkey: New Legal Framework and Impact on AIRBNB Rentals

The significance of tourism in the global economy and the changing habits of travel have made short-term residential rentals a popular alternative among accommodation options. The rise of platforms like Airbnb and the rapid growth of the sector have begun to render existing legal regulations insufficient, necessitating new legislation in many countries, resulting in the new Short-Term Rental Regulations in Turkey. Under the law numbered 7464, titled “Law on the Tourism-Purposed Leasing of Residences and Amendment of Other Laws,” new norms and obligations detailing tourism-purposed short-term residential rentals have been regulated and came into effect with its publication in the Official Gazette on November 2, 2023.

The new law aims to place short-term rental transactions within a certain legal framework, contribute to the regulation of the tourism sector, and establish clear and understandable rules for both property owners and tenants. With this law, issues such as the obligation to obtain a permit for the tourism-purposed short-term leasing of residences, administrative sanctions, and the characteristics of the permit have been legally structured.

2024 Update: Clarifications regarding the application procedures and exemptions for luxury residences can be found here.

I. Purpose and Scope of the New Short-Term Rental Regulations in Turkey

The Law No. 7464 regulates the short-term rental of residences for tourism purposes and ensuring this process is subject certain rules and licenses.It establishes the legal foundation for the leasing of residences to tourists and other visitors for short-term periods and aims to keep this process under control. The new Short-Term Rental Regulations in Turkey, which covers rentals of up to 100 days, excludes longer rentals from its legal scope, aiming not to affect the traditional long-term residential rental market.

In this context, the law brings regulations on issues such as the obligation to obtain a permit, certain obligations for properties with a permit, and administrative sanctions for those who fail to meet these obligations. However, it also imposes rather strict rules and requirements to obtain a license and permit, which can hinder short-term rentals such as Airbnb.

II. Characteristics of the Permit

Article three of the law details the characteristics and the process of obtaining the permit, one of the most important elements of tourism-purposed residential rentals. Obtaining a permit is a mandatory step for tourism-purposed rental operations and must be performed before entering into a contract. To obtain a permit, a unanimous decision by all shareholders of the building where the residence is located is required, which is especially important in multi-story buildings. This requirement will affect many short-term rental units, especially those listed in e-commerce sites such as Airbnb, as most of the units listed are apartment flats. Additionally, the obligation to obtain this permit and display the plaque lies directly with the lessor, and this process operates according to the procedures and principles determined by the Ministry of Culture and Tourism.

III. Properties and Individuals Subject to the Turkey Short-Term Rental Law

a. Are Airbnb Rentals Subject to the Permit?

The permit mechanism, a cornerstone of the regulations brought by the law, clearly defines tourism-purposed short-term residential rentals and outlines the legal boundaries of this process. Rentals subject to the permit are limited to a maximum of 100 days (including Airbnb rentals), and rentals exceeding this duration are kept outside the scope of the law. This is an important point for property owners who wish to rent their residences during the tourism season, including short-term rentals via e-commerce sites and listings such as Airbnb.

Furthermore, even if rental contracts are made for periods longer than 100 days, the situation where the same residence is rented out more than four times within a year from the date of the first contract is separately regulated by the law and such rentals are also subjected to the permit. This rule aims to prevent property owners from manipulating contract durations to bypass the 100-day limit.

b. Who is Obliged to Obtain the Permit?

The obligation to obtain a permit is the responsibility of property owners and any natural or legal person intending to lease residences for tourism purposes. This document proves the existence of an official permission for the rental activity and that the residence meets certain standards. Therefore, every lessor wishing to rent their property for tourism purposes must have obtained this document before signing the contract.

The procedures required to obtain a permit and the special conditions that must be considered in this process are explained in detail in the law. For example, if the residence is in a building consisting of more than three independent sections, a permit can be issued on behalf of the same lessor for no more than twenty-five percent of the building, and additional documentation may be required if a permit is sought for more independent sections.

IV. Permit Application Conditions and Process

a. Approval of Proprietors and Application Process

Under the new Short-Term Rental Regulations in Turkey, pertaining to short-term residential rentals for tourism purposes, a decision unanimously made by all proprietors of the building in which the property is located is required to obtain a permit. This decision confirms the suitability of the property for tourism-based rental activities and must be presented to the relevant authorities during the application. In buildings or complexes with multiple independent sections, only the proprietors of the building where the independent section intended for tourism-based rental is located are subject to this approval process. A copy of the decision must also be delivered to the site management.

This requirement represents an important step, especially in buildings with many shareholders. The consent of all proprietors is critical to maintaining the building’s aesthetic and social structure, preventing noise and disorder, and protecting common living spaces.

b. Required Documents and Review

In the application for a permit, documents demonstrating the property’s compliance with fire, health, and safety standards must be provided, along with the unanimous decision of the proprietors. The application file must also include evidence that the property meets the minimum accommodation service standards and other relevant legal documents.

During the review process, the completeness and accuracy of the documents are evaluated, as well as the property’s physical conditions and the suitability of the services provided to tourism standards. This process serves as a security certificate for the use of the property for tourism purposes and verifies its suitability for rental purposes.

c. Obtaining and Renewing the Permit

Once obtained, the validity period and renewal conditions of the permit are determined within the framework of legal regulations. A renewal application must be made before the permit expires, and any changes must be reported to the relevant authorities.

V. Obligations and Sanctions for E-Commerce Sites and Platforms

A significant portion of short-term rental transactions for tourism purposes is conducted through e-commerce sites and various online platforms. The new legal arrangement defines the obligations of these platforms and the sanctions they will face if they fail to fulfill these obligations.

a. Responsibilities of E-Commerce Platforms

E-commerce sites, platforms, and other intermediary service providers are authorized to advertise only properties with a permit. These platforms are prohibited from publishing listings of properties without a permit. They are responsible for continuously checking the accuracy and currency of the permit information in their listings. The completeness and up-to-dateness of this information ensure that the platforms meet their legal obligations and allow users to transact confidently. In this context, platforms are required to clearly indicate the permit number in their listings and keep this information up to date.

b. Sanctions for Platforms that Violate Obligations

The new Short-Term Rental Regulations in Turkey imposes serious financial sanctions on e-commerce sites and platforms that publish listings without a permit or fail to meet legal requirements. These sanctions are designed to ensure that platforms adhere to the legal framework and guarantee that rentals are conducted in accordance with the law. Under the law, platforms may face severe administrative fines for publishing listings without a permit or breaching legal conditions.

The process also involves additional responsibilities for platforms, such as regular inspections and informing users about legal requirements. The implementation of these sanctions is crucial for increasing compliance with regulations and ensuring transparency in the sector.

This section of the law mandates a significant compliance process for both property owners and e-commerce platforms and aims to bring more organized and reliable structures to short-term rental transactions for tourism purposes.

VI. Sanctions and Administrative Fines for Non-Compliance

a. General Sanctions noted in the Short-Term Rental Regulations in Turkey

The new Short-Term Rental Regulations in Turkey clearly defines the sanctions and administrative fines to be applied in the event of non-compliance with obligations in the area of short-term residential rentals for tourism purposes. These sanctions aim to enhance the deterrent effect of the law and ensure order in the sector.

b. Renting Without a Permit

Property owners who conduct short-term tourism rentals without obtaining a permit as per the Short-Term Rental Regulations in Turkey may face administrative fines of up to one million Turkish Lira. The amount of this fine can vary depending on the nature and extent of the violation.

c. Renting for More Than One Hundred Days

Property owners who enter into rental contracts for periods longer than one hundred days, yet within a year from the date of the first contract, rent out the same property more than four times, are subject to a one million Turkish Lira administrative fine. The Short-Term Rental Regulations in Turkey aims to control situations that exceed the rental duration and frequency outlined in the law.

d. Responsibilities and Penalties for E-Commerce Platforms

E-commerce sites and platforms that publish property listings without a permit, provide misleading information, or engage in behaviors contrary to legal regulations also face severe administrative fines. These fines are intended to ensure that platforms take their responsibilities seriously and protect the rights of consumers.

e. Implementation of Administrative Fines

The application of administrative fines is carried out by the relevant ministry and governorships, and the provisions of the relevant legislation apply to the finalization and collection of fines. The magnitude of the fines plays a significant role in preventing violations and promoting adherence to the law.

f. Additional Measures in Case of Violation

Sanctions extend beyond monetary fines and may include additional measures if necessary. For instance, more severe sanctions, such as the suspension of activities or cancellation of the permit, can be applied in cases of repeated violations.

g. Appeal and Correction Processes

There is the possibility of appealing against penalties, and correction and compliance processes are envisioned for property owners and platforms found to be in violation of obligations. These processes provide an opportunity to rectify violations and prevent the same infractions from recurring in the future.

