Legal Newsletter Turkey Q4/2010The understanding of a Portfolio Compensation under the laws of Turkey is “the expression of gratitude for the efforts of the agent to establish a market for the principal”, as indicated in legal doctrine and Court of Appeals’ judgments.

More precisely, if through its activity, an agent has substantially increased the principal’s clientele and if, even after termination of the agency relationship, the principal benefits substantially from the business relations with this acquired clientele, the agent has a right to request an adequate compensation called “portfolio compensation”.

Despite the clear provisions stated in the German and Swiss Commercial Codes, there is no objective criteria stated in the Turkish Commercial Code in force (Law No. 6762) (published in the Official Gazette on July 9, 1956 and numbered 9353) (as amended from time to time) (the “TCC”), with respect to the facts to be considered in the calculation, such as the period for which the agent or distributor provided a service to the principal or the maximum limit of portfolio compensation. Although some calculation methods have been set forth within some Court of Appeals’ judgments, such methods were not codified.

On the other hand, the New Turkish Commercial Code (Law No. 6102) (published in the Official Gazette on February 14, 2011 and numbered 27846) (which shall enter into effect on July 01, 2012) (the “NTCC”)regulates the right to request “portfolio compensation”, under the provision titled “equalization claim”.

In this respect, pursuant to Article 122 of the NTCC, following the termination of the contractual relationship (i) in the event the principal benefits substantially from the new clientele acquired by the agent, even following the termination of the contractual relationship, (ii) in the event the agent, as a result of the termination of the contractual relationship, loses its right to request payment that it shall be entitled to if the contractual relationship had continued due to the clientele provided to the enterprise by it or through the transactions which would have been done in a short period of time and (iii) if such payment is deemed just, by taking into consideration the specificity and conditions of the existing situation; then, the agent is entitled to request adequate payment from the principal.

Concerning the amount of such compensation, Article 122 stipulates that the compensation amount cannot exceed the average of the annual commission or other payments that the agent obtained as a result of its transactions in the last five years. However, if the contractual relationship has continued for a shorter period of time, then the average during the course of the transaction shall be taken into consideration for the calculation.

On the other hand, the said Article also brings a limitation as to the equalization claim by underlying that, if the agent has terminated the agreement without just cause or if the agreement has been terminated by the principal with just cause due to the fault of the agent, the agent cannot claim equalization.

Legal NewsletteIn addition, it is expressly stipulated within the mentioned Article that the claim of equalization cannot be subject to a waiver in advance.

The time limit set forth for the equalization claim is one year following the termination of the contractual relationship. In other words, pursuant to Article 122, any claim for equalization must be filed within one year following the termination of the contractual relationship.

Last but not least, Article 122 also regulates the legal application framework of the notion. In that regard, the mentioned Article states that this provision shall be applied to the termination of the exclusive distributorship agreements and other similar continued contractual relationships providing monopoly rights, unless deemed unjust.

In light of the explanations above, it is clearly seen that the NTCC, through codification of the “portfolio compensation” and by bringing a uniform understanding of the notion, fills the gap which existed during the period of the former TCC.