Customer Portfolio Compensation in relation to
Distribution and Agency Agreements under Turkish Law
Introduction
The Turkish Commercial Code (hereinafter referred to as the “TCC”) does not explicitly
entitle agencies or distributors to claim customer portfolio compensation upon termination
of their agency or distribution agreements. Notwithstanding this fact, the Court of Appeals
may from time to time award payment of customer portfolio compensation to agencies or
distributors. Numerous scholars and precedents of the Court of Appeals accept that although
portfolio compensation has not been explicitly regulated within the scope of the TCC, it
should not be concluded that agencies or distributors cannot be entitled to any compensation
in relation to customer portfolios and goodwill they have generated for their suppliers. In
this article, we have analyzed the applicability of customer portfolio compensation under
Turkish law and conditions under which an agent or a distributor will have a right to claim
customer portfolio compensation.
Applicability of Customer Portfolio Compensation
The TCC does not entitle agencies to receive foresee any compensation except for
compensation payable to an agent if the supplier does not give a reasonable notice period to
the agent before the termination of the agency relationship. However, some scholars believe
that a judge may, in a dispute award customer portfolio compensation to an agent or
distributor by applying the principles of good faith and equity. During the conduct of their
business, agencies or distributors contribute to the extension of their suppliers’ customer
portfolios and generate goodwill for their suppliers. As a result of this conduct, agents and
distributors improve their suppliers’ economic status. Suppliers continue to maintain their
commercial relations with the customers generated by the agent or the distributor after the
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termination of the distribution or agency agreements and will continue to benefit from these
customers financially. Therefore, in accordance with the principle of equity, a reasonable
amount of customer portfolio compensation has to be paid to the agent or the distributor in
an amount roughly corresponding to the economic contribution made by the agent or the
distributor to the supplier during the term of their relationship.
Furthermore, the above-mentioned opinions and views of scholars have been adopted in
various decisions of the Court of Appeals. In addition to the principles of good faith and
equity, the Court of Appeals bases some of its decisions awarding portfolio compensation on
Article 134/II of the TCC. Article 134/II of the TCC provides that in the event an agency
agreement is terminated due to the bankruptcy, incapacity or death of a supplier or an agent,
a reasonable amount of compensation must be paid to the agency, its heirs or its legal
representative. In such a case, the compensation must be calculated by taking into account a
reasonable percentage of the contractual fee paid to the agency. Although this provision is
not directly related to customer portfolio compensation, based on this provision and by way
of analogy, scholars and the Court of Appeals share the opinion that customer portfolio
compensation may also be applicable in case of termination of agency and distribution
agreements if certain conditions are fulfilled. Even though Article 134/II only relates to
agency agreements, this principle is also accepted to be applicable with regard to distribution
agreements since the Court of Appeals is inclined to apply the principles regarding agency
agreements to distribution agreements.
Conditions Entitling an Agent or a Distributor to Customer Portfolio Compensation
Although the Court of Appeals and scholars have a tendency to support the rights of agents
or distributors to claim customer portfolio compensation, they also accepted that certain
conditions must first be fulfilled. In order for such portfolio compensation to be payable, an
agent or distributor must have considerably contributed to the extension of the client
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portfolio of a supplier, and upon termination, only the supplier alone would practically
benefit from the marketing and promotion activities undertaken by the distributor up until
the termination of the agreement. Some scholars also argue that customer portfolio
compensation can only be payable if a distributor or an agent undertakes to transfer its client
portfolio to the supplier after termination of the agreement.
In addition, according to the precedents of the Court of Appeals, customer portfolio
compensation may be payable only if termination of the agency or distribution agreement
does not result from a reason attributable to the agent or distributor. In other words,
customer portfolio compensation shall not be payable if the supplier relies on a justifiable
ground, such as a breach of contract or default of the agency or distributor, to terminate the
agency or distribution agreement. However, a competent judge will decide whether the
alleged ground for termination is justifiable, taking into account the specific circumstances of
the case.
In light of the above, if the agent or the distributor has substantially contributed to the
extension of the customers of its supplier and did not give rise to a justifiable ground for
termination of the agreement, such agent or distributor may be entitled to customer portfolio
compensation.
Conclusion
Even though the TCC does not include explicit provisions entitling agencies or distributors
to customer portfolio compensation, it can be concluded that there is an established practice
of the Court of Appeals and doctrine that, in accordance with the principles of good faith
and equity, agents or distributors may be entitled to a certain amount of customer portfolio
compensation upon the termination of their business relationship with their suppliers if
certain conditions are fulfilled.
Contributed by Sebnem Isik, Partner, and Melike Akan, Associate, of Mehmet Gun & Partners
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