This section of the law is intended to prevent irregularities and illegal activities in the sector and requires all stakeholders to comply with the legal framework. The details of the sanctions and the fine amounts reflect the seriousness of the issue and the importance that the legislator places on this matter.

VII. Conclusion and Critical Perspective

This extensive regulatory overhaul within the legal framework for short-term residential rentals for tourism purposes in Turkey has been crafted with the needs of travelers and property owners in mind. The introduction of Law No. 7464 aspires to usher in a more regulated and dependable environment for the tourism sector. By instituting a permit requirement for property owners, enforcing compliance with specific standards, and imposing sanctions for non-compliance, it heralds a significant transformation within the tourism industry.

While the pursuit of permits serves not only as a legal mandate but also as a vehicle for elevating the service quality and reliability, it introduces a layer of complexity into the operation of short-term rentals. A particular point of contention is the unanimous consent requirement from building proprietors for obtaining a permit. This stipulation poses a considerable challenge in multi-owned properties where securing unanimous agreement can be an arduous task, often hindered by diverse interests and the reluctance of some proprietors to engage in short-term rental activities.

The stringent requirement for unanimous approval effectively creates a high barrier to entry, which could drastically reduce the number of eligible properties for platforms like Airbnb, thus impacting their listings and the broader short-term rental market. The potential decrease in available rental properties may not only limit options for travelers but could also lead to a contraction in the short-term rental market, which has been a vibrant part of the tourism economy.

Furthermore, the law’s strict regulations, while intended to enhance the quality and safety of tourist accommodations, may inadvertently disadvantage small property owners who lack the resources or the ability to navigate the complex bureaucratic processes involved in obtaining the necessary permits. This could result in an uneven playing field, favoring larger operators or established hotels and leading to a less competitive market.

The rules and obligations imposed on e-commerce platforms are meant to shield against deceptive practices and to cultivate consumer confidence. However, the law’s rigid stance on compliance and the hefty administrative fines underscore the seriousness with which irregularities and illegal activities are being addressed. The imposition of such sanctions highlights the law’s commitment to order and quality but also raises concerns about the flexibility and adaptability of the sector to evolving market dynamics.

In conclusion, while the enforcement of this law and adherence to its provisions are crucial for avoiding penalties and enhancing the standing of Turkish tourism, they carry significant implications for the short-term rental industry. The regulation, by mandating strict compliance, aims to elevate service standards and customer satisfaction. Yet, the challenges associated with obtaining licenses and permits, especially the necessity for unanimous building proprietor approval, could substantially stifle the growth of a sector that has been burgeoning and dynamic.

As Turkey navigates the implementation of these new regulations, it remains imperative for the stakeholders to engage in constructive dialogue and seek balanced solutions that preserve the vibrancy and inclusivity of the short-term rental market, while upholding the law’s intentions of safety, quality, and reliability. The future of tourism and the short-term rental sector in Turkey will be shaped by how these challenges are addressed and the industry’s ability to adapt to this new regulatory landscape.

Short-Term Rental Regulations in Turkey: New Legal Framework and Impact on AIRBNB Rentals

Av. Ali Yurtsever

Contact for consulation

Author Bio
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Trade Fairs in Turkey: Unpacking the Regulatory and Procedural Essentials

Turkey, strategically poised at the crossroads of Europe and Asia, has long been a hub of trade, commerce, and cultural exchange. This unique geographical advantage, combined with its burgeoning economy, has cemented its position as a focal point for global businesses and investors. An integral aspect of this international commerce is its vast trade fair calendar, a testament to Turkey’s expansive production capabilities and diverse markets.

These trade fairs in Turkey, ranging from local exhibitions to grand international expos, not only showcase the country’s industrial prowess but also offer a platform for businesses from across the globe to converge, collaborate, and catalyze new ventures. As Turkey continues its ascent in the global economic landscape, understanding the intricate fabric of its trade fair ecosystem becomes paramount for stakeholders aiming to tap into its vast potential.

In this comprehensive guide, we delve deep into the legal and procedural nuances of organizing and participating in Turkish trade fairs, illuminating the path for businesses to navigate this vibrant marketplace

I. Types of Trade Fairs in Turkey: A Diverse Landscape of Opportunities

Organizers have a couple of options to choose from when planning Trade Fairs in Turkey. These fairs, mirroring the country’s multifaceted economy and vibrant cultural diversity, can be broadly bifurcated into general and specialty fairs.

General fairs provide a comprehensive platform, encompassing a vast spectrum of products, services, and sectors. These events tend to attract a vast pool of participants, both from within Turkey and from international shores. Acting as hubs of innovation, these fairs offer a panoramic view of the prevailing market dynamics and trends.

Contrastingly, specialty fairs zero in on specific industries or domains. Whether the spotlight is on textiles, technology, or tourism, these events offer businesses a concentrated and curated platform, ensuring a match between the showcased offerings and the interests of attendees.

One unique facet of Trade Fairs in Turkey lies in the guidelines governing retail sales. While these events are primarily arenas for display and networking, there is provision for direct retail sales, albeit within a regulated framework.

Defense industry trade fairs, given the strategic and sensitive nature of their subject matter, are enveloped in a more stringent set of rules. The onus here is on preserving national security while facilitating business interactions.

The term “international fairs” warrants special mention. These globally recognized events serve as a testament to Turkey’s position on the world stage, drawing participants from all corners of the globe. The regulations for these fairs, naturally, are crafted with a global audience in mind.

II. Regulatory Requirements: Navigating the Complex Landscape

The Turkish government, in its endeavor to ensure fair practices, consumer protection, and the overall integrity of the trade fair ecosystem, has put forth a set of mandates. Comprehending these regulations is not just a matter of legal compliance but is instrumental in leveraging the full potential of these platforms.

a. Authorization Certificates for Trade Fairs in Turkey

Central to organizing or participating in a trade fair is the Authorization Certificate. This document acts as a testament to an entity’s legitimacy and its adherence to the prescribed norms. One of the prerequisites for obtaining this certificate is the establishment of a capital company.

