by Marcello Mantelli, Avvocato in Milan and Turin.
The international distribution contract is an important tool to enhance cosmetic product promotion in the local market. There is no specific legislation in Turkey regarding the distribution contracts. Since there are no specific provisions in the Turkish laws regarding these issues, the TCO and CCT provide the relevant provisions.
Thus the content of the contract is crucial for the purpose of conducting business safely in Turkey and will have to be adapted on a case-by-case basis.
Product Registration in Turkey
If your company is situated in the European Union and plans to market cosmetics products through a Turkish distributor, then it is necessary to register your products with the Product Tracking System (Ürün Takip Sistemi – ÜTS) that is controlled by the Turkish Medicines and Medical Devices Agency (Türkiye İlaç ve Tıbbi Cihaz Kurumu – TITCK).
Since Turkey follows the European requirements, every cosmetic product sold in Turkey must be registered with the ÜTS prior to being marketed in Turkey. The registration process should be done by a local Responsible Person (RP) who will guarantee that the product complies with the local regulations.
Normally the Responsible Person is the distributor or another person designated by the distributor to perform the product registration with ÜTS so as to comply with the Turkish legislation.
Registration responsibilities should be precisely defined in the contract regarding the duties of registration on behalf of the supplier and cost sharing arrangements for the registration.
Non-Competition in Turkey
A non-competition clause may be incorporated in the distribution contract by implication.
Exclusivity
The exclusivity is not considered as a mandatory clause but it can be specified in the contract. In the absence of specific provisions, exclusivity may still be deduced from the very nature of the business relationship.
Sales Outside Contract Territory
The supplier cannot restrict the distributor from selling outside the territory agreed upon unless there are other restrictions as permitted by Turkish competition laws.
Resale Pricing
Distributors cannot be required by the supplier to fix resale prices, but the supplier can only provide the maximum or the recommended resale price.
Minimum Purchase Requirements
Business partners can define minimum sales requirements for certain time frames that are often annual. Non-performance of these sales targets is considered a material breach of contract and may warrant termination of the contract.
Trademark and Intellectual Property Rights
The distributor must obtain a written consent from the supplier to use trademarks as provided for in the contract.
Contract Duration
The contracts can be of fixed duration, of fixed duration with an automatic extension (subject to notice) or of an indeterminate duration. The contract may specify the conditions under which the contract may be terminated early. However, it is important to note that if the distributor is unjustly dismissed, it may be entitled to damages for losses of profit and investments made. The Turkish distributor is entitled to an indemnity for the duration of the contract in Turkey in accordance with the agency rules, if the distributor has succeeded in bringing new customers to the supplier and the supplier continues to derive significant commercial advantage from these customers after the contract has ended.
Applicable Law
Where the parties do not choose the law of the contract and the distributor’s place of business is in Turkey, the law of Turkey shall be applied (place of performance).
With respect to international sales rules, Turkey has adopted the 1980 Vienna Convention on International Sales of Goods which entered into force on August 1, 1983. This Convention lays down general rules for sales contracts between parties from different jurisdictions and fills in any gaps left by the terms usually employed by the parties.
Dispute Resolution Methods
The contract should specify which court is to have jurisdiction in case of disputes. If the contract provides for international arbitration, then this is another way of resolving disputes. Turkey is a signatory to the 1958 New York Convention and the 1961 European Convention on the recognition and enforcement of foreign arbitration awards.Reviewing some key rules that apply not only to drafting distribution contracts but also to scenarios without a formal contract, these rules – including the potential payment of an end of contract indemnity – may still apply, particularly in commercial relationships characterized by established practices that qualify as distribution contracts.
