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

Sponsored briefing: Obligation to register before the Turkish data controllers registry and maintain personal data-processing inventory

Sponsored briefing: Obligation to register before the Turkish data controllers registry and maintain personal data-processing inventory

Yasin Beceni and Susen Aklan of BTS clarify Turkey’s data protection regulations on data controller registry obligations

Article 16 of Law no. 6698 on the Protection of Personal Data (DP Law) introduced a general obligation on data controllers to register before the Data Controllers Registry that is to be maintained by the Turkish Data Protection Board.

Obligation of foreign data controllers to register before the Registry

With the Regulation on the Data Controllers Registry and a number of board decisions, the board determined the scope of the obligation of registration and clarified the types of data controller that would be under the obligation to register. As per the regulation and the board decisions, it has been determined that no exemptions shall apply to foreign data controllers acting as data controllers1 pursuant to Turkish data protection legislation and that all such foreign data controllers must carry out their registration processes by the deadline of 31 December 2019.

Obligation to maintain Personal Data-Processing Inventory

All data controllers under the obligation to register must maintain a data processing inventory, a document that is similar in format to records of processing maintained as per Article 30 of the General Data Protection Regulation (GDPR). Stated in the table opposite is a comparison of the inventory and records of processing.

1. Unlike Article 3/2 of GDPR, there is no explicit provision regulating territorial scope under the DP Law. However, under certain decisions of the board, Article 3/2 is taken as a reference on interpretation of the DP Law.

Records of processing Inventory
Obligation An enterprise or an organisation employing fewer than 250 persons is not obliged to maintain records of processing unless the processing:
• is likely to result in a risk;
• is not occasional;
• includes special categories of data or personal data relating to criminal convictions and offences.The processor and processor’s representative will maintain a record of processing.
All data controllers under the obligation to register must maintain an inventoryProcessors are not obliged to maintain an inventory
Contact details Name and contact details of the controller, the joint controller, the controller’s representative and the data protection officer Not explicitly stated. However, contact details of the controller and the controller’s representative should be submitted to the registry.
Purpose Purposes of processing Purposes of processing
Personal data Categories of personal data Categories of personal data
Data subjects Categories of data subjects Categories of data subjects
Recipients Categories of recipients to whom the personal data has been or will be disclosed, including recipients in third countries or international organisations Categories of third-party recipients
Cross-border transfers Identification of that third country or international organisation and the documentation of suitable safeguards Categories of personal data transferred abroad
Retention Envisaged time limits for erasure of the different categories of data Maximum retention periods
Security A general description of the technical and organisational security measures Administrative and technical measures
Legal ground N/A Legal grounds of the processing

For more information, please contact:Yasin Beceni, managing partner – attorney at law

E: yasin.beceni@bts-legal.com

Susen Aklan, managing associate – attorney at law

E: susen.aklan@bts-legal.com

BTS & Partners

www.bts-legal.com

Sponsored briefing: Life sciences in Turkey

Sponsored briefing: Life sciences in Turkey

Özge Atılgan Karakulak and Dicle Doğan of Gün + Partners explain how the country’s growing healthcare and pharma industries operate under current regulations

Having a population of 80 million covered by an extensive social healthcare system, Turkey’s life sciences industry is still important in size and volume.

Both the Turkish pharma and medical device industries are heavily regulated and mostly in line with EU regulations. All aspects ranging from market access to pricing and reimbursement are being covered by industry-specific regulation. The relevant bodies enforcing these regulations are the Ministry of Health (MoH), the Turkish Medicines and Medical Devices Agency established under the MoH, and the Social Security Institution (SSI).

An increase in the quality of health services and access to pharmaceuticals has inevitably and consequently increased the demand, and also resulted in an increase in public spending. This circumstance has forced the government to look for ways to rein in public spending, by incorporating rigid pricing and reimbursement policies. Indeed the SSI requests a serious discount for reimbursements, which reaches up to 41% for innovative drugs.

These pricing and reimbursement difficulties have created a barrier to access to pharmaceutical products. Procurement from abroad of pharmaceuticals via named patient programmes, which is defined as an exceptional importation of drugs, has also led to extra expenditure on the health budget. Additionally, in order to control the budget, the SSI have developed alternative reimbursement models and implemented localisation policies. Nevertheless, the healthcare industry regulation in Turkey is mostly aligned with worldwide standards.

Marketing authorisation of pharmaceuticals

Marketing authorisations of pharmaceuticals is governed by the Regulation on Licensing of Medicinal Products for Human Use. For placing a pharmaceutical product on the market, additional regulations, such as the Regulation on Labelling and Packaging of Medicinal Products for Human Use and the Regulation on Safety of Medicines, will also be applied.

No medicinal product for human use can be marketed unless it is granted a marketing authorisation (licensed) by the MoH. Abridged applications are also possible in Turkey under the conditions set forth in the Licensing Regulation. The MoH follows the European common technical document format (including five modules) for the application files. The Licensing Regulation envisages a 210-day period for the evaluation of the licence application by the MoH following the preparation of all required documents. In practice, however, this may go up to two years or more due to the good manufacturing practice certification rules of the MoH, which require that each manufacturing facility be audited by MoH personnel.