But it’s not just about having a company on paper; there’s a stringent financial requirement attached. The company must boast a paid-up capital of at least TRY 1.000.000. This monetary stipulation ensures that only serious and financially sound entities venture into the realm of trade fairs, thereby preserving the quality and reputation of these events. For guidance in company incorporation in Turkey, please refer to our other articles here.

b. Venues

The physical space where the fair is hosted, the venue, is more than just a backdrop. It plays a pivotal role in determining the success of the event. Consequently, there are specific requirements that venues need to fulfill. From accessibility to safety norms, and from infrastructure to environmental considerations, each aspect of the venue undergoes scrutiny.

c. Licenses

Depending on the nature and scale of the trade fair, there might be a need for additional licenses. These could range from licenses for hosting international participants to permissions related to specific industries or product categories. Each license carries its own set of criteria and is indicative of the fair’s adherence to specific standards. Acquiring the necessary licenses not only ensures compliance but also augments the credibility of the event in the eyes of potential participants and attendees.

d. Taxation and Customs

Navigating the taxation landscape is crucial for any entity participating in or organizing trade fairs. When it comes to importing goods specifically for the fair, it’s imperative to be aware of the prevailing tax implications. Turkey has a structured taxation system, and goods brought into the country, even temporarily for a fair, may attract certain duties or taxes. Additionally, customs regulations play a pivotal role. Ensuring that all goods pass through customs without hitches requires adherence to specific documentation and procedural norms. It’s always advisable to consult with a local tax and customs expert to ensure smooth operations and avoid unforeseen financial burdens.

e. Use of the Term “Trade Fair”

The term “Trade Fair” isn’t just a descriptor; it carries weight and significance in the Turkish context. As such, its use is protected by specific regulations. Only events and trade fairs in Turkey that have secured the necessary permissions and adhere to the set guidelines can officially use the term. Any deviation or unauthorized use can lead to legal consequences. This measure ensures that the term remains a hallmark of quality and authenticity, and that businesses and consumers can trust the events branded as such.

f. Guarantees and Refunds

Ensuring the authenticity and commitment of organizers is crucial. To this end, companies are required to deposit guarantees before organizing trade fairs. These guarantees act as a safety net, ensuring that the companies uphold their end of the bargain and stick to the regulations. If a company fails to meet the prescribed standards or reneges on its commitments, the deposited amount can be forfeited. However, in cases where everything goes as planned, or if certain conditions are met, these guarantees are refundable. Understanding the nuances of this process is vital to ensure financial prudence.

g. Transfer

Trade fairs in Turkey, given their significance, often become assets in themselves. While the transfer of the actual authorization certificate to another entity is restricted, certain aspects related to the fair, such as its history or international stature, can be transferred between organizers. This allows for continuity and preserves the legacy of the event. However, such transfers are regulated, and both the transferring and receiving parties must adhere to specific guidelines to ensure the sanctity of the process.

III. Navigating the Application Process: Procedures, Timelines, and Evaluations for Trade Fairs in Turkey

Navigating the realm of trade fairs in Turkey is as much about understanding the processes as it is about knowing the market. While the potential for growth and outreach is vast, it’s essential to be mindful of the procedural intricacies to ensure a seamless experience, which requires an understating of the the application and evaluation mechanisms.

a. The Application Process

To initiate the journey, prospective organizers must submit an application to the relevant authorities. This application encapsulates various facets, from the intent of the fair to its logistical details. Essential documents include proof of the company’s financial standing, details about the venue, the nature of the fair, and any other pertinent information that defines the event’s scope and purpose.

b. Timeline

Timing is crucial for all trade fairs in Turkey. Applications must be submitted well in advance of the intended start date of the fair. Specifically, if one aims to be part of the main trade fair calendar, the application should be made post the publication of the primary calendar for that year, but at least three months before the commencement of the event.

c. Fees and Charges

Organizing a trade fair isn’t just a logistical endeavor; it’s a financial commitment. Beyond the operational costs, there are application fees that need to be catered to. These fees vary based on the nature of the fair and other defining parameters. In certain cases, especially when payments are made online, the need for additional documentation might be waived, simplifying the process.

d. Changes and Cancellation

Flexibility is a cornerstone of any significant business operation. Recognizing this, the regulatory framework allows for changes to be made to the initial application. However, these changes are subject to re-evaluation and must adhere to the overarching guidelines. In instances where the organizer wishes to withdraw the application or the event altogether, certain conditions dictate the refund of the application fee. It’s crucial to understand these nuances to avoid financial pitfalls.

e. Evaluation

Once the application, complete with all necessary documentation and fees, is submitted, it undergoes a rigorous evaluation process. This assessment isn’t just a bureaucratic formality; it’s a quality check ensuring that the proposed event aligns with Turkey’s trade fair objectives and standards. Feedback from local chambers of commerce and industry play a vital role in this evaluation, emphasizing the event’s alignment with local business interests and its potential impact on the local economy.

IV. The Pivotal Role of the Main Trade Fair Calendar in Turkey

In the realm of trade fairs in Turkey, the Main Trade Fair Calendar stands as a beacon for both organizers and participants. This calendar, meticulously curated and updated, serves as a comprehensive guide to the myriad trade events taking place across the nation.

The Main Trade Fair Calendar isn’t merely a schedule; it’s an embodiment of the structured and planned approach Turkey adopts for its trade fairs. Its publication offers a comprehensive overview of the year’s events, acting as a vital reference for organizers, participants, and even attendees. Ensuring a place on this calendar not only enhances an event’s credibility but also amplifies its visibility among stakeholders.

Organizers keen on marking their presence on this pivotal calendar must be vigilant about the application timeline. Post the release of the year’s primary calendar, there exists a window leading up to three months before the intended trade fair date for submissions. This timeframe ensures ample preparation for all parties involved.

Applications necessitate a meticulous compilation of details, encompassing aspects we’ve previously touched upon—authorization certificates, venue details, and any incumbent fees. It’s a reflection of an organizer’s commitment to adhering to the established norms and ensuring the event’s success.

It’s also pertinent to acknowledge the fluid nature of trade fairs. Situations might mandate modifications to an event’s date or even its outright cancellation. The framework around the Main Trade Fair Calendar is agile enough to accommodate these shifts, albeit within set parameters and deadlines.

V. Navigating the Key Aspects of Trade Fair Organization

In orchestrating a trade fair in Turkey, thorough preparation and a keen understanding of various aspects are essential. Let’s delve into these critical components:

1. Securing the Necessary Permits and Licenses: Before any tangible steps are taken, the acquisition of the required permits and licenses is imperative. Each type of trade fair has its own set of prerequisites, and it’s crucial to be well-informed and compliant to ensure a smooth operation. Evaluations for each permit and licenses are carried out by relevant authorities, ensuring adherence to Fair Organization Principles.

2. Intellectual Property: Protecting the Core of Exhibitions: Trade fairs often become the launchpad for novel products and groundbreaking innovations. It’s paramount to safeguard these unique ideas. Exhibitors and sponsors should be proactive in understanding and asserting their intellectual property rights.

3. Contractual Foundations: Solid contractual agreements with vendors, exhibitors, sponsors, and service providers form the bedrock of a successful trade fair. These agreements set the expectations, roles, and responsibilities for all parties involved. Ensuring that these contracts are clear and comprehensive can prevent potential disputes and misunderstandings.

4. Ensuring Data Integrity: In the age of information, the data collected during the registration and operation of a trade fair holds significant value. The protection of attendees’ and participants’ personal information should be a top priority, with stringent measures in place to ensure data security.

VI. The Risks of Overlooking Rules: Potential Liabilities & Non-Compliance

Organizing a trade fair in Turkey, like in many parts of the world, is not just about logistics, marketing, and execution. It’s also about ensuring that every aspect of the event adheres to the established regulations. Overlooking or intentionally bypassing these guidelines can lead to severe consequences, both financially and reputationally.

  • The Use of the Term “Fuar” (Trade Fair): Correct usage of the term “Fuar” or its equivalents in foreign languages is important. As per regulations, only events that have obtained the relevant documents or are listed in the official Fair Calendar are entitled to use this term. Any misuse, especially in promotional materials like brochures, advertisements, social media, and websites, can lead to legal consequences.
  • Venue and Date Non-compliance: Organizers must ensure that the trade fair takes place at the declared venue and adheres to the specified dates. Any discrepancies between the declared and actual details can result in the organizer facing penalties and even the potential cancellation of the event.
  • Intellectual Property Violations: Trade fairs often showcase innovative products and ideas. If any exhibitor or sponsor feels their intellectual property rights have been infringed upon, the organizers could face legal challenges, especially if due diligence was not conducted.
  • Violation of Transfer Restrictions: The regulations are clear that the Authorization Certificate cannot be transferred under any circumstances. Failing to adhere to this can lead to the revocation of the certificate by the Union.
  • Non-refundable Application Fees: It’s essential to note that if an application for a trade fair is rejected or withdrawn by the organizer, the application fee will not be refunded. Additionally, if a company fails to complete the guarantee amount within a month of being notified, their authorization certificate can be annulled.
  • Guarantee Deposits and Their Forfeiture: Organizing companies are required to deposit guarantees. If these entities do not adhere to their commitments or breach the stipulated regulations, a part or the entirety of this deposit can be recorded as revenue by the Union.

