Sponsored briefing: Notable developments in Turkey’s oil and gas policy

Sponsored briefing: Notable developments in Turkey’s oil and gas policy

Yazıcı’s Kerem Arıç explores three key areas of growth for the country’s energy sector

Due to its dependence on oil and natural gas imports, Turkey has been in need of structural changes in its energy sector. Although the share of natural gas in power generation was significantly reduced in 2019, the overall reliance on natural gas and oil imports creates major challenges both from a commercial and strategic perspective. To overcome these challenges and increase its energy security, the Turkish government made a fundamental decision to move from a role of investor to a role of policy maker and regulator. As a result, Turkey’s oil and gas policy has been mainly driven by the following ground rules: Continue reading “Sponsored briefing: Notable developments in Turkey’s oil and gas policy”

Sponsored briefing: Mediation on the rise in Turkey

Sponsored briefing: Mediation on the rise in Turkey

Eda Cerrahoğlu Balssen (pictured, left) and Sezin Dündar (pictured, right) of Cerrahoğlu discuss the legal requirement for mandatory mediation in commercial disputes

Turkey was introduced to mediation in 2012 with the adoption of Law No. 6325 on Mediation in Legal Disputes (Mediation Law), which regulates the mechanism of voluntary mediation. Continue reading “Sponsored briefing: Mediation on the rise in Turkey”

Sponsored briefing: Notable developments in construction law and practice

Sponsored briefing: Notable developments in construction law and practice

Yazıcı’s Bilge Müftüoğlu on the effect of government incentives on the energy sector

There are major criteria that investors consider in advance of determining the type and extent of their investment in any sector and the energy sector is no different. Incentives granted by states are one of these as they have considerable impact on construction contracts of projects involving infrastructure and energy, such as power plants. Continue reading “Sponsored briefing: Notable developments in construction law and practice”

Sponsored briefing: Termination of distributorship agreements

Sponsored briefing: Termination of distributorship agreements

Ecem Yıldırım of Apak Uras outlines how distributorship agreements are dealt with under Turkish law

a) General explanations

We are living in a world where, day by day, customers’ demands for more products that are not manufactured in their own countries increase. Furthermore, the continuing growth in the financial world has also led businesses to expand into new geographical locations. As a result of this, in order to fulfil the demands of their customers and businesses’ expansion targets, more and more companies prefer distributorship agreements as a way to enter into new markets. Distributorship agreements can be defined as agreements in which the supplier and the distributor agree on the supply of certain products to the distributor who will be selling, promoting and marketing such products within a specific region. In these type of agreements, the distributor acts on his own behalf and account, and aims to increase the sale of the products in the specified region in order to gain more revenue over the purchase prices.

Distributorship agreements are considered sui generis agreements under Turkish Law and as in most countries, they are not directly regulated and defined by the provisions of law in Turkey. Such gap is filled by court precedents, the doctrine in accordance with article 1 of the Turkish Civil Code and the equity principle. Even though Turkish legislation does not include any specific provisions related to the distributorship agreements, in accordance with Turkish doctrine and court precedents, certain provisions set forth for agency agreements shall be applicable to the distributorship relations.

b) Termination of distributorship agreement

The termination of a distributorship agreement can be made by either ordinary termination or extraordinary termination (based on justified reason). In general, ordinary termination is made by notifying the other party in advance whereas the extraordinary termination can be made without complying with any time period.

Extraordinary termination

Pursuant to Turkish law, the distributor’s breach of a primary obligation is evaluated as a justified reason (eg, payment default, the refusal of notifying its business activities, fraudulent conduct). In addition to these, reasons such as non-increase in the sales, marketing and promotion of the product, decrease in the purchasing price of the product and change in the payment method may be signified as examples of justified reasons.