Pricing of pharmaceuticals and the fixed exchange rate

The prices of pharmaceuticals to be marketed in Turkey are set based on a reference pricing system, whereby the cheapest wholesale price in one of the listed EU countries for the same product is taken as the wholesale price in Turkey. Although to determine the prices of pharmaceuticals in Turkish lira, the currency of the defined wholesale price is converted into Turkish lira, the conversion is not made according to the current exchange rate. In order to avoid the reflection of exchange rate fluctuations on the prices of pharmaceuticals, the MoH issue a fixed exchange rate to be applicable in the pricing of medicines. However, the exchange rate defined by the MoH applied to the reference price taken from the respective EU country gives out a much lower price than if it was converted at the current rate. The rate for 2019 was determined as TRY 3.40 by the MoH. On the other hand, the current exchange rate for the euro is TRY 6.34 on average in 2019.

Market access

Until recently, there was no direct contractual relationship between the SSI and the pharmaceutical companies regarding the pharmaceuticals purchased by the state. The pharma companies applied for the reimbursement of their products to the SSI and once listed, the pharma companies sold their products to the warehouses, which distribute the products to the hospitals and pharmacies. In line with this sales and distribution chain, the SSI reimburses the hospitals or the pharmacies the price of the listed products.

With the enactment of some regulations in the past couple of years, alternative reimbursement models have also become a hot topic in the Turkish healthcare industry, allowing the pharma companies and the SSI the benefit of discussing the terms and conditions of an alternative reimbursement model for special products. The system aims for the ultimate purpose of providing quicker access for patients to innovative pharmaceuticals along with ensuring their reimbursement.

Advertisement and promotion

According to the Regulation on Promotional Activities of Medicinal Products for Human Use, any advertisement of pharmaceuticals to the general public is prohibited, whether made directly or indirectly, through any public media or communication channels, including the internet. The promotion of pharmaceuticals shall be made only to physicians, dentists and pharmacists. The interaction between the pharma companies and patients shall therefore be at a minimum level.

The advertisement and promotion of medical devices is regulated by the Regulation on the Sales, Advertisement and Promotion of Medical Devices. Accordingly, medical devices that must be used or administered exclusively by healthcare professionals and medical devices within the scope of the reimbursement cannot be advertised to the public, either directly or indirectly. However, the advertisement of devices intended for personal use and that do not fall within the scope of reimbursement is allowed.

Both promotion regulations regulate promotional materials, scientific and educational activities, sponsorships, free samples and donations to healthcare organisations.

For more information, please contact:

Özge Atılgan Karakulak, partner

T: + 90 (212) 354 00 24

E: ozge.atilgan@gun.av.tr

Dicle Doğan, managing associate

T: + 90 (212) 354 00 24

E: dicle.dogan@gun.av.tr

Gün + Partners Avukatlık Bürosu

Kore Şehitleri Cad. 17

Zincirlikuyu 34394

Istanbul

www.gun.av.tr

Sponsored briefing: Independent power projects in Africa

Sponsored briefing: Independent power projects in Africa

Miranda’s Nuno Cabeçadas (pictured, left) and Renato Almeida (pictured, right) discuss trends and developments in Angola and Mozambique

Throughout the world, one of the main goals of different governments and industry is to enhance the use of renewable energy. Africa, in general, is no exception, particularly Angola and Mozambique. In effect, in these two countries’ governments are working towards the promotion and acceleration of private and public investment in new renewable energy. As spelled out in the Angola Energy 2025 programme, one of the goals is to generate effective conditions of investment in new renewable energy, eliminating or dramatically reducing the distortion introduced by subsidies to fossil fuels, offering a suitable payback to investments, an appropriate mitigation of risks and a regulation that eases implementation and commits investors. Continue reading “Sponsored briefing: Independent power projects in Africa”

Sponsored briefing: Growing interest in asset deals

Sponsored briefing: Growing interest in asset deals

Yegan Liaje of Pekin & Pekin describes a rising interest in asset deals following a period of economic uncertainty in Turkey

Turkey has faced some serious financial challenges in recent years, such as high inflation, currency collapse and rising borrowing costs; however, surprisingly, these challenges have not dramatically affected the Turkish M&A market in terms of total transaction volume; though, we have noticed that it has affected the deal type in which investors have gained interest. In the last two years, we have experienced asset deals attracting more attention in the eyes of investors, despite share deals still having more advantages. Although investors do not have to bother with costly revaluations and retitles of individual assets, and can typically assume non-assignable licenses and permits without having to reapply for the same licenses and permits in share deals, asset deals also have some noticeable benefits.

Probably the most appealing advantage of asset deals is to enable buyers to pick and choose what they want to buy in the relevant target company without being bound to the whole company, all the unwanted remaining assets and certainly their unwanted liabilities. In other words, asset deals provide a playing field for investors where they can freely choose what suits best their business insight, in contrast to share deals where the shares of the target company are purchased with all attached shareholding rights and obligations, but the target company would remain liable against third parties for all historic claims.