Being aware of these potential pitfalls and ensuring strict adherence to guidelines is not just a matter of regulatory compliance. It’s about upholding the trust of participants, exhibitors, sponsors, and attendees.

VII. Conclusion

While this article offers a glimpse into the legal aspects of organizing trade fairs in Turkey, the intricacies of regulations and potential liabilities are vast. Consulting legal experts with experience in Turkish event law can provide you with tailored guidance to navigate these complexities effectively.

As a boutique law firm specializing in event law in Turkey, we are committed to supporting your fair organization journey. Our team of legal professionals possesses the knowledge and experience to guide you through the legal landscape, ensuring a successful and compliant fair. Contact us today to schedule a consultation and embark on your journey to an exceptional fair experience in Turkey.

Trade Fairs in Turkey: Unpacking the Regulatory and Procedural Essentials

Av. Ali Yurtsever

Contact for consulation

Author Bio
Distribution-5

Unpacking Distributor Agreements in Turkey: What Every Business Should Know

cargo ship symbolising Distributor Agreements in Turkey

The legal landscape of distributor agreements in Turkey is both fascinating and intricate. Like many jurisdictions worldwide, Turkey does not offer a clear-cut legal definition for distributorship agreements. These agreements, which bridge the gap between producers and the end consumers, have evolved in their scope and importance over the years, creating a need for a deeper understanding and legal insight.

As businesses expand their reach and market dynamics become more complex, distributorship agreements stand as pivotal elements in the supply chain, ensuring that products reach their intended audience. This article, in addition to our previous article on distributorship agreements, delves into the technical aspects of these agreements in Turkey, shedding light on their nuances, intricacies, and the overarching legal framework that governs them.

I. General outline of Distributor Agreements in Turkey

Distributorship agreements play a pivotal role in Turkey’s commercial arena. These agreements serve as the backbone for various industries, connecting manufacturers with retailers, and ensuring products reach consumers efficiently. However, unlike many commercial agreements that have specific regulations, distributorship agreements remain undefined in Turkish legislation. Their scope and dynamics are primarily derived from precedents and interpretations of related legal provisions.

To navigate the complexities of these agreements, one must comprehend their underlying principles, definitions, and the legalities associated with them in the Turkish context. The subsequent sections unravel these aspects in detail, offering insights into the definition, types, rights, obligations, and the intricate balance of consumer protection and anti-competition laws as they relate to distributorship agreements.

II. Definition and types of distributor agreements

The realm of distributor agreements is multifaceted, and their classifications can vary based on several parameters. However, to truly grasp their essence, it’s crucial first to define them.

Definition: A distributor agreement is a contractual arrangement wherein a manufacturer or a primary supplier grants a party the rights to distribute or resell its products within a specified region or to a particular group of customers. Unlike agents, who act on behalf of the principal in a representative capacity, distributors function independently, buying and selling goods on their own behalf and risk.

The core types of distributor agreements prevalent in Turkey are:

  • Exclusive Distributor Agreement: In this arrangement, the distributor enjoys exclusive rights to distribute the manufacturer’s products within a specific territory or to a designated customer group. This exclusivity means that the manufacturer cannot appoint other distributors or directly sell to customers within the stipulated territory or segment.
  • Selective Distributor Agreement: Under this, manufacturers select a group of distributors based on specific criteria. The chosen distributors are the only entities allowed to distribute the products in a particular region. However, the manufacturer retains the right to sell directly to the end customers.
  • Non-exclusive Distributor Agreement: In a non-exclusive setup, the manufacturer can appoint multiple distributors in the same territory, leading to potential competition among them. This type of agreement offers flexibility to manufacturers but might reduce the incentive for distributors to invest heavily in marketing or infrastructure.

The nature of the relationship, the rights and obligations of the parties involved, and the terms and conditions will vary depending on the type of distributorship agreement chosen. The subsequent section delves deeper into these aspects, providing clarity on what each party can expect and is obligated to deliver within the framework of the agreement.

III. Rights and Obligations of the Parties in Distributor Agreements

In any distributorship agreement, defining the rights and obligations of the involved parties is paramount. This clarity not only ensures smooth business operations but also minimizes potential disputes. Here’s a deeper look into the typical rights and obligations of both manufacturers and distributors within the Turkish legal framework:

1. Rights of the Manufacturer:

– Product Standards: The manufacturer retains the right to set and modify the standards and specifications of the products. This ensures that the products maintain a consistent quality and brand identity across different markets.

– Price Setting: While the manufacturer may suggest retail prices, it’s often the distributor’s discretion to set the final selling price unless otherwise agreed.

– Termination: Subject to the terms of the agreement, the manufacturer can terminate the distributorship if certain predefined conditions aren’t met, such as sales targets or compliance with brand guidelines.

2. Obligations of the Manufacturer:

– Supply of Goods: The manufacturer is obligated to supply the agreed quantity and quality of goods to the distributor.

– Support and Training: Often, manufacturers provide training to the distributor’s staff, ensuring they are equipped with the necessary knowledge to market and sell the products effectively.
– Warranty: The manufacturer typically offers warranties for the products, ensuring they are free from defects and meet the agreed specifications.

3. Rights of the Distributor:

– Exclusive Distribution: If the agreement is exclusive, the distributor has the sole right to market and sell the products in a designated territory or to a specific customer group.
– Marketing Discretion: Distributors often have the freedom to decide on marketing strategies, promotional campaigns, and sales tactics for the region they cover.

– Pricing: As previously mentioned, distributors usually have the discretion to set the final retail price unless contractually bound to adhere to manufacturer-suggested pricing.

4. Obligations of the Distributor:

  • Sales Targets: Distributors may be obligated to achieve certain sales targets as stipulated in the agreement.
  • Brand Representation: Distributors are often required to maintain the brand’s reputation, adhering to guidelines on branding, advertising, and customer service.
  • Feedback Loop: A distributor might be obligated to provide regular feedback to the manufacturer about market trends, customer preferences, and competitive products.

It’s imperative to note that while these rights and obligations serve as a general framework, the specifics can vary based on mutual agreement, industry standards, and regional legal stipulations. As such, both manufacturers and distributors should seek legal counsel to ensure their interests are adequately protected and their obligations clearly defined.

IV. Consumer Protection & Anti-Competition in Distributor Agreements

Before the enactment of specific consumer protection laws in Turkey, general provisions were applied in matters related to consumer rights. However, with the introduction of consumer-specific regulations, there has been a significant shift in ensuring the rights of consumers are upheld.

The distributor, being an essential link between the manufacturer and the consumer, plays a pivotal role in upholding consumer rights. Distributors are obligated to ensure that the products they distribute are of standard quality, free from defects, and fit for the intended use.

In cases where consumers encounter issues with products purchased, they have the right to approach the distributor for redressal. The distributor, in turn, collaborates with manufacturers to address these grievances, ensuring consumers receive the due quality and service.

a. Consumer Protection in Distributor Agreements in Turkey

Before the enactment of specific consumer protection laws in Turkey, general provisions were applied in matters related to consumer rights. However, with the introduction of consumer-specific regulations, there has been a significant shift in ensuring the rights of consumers are upheld.

The distributor, being an essential link between the manufacturer and the consumer, plays a pivotal role in upholding consumer rights. Distributors are obligated to ensure that the products they distribute are of standard quality, free from defects, and fit for the intended use.

