In this article, we would emphasize on several local court decisions yet to be finalized, concerning the goodwill compensation regulated under the name of “Equalization Claim” in Turkish Commercial Code entered into force in 2011.  It can be said that these recent decisions constitute a strong indication of local courts’ views on this compensation type. 

Main Dispute:

In the present case, Claimant has acted as one of the distributors of a Production Company. In the main dispute between the parties, the Claimant distributor has argued that the Distributorship Agreement (“Agreement”) between the parties was terminated without a cause and claimed both monetary and moral compensation.

Arguments and Defenses of the Parties:

In its statement of claim, the Distributor has argued that, during the 16 years period that the Distributor had acted as a distributor of the Production Company, the Distributor had conducted the sale of Production Company’s products, had promoted and advertised the same, established several sub-distributorships, and thus played an important role in bringing the Production Company as a leader firm in its field of activity. The Claimant has declared that, although the latest Distributorship Agreement executed between the parties included an automatic termination provision upon expiry of 3 years, the first Distributorship Agreement that was executed many years ago, had always been renewed and prolonged so for 16 years.

The Claimant has declared that, in his notice served after the termination of the Agreement, the Production Company had notified that the Agreement had automatically terminated at the end of the expiry period. However, the Claimant has declared and argued that, due to the acts and behaviors conducted until just before the issuance of the said notice, the Claimant had a rightful impression that the Distributorship Agreement would be renewed. The Claimant has also submitted that the parties had executed a new target protocol 3 months before the expiry date in the Agreement and although such new target protocol imposed several new duties, the Claimant had, with a trust to the established practice between the parties for the past 16 years concerning the renewal and prolongation of the Agreement -and by having a promise of such renewal-, agreed to those new conditions.

In its statement of defense, the Respondent Production Company has submitted, in brief, that he did not serve a termination notice, hence according to the express provision in the Agreement it had been expired automatically and the sales to the Claimant had been ceased. Moreover he has argued that the new targets concerned only with the Agreement period and not with the next year. Besides, he has declared that the Agreement contains a non-competition clause and according to the Communiqué on the Group Exemption Concerning Vertical Agreements there can be no agreement between the parties that is subject to automatic renewal and prolongation. The Respondent Production Company has also argued that the Claimant had not been an exclusive dealer/single vendor, had not been granted with exclusivity, and that the Respondent has two more distributors similar to the Claimant. Besides, the Respondent has emphasized that the Respondent had reserved his right of direct sale and that such right had been regulated under the Agreement. Finally, Respondent Production Company has requested the submission of the sub-distributorship agreements in order to verify the claims of the Claimant concerning the establishment of sub-distributorship system. Respondent has argued that, Claimant has failed to provide evidence to prove that the sub-distributorship system had been established by the Claimant and that the claims of the Claimant concerning the promotion, investment and organization made by the Claimant with a trust of renewal of the Agreement are frivolous.

Expert Reports

In both the main and supplemental expert reports, it has been determined that the Agreement was not terminated by the Respondent and that the Agreement had expired automatically. Having said that, the expert report has also pointed out that the Claimant had the right to claim for goodwill compensation, the amount of which had been calculated in the same report.

Decision of the Local Court

At the end of the proceedings, the Local Court has determined that the Agreement between the parties had expired automatically. The Court has also determined that, upon review of the context of the Agreement, the Claimant had been one of the distributors of the Respondent and given there had been several other distributors, that the Claimant had not been an exclusive dealer/single vendor.

It was assessed by the Local Court whether the Claimant who had not been an exclusive dealer/single vendor would have the right to claim for goodwill compensation due to the termination of the distributorship agreement. The Local Court has qualified the goodwill compensation as a type of a recovery of loss of profit of an agent who, after the expiry of the agency agreement, cannot benefit from the “customer portfolio” that he had created with his efforts during the term of the agency agreement, but from which the main company still benefits. Local Court has made reference to 11^th Supreme Court’s decision dated 17/04/2014 and numbered 2013/2986-2014/7611, which emphasized that “in case the relation between the parties is determined as a distributorship, it is not correct to grant the goodwill (equalization) compensation which is only available for exclusive dealer/single vendor and agency agreements”. At the present case, the Local Court has, in light of the Supreme Court’s precedent, determined that the relation between the parties is a distributorship relation, that the Claimant is neither an exclusive dealer/single vendor nor an agent, that the goodwill compensation is not available for distributorship/dealership agreements, and thus the Claimant is not entitled equalization compensation. Local Court has ruled that the expert reports and legal opinions submitted to the court are in accurate and irrelevant to the case at hand and accordingly has dismissed the Claimant’s claims for goodwill compensation.   

In another dispute between the Respondent Production Company and his another distributor, the Court has dismissed the goodwill compensation claims of the other distributor on the following legal basis “that the distributorship agreement does not grant an exclusive right to the distributor, that the Distributor is not granted with monopoly right, on the contrary the Respondent reserved his right of direct sale within the Agreement”.

Both of the above referenced court cases are finalized and approved by the Supreme Court.

Beril Çelebi Cem