On the other hand, asset deals do have some procedural disadvantages as well; each category of asset and liabilities subject to the relevant asset deal will be evaluated separately for consent requirements or formal perfection requirements rendering asset deals procedurally more burdensome. Furthermore, even where there are no consent requirements or formal perfection requirements, notifications would have to be provided to creditors in order to prevent good-faith payments made by creditors to the seller with respect to acquired assets, since under the Turkish Code of Obligations, such good-faith payments would discharge the debts of creditors who were not informed of the transfer. One more interesting point about asset deals in Turkey: as per the Turkish Labour Code, in the event that a workplace is transferred to another legal body on the basis of a legal transaction, the employment contracts that exist at the workplace at the date of transfer are automatically transferred to the transferee together with all rights and obligations. Therefore, buyers are not able to pick and choose when it comes to employees!

For more information, please contact:Yegan Liaje, senior partner, M&A

Pekin & Pekin
10 Lamartine Caddesi
Taksim 34437 Istanbul

D: +90 212 313 35 48
T: +90 212 313 35 00
F: +90 212 313 35 35
E: yliaje@pekin-pekin.com

www.pekin-pekin.com

Sponsored briefing: Economic crisis and the popularisation of voluntary termination of labour contracts

Sponsored briefing: Economic crisis and the popularisation of voluntary termination of labour contracts

Murat Uyanık of Yavuz & Uyanık discusses Turkish labour law developments

Turkey’s progress towards full membership of the EU had gained pace by the beginning of the 2000s. To achieve full legislative alignment with the EU acquis, the Turkish labour law was renewed and a new concept was introduced to the country’s labour law sphere: employment protection. Continue reading “Sponsored briefing: Economic crisis and the popularisation of voluntary termination of labour contracts”

Sponsored briefing: Profile – Richard Mann, partner, GKH

Sponsored briefing: Profile – Richard Mann, partner, GKH

Richard Mann heads the firm’s M&A practice. He leads a team of experienced attorneys who focus on representing Israeli and foreign clients in implementing complex cross-border transactions, including mergers and acquisitions, public and private debt and equity financings, and secured and unsecured finance transactions. His clients include acquirers and targets, leading international private equity funds, strategic and financial investors, and joint venture partners. Mann also represents issuers and leading underwriters in public offerings in the US and London, and advises Israeli companies on ongoing Securities and Exchange Commission and stock exchange regulatory matters.

According to Chambers & Partners 2018 Global Guide – Capital Markets: ‘Richard Mann is highly regarded for his M&A practice and has additional experience in capital markets. His focus is on international and cross-border mandates and he possesses experience of equity financing and IPOs.’

Chambers 2018 Global Guide – Corporate M&A: ‘Joint head of the group Richard Mann maintains an impressive reputation, with market sources describing him as “thoughtful, imaginative and business-oriented.” He has an active domestic M&A practice and acts as Israeli counsel for large cross-border transactions.’

IFLR1000: ‘The head of M&A at Gross is one of the most liked and respected lawyers in the country and the market has repeatedly referred work to him over the years.’

PLC Which Lawyer?: ‘Gross, Kleinhendler, Hodak & Co. is unquestionably a favourite pick for securities transactions and Richard Mann’s corporate and finance experience provides the ideal platform for his success in this area. Mann is held in high esteem for his international expertise.

‘Highly recommended in Mergers & Acquisitions. Advises on both the buy and sell sides for Israeli firms and for international private equity houses.’
The Legal 500: included in Corporate M&A ‘Leading Individuals’.

Prior to joining Gross, Kleinhendler, Hodak, Halevy, Greenberg, Shenhav & Co in 1996, Mann served from 1988 to 1992 as a corporate and tax associate at Fried, Frank, Harris, Shriver & Jacobson in New York, and from 1992 to 1995 as legal counsel to the Israeli Ministry of Defense’s United States Mission in New York.

EDUCATION

University of Pennsylvania (BA Political Science, 1985); Wharton School of Finance, University of Pennsylvania (BS Finance, 1985); Columbia University, New York (JD, 1988), Harlan Fiske Stone Scholar.

MEMBER

Israel Bar, 1996; New York Bar, 1989.

For more information, please contact:Richard Mann, partner, head of M&A

Gross, Kleinhendler, Hodak, Halevy, Greenberg, Shenhav & Co
One Azrieli Center, Round Building
Tel Aviv 6701101
Israel
T: +972 3607 4431
E: rick@gkh-law.com

www.gkh-law.com

Sponsored briefing: Israel adopts the UNCITRAL Model Law

Sponsored briefing: Israel adopts the UNCITRAL Model Law

Inbar Hakimian-Nahari of Yigal Arnon & Co explains how Israel’s new law provides clarity and makes it easier for foreign companies and investors operating in the country

In September 2019, the Insolvency and Economic Rehabilitation Law, 5778-2018 will come into force in Israel. The new law is a comprehensive insolvency legislation for individuals and corporations, which includes extensive changes to the current insolvency legal framework, while also incorporating customary practice and legal precedents. Continue reading “Sponsored briefing: Israel adopts the UNCITRAL Model Law”