In cases where consumers encounter issues with products purchased, they have the right to approach the distributor for redressal. The distributor, in turn, collaborates with manufacturers to address these grievances, ensuring consumers receive the due quality and service.

b. Anti-Competition in Distributor Agreements

Distributor agreements can sometimes inadvertently restrict competition, especially when exclusivity clauses are involved. While these agreements are designed to benefit manufacturers and distributors, it’s essential to ensure they don’t stifle competition in the market.

The European Commission has recognized that for distributorship agreements to restrict competition, the businesses involved must possess significant market power. The Turkish Competition Authority mirrors this sentiment, emphasizing the need for a detailed economic analysis to determine the market impact of such agreements.

While distributor agreements can set terms of operation, it’s imperative that they don’t result in anti-competitive practices. This means avoiding agreements that can lead to price fixing, market division, or other practices that can harm the competitive landscape. It’s essential for businesses to be aware of these dynamics and seek legal counsel when drafting or entering into such agreements, ensuring they adhere to the regulatory framework and uphold the spirit of fair competition and consumer protection.

V. Conclusion

Distributor agreements in Turkey, like many facets of commercial law, are imbued with layers of complexity and depth. As businesses and markets evolve, so does the importance of these agreements. They not only define the relationship between manufacturers and distributors but also influence how products reach their intended consumers.

From understanding the very definition and types of distributor agreements to comprehending the rights and obligations of the involved parties, there’s much to consider. Add to this the balancing act between consumer protection and anti-competition, and the importance of legal expertise in this domain becomes evident.

In a rapidly globalizing world, distributorship agreements serve as the lynchpin for businesses expanding their reach across borders. They encapsulate the intricacies of market dynamics, legal frameworks, and commercial relationships.

As we’ve seen, while these agreements play a pivotal role in Turkey’s commercial arena, they remain largely undefined in Turkish legislation. Their nature, dynamics, and the legalities associated with them are primarily derived from precedents and interpretations of related legal provisions.

For businesses operating in Turkey or collaborating with Turkish entities, a deep understanding of distributor agreements is indispensable. Whether it’s ensuring compliance with local laws, navigating the complexities of consumer protection, or fostering a competitive market environment, these agreements stand at the intersection of commerce, law, and strategy.

Unpacking Distributor Agreements in Turkey: What Every Business Should Know

Av. Ali Yurtsever

Contact for consulation

Author Bio
Biometrics-7

Biometric Signatures in Turkey: Legal Implications and Data Protection Concerns

I. Introduction to Biometric Signatures in Turkey

Biometric signatures, a contemporary convergence of technology and personal identification, represent a new frontier in the world of electronic and digital validation. At their core, biometric signatures are an offshoot of biometric data. This data, renowned for its inherent association to an individual and its typically unchangeable nature, provides unique attributes that distinguish it from conventional data. Its inability to be altered or forgotten, rooted in its innate connection to the individual, renders biometric data distinct from other forms of information.

Yet, as we venture deeper into the realm of digital transactions and electronic authentication, we encounter a blend of different regulations that can vary significantly across jurisdictions. The European Union, with its systematic and broad-based approach, has developed a comprehensive regulatory framework encapsulating various forms of electronic and digital signatures. The eIDAS Regulation, a notable pillar in this construct, provides clear definitions between different levels of electronic signatures, ranging from ‘simple’ to advanced and qualified signatures.

On the contrary, biometric signatures in Turkey presents a contrasting picture. While the EU’s regulatory framewokr offers clarity and comprehensive coverage, Turkey’s approach appears narrower. The country’s regulatory landscape, predominantly focusing on “qualified electronic signatures”, leaves other types of electronic and digital signatures unregulated. This limited framework leads to significant gray areas, prompting questions about the validity, recognition, and enforceability of various e-signatures within the Turkish jurisdiction.

In this article, we’ll dive into biometric signatures, looking at how they fit into the wider landscape of digital rules in both the EU and Turkey

II. Differentiating Types of Signatures: Electronic, Digital, and Biometric

Before we delve deeper into biometric signatures, it’s pivotal to understand the distinction between electronic signatures, digital signatures, and biometric signatures. The eIDAS Regulation provides a structured approach to electronic signatures:

  • ‘Simple’ electronic signatures: Defined as “data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign”. Essentially, appending your name under an email could be a ‘simple’ electronic signature.
  • Advanced electronic signatures (AdES): Beyond the basic electronic signature, an AdES is uniquely tied to the signatory and allows them complete control. Moreover, it’s linked to its associated document in a way that any subsequent changes can be detected. The most prevalent technology ensuring this is public-key infrastructure (PKI), encompassing the use of certificates and cryptographic keys.
  • Qualified electronic signatures (QES): A QES is an enhanced version of the AdES, created by a qualified signature creation device (QSCD) and founded on a qualified certificate for electronic signatures.

While electronic and digital signatures primarily revolve around data validation and user authentication, biometric signatures capitalize on the unique physical or behavioral characteristics of the signatory. It’s crucial to note the position of Turkish regulations in this context. Turkish regulations only recognize “qualified electronic signatures” (QES) as valid signatures. Other forms, including simple and advanced electronic signatures, aren’t fully acknowledged as official signatures in the country, rendering them with limited legal standing. This distinction becomes more pronounced when considering the evolution and the potential legal recognition of biometric signatures in Turkey

III. Understanding Biometric Signatures

Biometric signatures involve the use of specific biometric data to create signatures on a dedicated tablet or pad, with these data often securely linked to the signed document. It is important to clarify that while biometric signatures share some similarities with traditional handwritten signatures, they are distinct concepts. Unlike traditional wet signatures created with pen and paper, biometric signature solutions lack a standardized framework, resulting in diverse design features and differing functionalities.

The crucial differentiation between biometric signatures and traditional handwritten signatures lies in the manner in which they are evaluated. In the context of data privacy, the essence of biometric signature analysis hinges on dynamic characteristics, considering factors like the amount of pressure applied during the signature, the angle of writing, the speed and acceleration of the stylus, the formation of letters, the orientation of the signature, and other unique dynamic attributes. This contrasts with traditional signatures, which primarily focus on the visual appearance of the signature.

IV. Legal Aspects of Biometric Signatures: eIDAS, LPDP and Beyond

a. EU vs Turkey

The examination of biometric signatures in the context of legal and regulatory frameworks reveals a multifaceted landscape. Biometric signature solutions exhibit variations in design and implementation standards, largely due to the absence of a universal global standard governing their development and utilization. In contrast, the European Union has taken substantial strides in crafting a cohesive framework for electronic identification and trust services within the digital single market. This framework, known as the “Electronic Identification and Trust Services Regulation” (eIDAS), provides a structured approach to these matters, offering a measure of clarity within the EU.

However, when we shift our focus to Turkish legislation, we encounter a dearth of similar clarity. The distinctions between biometric and handwritten signatures and their compatibility with existing legal structures become increasingly pronounced. The absence of a specific legislative framework catering to biometric signatures within Turkey raises pertinent questions about their status and recognition under the law. This ambiguity underscores the necessity for a rigorous legal analysis to elucidate the position of biometric signatures within the Turkish legal landscape.

b. TCC, LPDP and the Data Protection Board Decision

The inclusion of biometric signatures within the legal framework poses intriguing questions, particularly regarding their compatibility with the provisions of Turkish Code of Obligations No. 6098 (the “TCC”). In the 14th and 15th articles of the TCC, which delineate the fundamental principles of contract formation, the requirement for signatures is stipulated as a handwritten act. This emphasis on the act of signing exclusively by hand prompts a pertinent query: Can biometric signatures be evaluated within the purview of Article 6, paragraph 3, of Turkish Law on the Protection of Personal Data No. 6698 (the “LPDP”)?

The distinction between traditional handwritten signatures and biometric signatures hinges on the evaluation process. Traditional handwritten signatures rely on static or geometric attributes—how they visually appear. In contrast, biometric signatures focus on dynamic characteristics, scrutinizing the process of signature creation. A comprehensive analysis of biometric signatures considers dynamic elements such as the pressure applied during signing, the angle and speed of the stylus, the formation of characters, the direction of the signature, and an array of other distinctive dynamic features.