Ordinary termination

Under Turkish doctrine, in line with the freedom-of-contract principle, parties can include a clause that gives rights to the parties to terminate the agreements with or without any cause. In practice, Turkish law considers a 90-day notification period in advance of the effective date of the termination as a reasonable period to terminate the agreement without cause. Under Turkish doctrine, the courts can at their discretion determine the appropriate time to notify the other party as being six months in respect of agreements executed for more than a five-year period.

c) Distributors’ claims arising from termination

Another typical characteristic of a distributorship agreement is that it can be executed as exclusive and non-exclusive. Depending on the type of agreement, distributors’ claims arising from the termination of the distributorship agreements differ accordingly. There are two main different compensation claims that arise pursuant to Turkish law:

Portfolio compensation

In accordance with article 122/5 of the Turkish Commercial Code, unless deemed inequitable, this provision (claiming portfolio compensation) shall be applicable to the termination of the exclusive distributorship agreements and other similar permanent agreements providing monopoly rights. In order to claim portfolio compensation, the termination of the distributorship agreement by the distributor should be based on a justified reason, or if the distributorship agreement is terminated by the supplier without justified reasons, the payment of this compensation should be equitable, the supplier should continue to receive notable benefit from the clients even after the termination and the distributor should lose its right to receive remuneration.

Compensation for damages

The distributor can request compensation for his damages, which may include his actual losses and deprived profit. In this context, if the distributor has leased a place or made expenses for promoting activities, etc, considering that the distributorship relation among them will continue, then the distributor can claim compensation for the damages that they have incurred in making these investments.

d) Conclusion

In summary, both the legislation and the practice of Turkish doctrine draw the path for the termination process of the distributorship agreement. However, as every distributorship agreement constitutes a unique and sui generis relationship between the distributor and the supplier, it is vital to consider the period of the distributorship relation, the amount of investment made by the distributor, preparation activities for the relevant markets and products, and the obligations of the parties set forth in the distribution agreement during the termination process.

For more information, please contact:

Ecem Yıldırım, associate, Apak Uras Law Firm

E: ecem@apakuras.com

www.apakuras.com

Sponsored briefing: Restrictive measures against Turkey by the EU

Sponsored briefing: Restrictive measures against Turkey by the EU

Vona Law Firm’s Gül Özdinç sets out a criticism of the European Council’s new regulation concerning restrictions on Turkey

The European Council adopted a framework for restrictive measures against Turkey for its drilling activities in the Eastern Mediterranean with Regulation (EU) No 2019/1890 of 11 November 2019.

The framework will make it possible to sanction individuals or entities responsible for or involved in drilling activities of hydrocarbons in the area. The sanctions consist of a travel ban to the EU, and an asset freeze for persons and for entities. And yet the framework did not refer to any names of individuals and entities. According to the regulation, the definition will be based on the following items:

a) Being responsible for or involved in, including by planning, preparing, participating in, directing, or assisting, drilling activities in relation to hydrocarbon exploration and production, or hydrocarbon extraction resulting from such activities, which have not been authorised by the Republic of Cyprus within its territorial sea, in its exclusive economic zone or on its continental shelf, including in cases where the exclusive economic zone or continental shelf has not been delimited in accordance with international law with a state having an opposite coast, activities which may jeopardise or hamper the reaching of a delimitation agreement.

b) Providing financial, technical or material support for drilling activities in relation to hydrocarbon exploration and production, or hydrocarbon extraction resulting from such activities, referred to in point (a).

c) Being associated with the natural or legal persons, entities or bodies referred to in points (a) and (b).

The regulation refers to funds and economic resources together: cash, securities, bonds, rights of set-off, letters of credit and bills of lading, and any kind of asset, whether tangible or intangible, movable or immovable, which are not funds but may be used to obtain funds, goods or service.

The regulation aims to prohibit almost all commercial activities with sanctioned individuals or entities, unless authorised by the regulation or by the relevant competent authority. The competent authorities may authorise the release of certain frozen funds or economic resources under such conditions as they deem appropriate according to the regulation.

It is obvious that both parties need each other: whereas the European bloc needs to co-operate with Turkey on migration, NATO, countering terrorism and energy transmission, Turkey needs the EU to continue its commercial activities. Our consideration is that the regulation violates international law and procedures of the UN Security Council, and we believe that the related parties will finally reach a common understanding that may satisfy all parties looking from different perspectives.

Currently, the EU has not published a name list and we do not see a practical reason not to continue trading with Turkey. However, Vona recommends its clients prepare their security nets by defining counterparties that could be a potential target of the sanctions and analysing the risks under the current relations, and setting out a plan B in case the counterparty is listed by the council.

For more information, please contact:Gül Özdinç, partner

Vona Law Firm

Caddebostan Mah Prof Dr Hulusi Behçet
Cad No: 14 K: 7 D: 8

Kadıköy

34728 Istanbul

E: gul@vonahukuk.com
T: +90 216 372 2816 (E: 23)

www.vonahukuk.com