In a pivotal decision with the docket No. 2020/649, the Turkish Data Protection Board weighed in on this very matter. Their perspective emphasized that the term “signature” within the TCC includes the traditional handwritten signature and the secure electronic signature. While these two types of signatures produce similar legal outcomes, the board noted that the legislator distinctively regulates both. Expanding the TCC provisions to cover biometric signatures might lead to an overly broad reading of the exception in Article 6, paragraph 3, of the LPDP, potentially clashing with the principle of proportionality. As such, the board suggested careful handling of biometric signatures, requiring:

  • Express consent from related individuals,
  • Proper notification under Article 10 of the LPDP,
  • Adherence to the “Adequate Measures” determined by the Board when processing sensitive personal data, as per Article 6, paragraph 4, of the LPDP.

In light of these points, it’s clear that biometric signatures raise intricate legal questions that demand thoughtful analysis within the existing Turkish framework.

V. Using Biometric Data & Biometric Signatures

In the realm of data protection, the use of biometric signatures is intertwined with intricate legal considerations. LPDP categorizes biometric data as a special subset of personal data. Such data’s processing, devoid of explicit consent, is sanctioned solely when other laws authorize it. A prime example is the provision for collecting biometric data for health services under Article 67 of Law No. 5510, Social Security and General Health Insurance Law.

For a deeper exploration into the intricacies of biometric data in Turkey, including critical insights from the European Court of Human Rights (ECHR) and the Turkish Data Protection Authority (DPA), readers are encouraged to consult our detailed article: “Unlocking the Use of Biometric Data in Turkey: Critical Insights from ECHR and the Turkish DPA”.

When processing biometric data, it is crucial to adhere to the following conditions:

  • Explicit Consent: Biometric data processing generally requires explicit consent from data subjects.
  • Information Obligation: Data controllers must provide clear and comprehensive information to data subjects about the data processing.
  • Measures for Data Security: To protect the integrity and confidentiality of biometric data, stringent security measures must be in place.

a. Biometric Data in the Healthcare Sector

In the healthcare sector, Article 67 of Law No. 5510 allows state hospitals to request biometric data to verify patients’ identities when receiving healthcare services. This practice has sparked debates over privacy rights. However, the Constitutional Court ruled that this provision does not violate the Constitution, emphasizing the significance of preventing corruption in public offices and the enhanced security offered by biometric verification.

b. Biometric Data for Employee Shift Controls

Large companies and holdings often employ biometric data for tracking employee working hours. However, the use of fingerprint scanners for such purposes raised legal challenges. The Council of State ruled that fingerprints are an integral part of an individual’s private life and thus protected under the right to privacy (Article 20 of the Constitution). It was determined that other equally effective methods exist for tracking employee shifts, and forcing employees to use fingerprint scanning systems was deemed unconstitutional.

c. Biometric Data for Secure Rooms

The implementation of secure rooms, especially in tech companies for safeguarding confidential information, has led to the demand for biometric data. Companies may require employees to provide biometric data for access to these rooms. While high courts have yet to provide specific rulings on this matter, the Council of State’s decision regarding biometric data for employee shift controls suggests that employees cannot be compelled to provide such data for secure room access. Consent-based data collection remains a viable option, provided that consent is obtained meticulously.

VI. Conclusion

The intersection of biometric signatures and Turkish law is marked by both promise and ambiguity. While technology paves the way for innovative and secure means of authentication, the regulatory landscape in Turkey remains cautious, emphasizing the imperatives of explicit consent and robust data protection measures. Different scenarios, be it healthcare, employee management, or secure areas, each come with distinct legal nuances, underscoring the importance of a judicious approach. As we stand on the cusp of a digital transformation, the evolving narrative of biometrics in Turkey serves as a compelling testament to the intricate dance between technological advancement and legal adaptation. The path forward beckons a harmonized approach, championing both individual rights and the burgeoning potentials of biometrics.

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Sealing the Deal: Guidelines for Foolproof Turkish Real Estate Contracts

How to Ensure the Validity of Turkish Real Estate Contracts

I. Introduction to Promise of Sale Contracts

In the vast and intricate landscape of property dealings, real estate contracts serve as the bedrock of transactions, ensuring that both parties’ interests are adequately safeguarded. Among these, the promise of sale contracts emerges as an especially significant instrument, acting as both a commitment and a protection mechanism in the dynamic market.

Particularly in Turkey, where the real estate sector has witnessed burgeoning growth and increasing foreign interest, understanding these contracts becomes paramount. This article delves deep into the nuances and complexities of promise of sale contracts and the Turkish real estate contracts within the Turkish real estate framework.

By drawing upon a real-wrold scenarios and practical examples, we aim to demystify the fundamental legal aspects that shape these contracts. Whether you’re a seasoned investor or a newcomer to the Turkish property market, the insights provided herein offer a comprehensive overview, albeit with a generalist approach, to equip you with the knowledge needed to navigate this terrain confidently

II. Form and Viability of Turkish Real Estate Contracts

A. Language of Turkish Real Estate Contracts

One of the initial considerations that demand attention is the language of the Agreement. Turkish legislation, notably Article 1 of the Law on Compulsory Use of Turkish No. 805, mandates that Turkish companies conduct their business and execute contracts in Turkish. While Turkish companies engaging with foreign parties may utilize a secondary language, such as English, it is crucial to acknowledge that, in cases of disputes, the Turkish version takes precedence. The absence of a Turkish version deems such agreements invalid.

In the case of companies operating in Turkey, the Agreement should ideally be executed in both Turkish and a secondary language, such as English. However, it is crucial to note that the Turkish version prevails in case of discrepancies between translations. Consequently, a meticulous review of the Turkish version before signing is highly recommended.

B. Form of Execution of the Agreement: A Crucial Consideration

The form of execution of the Agreement is a critical aspect, often posing challenges for foreign customers seeking to purchase properties in Turkey. Many construction companies opt to bypass notarization due to associated costs, rendering this aspect particularly problematic. It is imperative to recognize that navigating notarization procedures should be entrusted to an expert attorney.

The absence of notarization can have significant implications. While a contract might appear legitimate, the failure to execute it before an authorized notary public renders it invalid as a real estate sale agreement. Consequently, the buyer forfeits the right to compel the seller, through legal channels, to transfer the property.

The significance of proper notarization cannot be overstated, especially for foreign buyers who may be unfamiliar with Turkish legal procedures. Engaging a legal expert to ensure the Agreement adheres to the official form of execution is a prudent step.

III. Provisions of Real Estate Contracts

Beyond the formality of execution, there are nuances within the provisions of the Agreement that warrant attention.

A. Habitation Permit and Condominium Deed: Pivotal to Property Acquisition

Another critical consideration revolves around habitation permits, which hold the key to property acquisition. Obtaining a habitation permit is a crucial milestone, as it paves the way for the issuance of the “kat mülkiyeti tapusu” (condominium deed). This document establishes the buyer’s ownership rights over the property.

B. Compensation in Case of Late Delivery

Contracts often include provisions addressing compensation in case of late property delivery. However, many agreements prepared by construction companies impose minimal late fees, which may amount to negligible sums compared to the property’s value. Moreover, some contracts contain clauses that extend the delivery timeline by up to one or two years. Vigilant scrutiny of these clauses is essential.

The terms governing late fees should be carefully examined, especially as they are commonly overshadowed by the substantial property purchase amount. Additionally, attention should be paid to clauses that allow for delivery extensions, as they may significantly impact the timeline of property acquisition.

IV. Real Estate Investment as a Gateway to Turkish Citizenship

In the sprawling landscape of Turkish real estate, another emerging trend involves foreign investors utilizing property investments as a tool to obtain Turkish citizenship. This route, though attractive, comes with its own set of regulations and prerequisites that investors must meticulously heed to ensure a seamless application process.

A foremost consideration is the stipulated minimum investment amount. To qualify for the Turkish citizenship by investment program, investors must commit to a real estate investment of at least USD 400,000. However, it’s imperative to note that not every property falls under the bracket of eligibility for this program. Hence, before plunging into a purchase, investors should undertake due diligence to ascertain the property’s eligibility. Factors influencing this include the property’s geographical location and its lineage of previous ownership. For further information please refer to our FAQ regarding citizenship applications here.

Furthermore, the intricacies of promise of sale contracts, a recurrent theme in the realm of Turkish real estate transactions, carry weight in the citizenship application process. The importance of proper notarization of these contracts cannot be stressed enough. An incorrectly executed or non-notarized contract can potentially derail the entire citizenship by investment application.

The General Directorate of Land Registry and Cadastre emerges as a central figure in this narrative. Tasked with the responsibility of overseeing the legitimacy of real estate transactions linked to citizenship applications, their roles are multi-faceted. They are charged with verifying the bona fide ownership of the property by the applicant. Moreover, they assess the property’s value to ensure it aligns with the stipulated investment criteria. Following this, the registration of the property under the applicant’s name is managed by them. Perhaps most crucially, they issue the Certificate of Conformity. This document stands as a testament to the investment’s alignment with the criteria set for citizenship by investment, forming a linchpin in the overall application process in Turkey.

V. Conclusion and Takeaways

Wrapping things up, it’s clear that promise of sale contracts in real estate aren’t just simple papers. They’re important agreements that need careful reading and understanding. Our guide looked at different situations, but the main ideas apply to most property deals in Turkey.

One big point to remember is how the contract is written. Having it in Turkish and another language is really important. If there’s ever a disagreement, the Turkish version is the one that counts. Also, getting the contract stamped by an official notary isn’t just a step you can skip. It makes sure the contract is seen as official and real.

When reading the contract, it’s good to check all the details. Look at the conditions and terms to make sure everything’s clear. If something seems off or confusing, it helps to work with trusted lawyers and experts, who can guide you through the process.

In short, when dealing with property contracts in Turkey, it’s best to know the rules and details. This way, buying or selling property goes smoothly, and everything’s on the right side of the law.

distributorship-agreements-under-turkish-law

Distributorship Agreements Under Turkish Law

The Intricacies and Legal Implications of Distribution Agreements in Turkey

I. Legal Standing of Distributorship Agreements

Distributorship agreements do not have a clear definition under Turkish law and are therefore a complex and unique type of agreement. They can be generally defined as agreements allowing for the distribution of produced goods to customers and end users, where the manufacturer of a specific good agrees with a third party to distribute the said products/goods in a specific region.

However, a distribution agreement differs from a standard purchase/sales agreement as the distributor’s role is not limited to simply purchasing the products from the manufacturer and selling them to customers or end-users. Instead, in a distribution agreement the distributor is actually incorporated into the distribution chain of the supplier/manufacturer, while conducting transactions on its own behalf (and therefore is not a representative of the manufacturer).

II. Legal Provisions Applicable to Distributorship Agreements

Since distributorship agreements are not regulated or otherwise recognized under separate provisions within the legislation, determining the applicable legal provisions and clauses to these agreements can sometimes be challenging.

As it stands, clauses and provisions applicable to distributorship agreements are determined by way of interpretation and reference of other laws as gap-fillers. To illustrate this with an example, since a distributorship agreement is, at its core, a debt-credit relationship, disputes arising from distributorship agreements may be resolved in conformity with the general provisions of the Turkish Civil Code and the Turkish Code of Obligations as gap-fillers (statutory analogy).

In cases where both parties are deemed as merchants (as is the case in most distributorship agreements), the relevant provisions of the Turkish Commercial Code may also be applicable to the dispute. Additionally, since the relationship between the manufacturer and the distributor resembles an agency relationship, the provisions of the Turkish Commercial Code regarding agent’s agreements may also be applied to certain disputes, depending on the merits of the case.

III. The Importance of the Duration of the Agreement

A distributorship agreement can be executed for a fixed duration (as in for a limited time, such as 5 years), or for an indefinite duration. This difference between durations of the agreement will have differing consequences for the agreement, especially for termination proceedings. Therefore, it is crucial for all parties to weigh the pros and cons of both duration types, and decide which duration type they want to proceed with (either a fixed or indefinite duration), taking into account the specifics of the commercial relationship between the parties and the nature of the transaction.

In a fixed duration distributorship agreement, the parties can enter into a commercial relationship with the intention of it expiring after a certain amount of time passes. Therefore, agreements with a fixed term will expire automatically and without the need for an additional declaration by to this effect, once the agreement term expires. Alternatively, the agreements may include provisions stating that the agreement will be extended/renewed unless one of the parties terminates the agreement in writing before the renewal period. These types of agreements are deemed agreements with indefinite terms.

It is also possible for the parties the renew/extend the agreements implicitly, without expressly declaring their intention to do so. So in cases where neither party submits a written declaration or proposal for the extension of the term at the end of the agreement term, but both parties continue place new orders, transfer payments and deliver goods as if the agreement is still in effect, will constitute an implicit renewal/extension.

IV. Termination and Possible Ramifications

The consequences and ramifications of early termination of a distributorship agreement will differ, depending on the type, duration, and the specific clauses of the agreement. For agreements with an indefinite duration, the termination notice period is especially important, as this can play a crucial role in protecting the rights of both parties.

a. Termination of Distributorship Agreements

As noted above, termination procedures will differ, depending on the type and the duration of the agreements. For example, distributorship agreements with a definite duration will automatically expire at the end of the agreement term, whereas those with an indefinite term do not necessarily have an end of term date specified. Instead, agreements with an indefinite term may be terminated with a notice of termination by either party, which triggers the termination notice period as noted within the agreement. It should be noted that agreements with a fixed term may also be terminated via this termination notice period method if the agreement includes specific clauses to this effect.

A termination notice period usually stipulates that the terminating party must issue a notification regarding the termination to the other party, which will trigger the termination notice period, during which the agreement will continue to remain in full effect until the notice period ends. Therefore, determining the duration of the termination notice period is extremely important in protecting the rights of the parties in case of an untimely termination.

It is generally advised to explicitly note the total duration of this notice period within the agreement itself in order to avoid any possible complications in the future, as the law does not provide for a minimum notice period duration for distributorship agreements where the agreement does not expressly state the duration.

Some argue that in such a cases, the 3-month termination notice period provided for agency agreements at the law should also be applied as a gap-filling provision to distributorship agreements, where others argue that a 3-month period will be insufficient to protect the rights of the distributor, due to the differing nature of distributorship agreements.

It should be noted that the Court of Appeals does have precedents where it ruled that a 3-month notice duration is not sufficient and that a 6-month termination notice period is much mora suitable for distributorship agreements.

b. Issuing a Termination Notice and Ramifications

Understanding the legal nature of termination notices is also crucial, as issuing a notice to the other party may have unintended consequences. It is especially important for all parties to understand the consequences before making a rash decision to issue a termination notice to the other.

The issue here arises from the formative right nature of the termination notice. A formative right means a right/action that immediately creates a new and separate legal situation once it is exercised by the relevant party. Since these rights create new legal situations, they are also irrevocable in nature, making it impossible for the relevant party to revoke, revert or otherwise cancel the right/action once it is exercised. Due to this fact, the right to issue a termination notice will expire once it is exercised and will have irrevocable consequences due to its formative right nature.

In layman’s terms, if one of the parties issues a termination notice as per the relevant distributorship agreement to the other, this termination notice will be irrevocable and the issuing party cannot revert this termination decision claiming that they no longer want to terminate the contract. Once the termination notice is issued, it will trigger the termination notice period and the agreement will terminate automatically at the end of this termination period as determined in the relevant agreement.

V. Possible Distributor Claims Following Early Termination

As mentioned above, the termination proceedings will differ depending on the type and the duration of the distributorship agreement. Furthermore, the rights and claims of the parties following an early termination may also differ, with clear differences between exclusive and non-exclusive distributorship agreements.

1. Inventory Buyback

In cases where the distributor is required to keep additional stocks during the agreement term for the purposes of ensuring a steady supply of the relevant goods to the relevant market, the distributor may claim that the remaining inventory items (excess stock items) be bought back by the supplier/manufacturer, as these can no longer be sold by the distributor due to early termination. It should be noted that as a rule, the supplier/manufacturer is required to buyback these excess inventory items even if there no provisions included within the agreement to this effect. However, it is also possible for the parties to include a provision stating otherwise, releasing the supplier from this buyback obligation.

2. Compensation for Investment Costs

Distributorship agreements usually require the distributors to make investments to implement a secure and efficient supply chain and for the marketing of the products within the relevant region. These investments can add up to large sums depending on the product to be distributed, and early terminations of distributorship agreements may result in losses as the distributor may not have had enough time to recover these investment costs. In such cases, the distributor may also claim a compensation for these unrecovered investment costs, provided that it can prove that the duration of the agreement (until termination) was not sufficient to recover such.

3. Compensation for Unfinished Works

It may also be possible to claim compensations for unfinished works as per Article 121 of the Turkish Commercial Code. However, the right to claim this compensation will differ depending on the duration of the agreement. If the agreement is for a fixed duration, this compensation may only be claimed in cases of unjust early terminations. Whereas for indefinite term agreements, it can only be claimed if the agreement was terminated without adhering to the termination notice period.

4. Compensation as per General Provisions of the Turkish Code of Obligations

If the supplier/manufacturer terminates an indefinite distributorship agreement without a just cause, the distributor may also claim compensation for the loss of profits because of this unjust termination, as per Article 96 of the Turkish Code of Obligations. The duration to considered for profit loss shall also correspond with the minimum termination notice periods, as noted above in section IV-a, between 3 and 6 months.

5. Equalization Compensation

The final compensation a distributor may claim from the supplier/manufacturer is equalization compensation, which covers compensation for the additional benefits that will be provided to the supplier/manufacturer as a result of the wide distribution network established by the distributor. However, it should be noted that this compensation is only available for exclusive distributors and will not be applicable for non-exclusive distributorship agreements.

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The Importance of Due Diligence

Emir Aksoy LL.M, LL.M. IP

On a broader sense Due Diligence means the assessment of a company by a prospective buyer through an investigation and analysis of a target company. In this Article our aim is to provide an overview on how to draft a due diligence report (hereinafter referred as “DD”) and with a specific focus on Intellectual Property and Information Technology part of the DD.

In Turkish law there is no special regulation on Mergers & Acquisition, so the Turkish Law of Obligations shall be applied to all contracts signed during the M&A process. Following the letter of intent or memorandum of understanding between the Buyer and Target Companies, it is necessary to prepare a legal due diligence report to avoid the legal risks and get a good analysis for the buying party before the acquisition.

Although reviewing all the contracts and commitments of the target company is the most time consuming element of drafting a legal DD, it is a the most vital part. Especially the contracts bearing change of control clauses must be pointed out at the report.

Intellectual Property of a company in most of the cases determines the price of the company and should be carefully analyzed during the DD process. Especially the national and international patents and pending patents of the Company should be reviewed. It is also important to check if any rights are guaranteed to any of the employees due to an employee invention.

The Status of the registered and pending national and international trademarks of the target company must be controlled and if the company is using any copyrighted material, it should be stated in the DD. Furthermore, during IP checks and controls, it is important to review any ongoing and previous lawsuits of the target company along with any possible infringement of IP’s by any third party or if the target company has ever infringed on the intellectual property rights of a third party.

Another important point is to check if there are liens and encumbrances on the intellectual property rights of the target company.

Technology transfer and license agreements are the most vital contracts in Intellectual Property part of the DD and must be analyzed very well, especially the exclusive intellectual property license agreements signed with third parties.

All the Software that the target company is using must be licensed appropriately and it must be also taken into account if the company is using any open source software for its products and if any disputes arising out of the incorporated open source software.

Drafting of the legal DD report shall be done by a local full service law firm where the target company has been incorporated. If you have further questions to this topic, please don’t hesitate to contact us anytime.

For further information and assistance regarding the matter, please do not hesitate to contact us here.

In some Mergers & Acquisitions, the Competition authority shall be notified and the approval of the Authority shall be sought for as per Article 7 of the Law on the Protection of Competition No. 4054

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THE IMPORTANCE OF CONFIDENTIALITY AGREEMENTS

Emir Aksoy LL.M., LL.M. IP

Confidentiality Agreements or also known as Non-Disclosure Agreements (NDAs) are often used between companies in order to protect their confidential information, developed technology, know-how and/or trade secrets that might be given to the receiving party during their interaction.

The general industry practice is to keep these NDA’s as short as possible in order to make them appear as simple and straightforward agreements, so that they will not raise any red flags when reviewed by an uneducated eye. Unfortunately, many of the startups and/or small businesses fall for this trap and tend to sign these NDA’s without consulting an attorney first, which generally results in these companies agreeing to detrimental provisions that may potentially cause problems for them in the future. This is especially the case for small tech startups where technology and know-how are the most valuable assets of that company.

For such startups and small businesses, agreeing to such NDA’s without consulting an attorney first may lead to the unintentional free transfer of technology and know-how to another company looking to exploit these startups. Another common occurrence in practice is that bigger companies looking for a cooperation with small businesses and/or tech startups for the innovation of either a new technology or a product, tend to flat out decline to sign any NDAs prior to the related patent application of the disclosing party, which may also cause huge problems for the small businesses.

The general industry practice is to keep these NDA’s as short as possible in order to make them appear as simple and straightforward agreements, so that they will not raise any red flags when reviewed by an uneducated eye. Unfortunately, many of the startups and/or small businesses fall for this trap and tend to sign these NDA’s without consulting an attorney first, which generally results in these companies agreeing to detrimental provisions that may potentially cause problems for them in the future.

This is especially the case for small tech startups where technology and know-how are the most valuable assets of that company. For such startups and small businesses, agreeing to such NDA’s without consulting an attorney first may lead to the unintentional free transfer of technology and know-how to another company looking to exploit these startups.

Another common occurrence in practice is that bigger companies looking for a cooperation with small businesses and/or tech startups for the innovation of either a new technology or a product, tend to flat out decline to sign any NDAs prior to the related patent application of the disclosing party, which may also cause huge problems for the small businesses.

In order to guarantee the safety of the confidential information in any dealing, the following provisions should be thoroughly examined when signing an NDA:

  1. The definition of Confidential Information: What is deemed as confidential information should clearly and strictly defined under an NDA, failure to do so might result in the unintended loss of confidential information to another company.
  2. The term of the Agreement: A time limit should be set regarding the term of the obligation of the Receiving party. Setting a short term time limit to protect the confidential information risks losing the confidential status of the relevant information/technology which may again lead to the unintended free transfer of such information It is self-evident that some trade secrets define the market value of the company, therefore NDAs regarding such important trade secrets like the recipe of Coca Cola would incorporate and unlimited term of protection in order to guarantee the interests of the company. Therefore, the term should be determined according the nature of the information disclosed, as it can either be an ordinary confidential information or a trade secret. In case of a trade secret it is highly recommended to set an indefinite term for the contract.
  3. Contractual penalty: In case of a breach of the NDA a contractual penalty could be set between parties due to the difficulty of calculation of the damages incurred.
  4. Non-compete clauses: Some disclosing parties try to put non-compete clauses in the NDAs which might limit the options of your company, therefore they should be evaluated carefully.
  5. Attorney and Court Fees: The attorney and court fees in case of a breach can be passed to the receiving party through an article in the NDA.

If you have further questions to this topic, please don’t hesitate to contact us via the inquiries section in our website.