Category: Turkiye

The Turkish Competition Board (“Board”) has recently assessed the allegations that Allergan Ilaclari Ticaret A.S. (“Allergan”) engaged in discriminatory conduct and abused its dominant position by way of refusal to supply in its preliminary investigation decision. The complainant, Denge Ecza Deposu Ticaret A.S. (“Denge”), alleged that Allergan supplied some of its pharmaceutical products only to certain warehouses, rejected Denge’s request to work with Allergan and hindered Denge’s activities by restricting its access to Allergan’s products. The Board’s decision is remarkable as it assesses the allegations in detail under both Article 4 (anticompetitive agreements) and Article 6 (abuse of dominant position) of Law No. 4054 on the Protection of Competition (“Law No. 4054”) by discussing the competition literature on certain concepts such as indispensability and essential facilities doctrine and making references to the decisional practice in the European Union.

Relevant Product Market

The Board emphasized the dual-level nature of the distribution activities in the pharmaceuticals sector and stated that pharmaceutical warehouses operate in the wholesale level while pharmacies engage in retail sale of products. To that end, the Board stated that there are two main types of pharmaceutical warehouses, namely (i) warehouses that distribute to community pharmacy channel and (ii) tenderer warehouses. It also noted that the allegations set forth within the casefile relate to warehouses focusing on the resale of pharmaceutical products procured from manufacturers to community pharmacies.

In terms of the market characteristics, the Board emphasized the extensive regulations from obtaining licenses to storage and distribution of pharmaceutical products and stated that profit margins of warehouses are determined by public authorities, indicating warehouses’ limited control over prices of products. As to the relevant product market definition, the Board carried out its assessment based on ATC-3 classification and defined eight separate product markets for Allergan’s relevant eye care products subject to the preliminary investigation. The Board defined the relevant geographic market as Turkey.

The Board’s Substantive Assessment

The Board’s Assessments under Article 4 (Anticompetitive Agreements)

The Board initially assessed Denge’s allegations under Article 4 (anticompetitive agreements) of Law No. 4054 on the Protection of Competition (“Law No. 4054”). In its assessment under Article 4, the Board assessed as to whether Allergan’s agreements concluded with pharmaceutical warehouses include any restriction that may restrict intra-brand and/or inter-brand competition.

In this regard, the Board stated that Allergan’s relevant agreements do not include any provision related to exclusivity or non-compete obligation, Accordingly, the Board concluded that the agreements do not have any negative impact on the inter-brand competition in any way.  

As to intra-brand competition, the Board pointed out the regulated nature of pricing of pharmaceutical products through relevant public regulations and stated that Allergan’s agreements do not have any impact on the intra-brand competition due to the relevant regulations. To that end, the Board also assessed the clause in Allergan’s agreements prohibiting the sale of Allergan’s products outside of Turkey and concluded that the relevant clause does not directly affect competition in Turkey by referring to its past decisional practice involving export bans.

Moreover, the Board evaluated whether sales to other warehouses are restricted by Allergan and whether Allergan seeks any criteria in selecting warehouses that it plans to work with. After reviewing Allegan’s agreements, the Board concluded that the agreements between Allergan and its warehouses do not include any provision prohibiting sales to other warehouses. In other words, warehouses can freely sell to other warehouses. The Board also stated that Allergan considers reasonable criteria in determining the warehouses it will work with, such as the warehouse’s financial status, compliance to the legislation in force, size and capacity. The Board also underlined that Allergan can work with other warehouses; if there is such a need in the future due to the market needs and progress of the sales.

Consequently, the Board concluded that Allergan’s relevant agreements do not lead to any competition law violation under Article 4 of Law No. 4054.

The Board’s Assessments under Article 6 (Abuse of Dominant Position)

Allergan’s refusal of Denge’s request has been considered as a unilateral conduct by the Board.  To that end, the Board classified Allergan’s alleged conducts as refusal to supply and assessed as to whether Allergan engaged in anticompetitive refusal to supply by rejecting Denge’s request. Even though for such analysis, cumulative criteria of (i) existence of dominant position and (ii) abusive conduct are sought under Turkish competition law, the Board did not specifically evaluate whether Allergan enjoys dominant position in the relevant markets and directly proceeded with the assessment as to whether Allergan’s relevant conducts are of abusive nature.

The Board stressed that the following three criteria are sought collectively in order to determine a violation by way of refusal to supply: (i) the refusal should relate to a product which is indispensable to compete in the downstream market, (ii) the refusal should be likely to lead to the elimination of effective competition in the downstream market and (iii) the refusal should be likely to lead to consumer harm.

In this regard, the Board stated that the main concern stemming from exclusionary conducts is the likelihood of anticompetitive foreclosure effect by referring to the Board’s Guidelines on Abuse of Dominance as well as relevant regulatory framework in the EU. The Board noted that in case refusal is carried out by a dominant undertaking, which is active in the downstream market, the conduct is more likely to lead to restrictive effects.

The Board then referred to the legislative framework in the EU as well as the Board’s and Commission’s decisional practice involving refusal to supply and concluded that in order to determine a violation by way of refusal to supply, regardless of whether it aims at rivals or customers, refusal should be correlated with the exclusion of rivals. In other words, anticompetitive refusal to supply is deemed to arise to the extent dominant undertaking’s conduct indicates the exclusionary effect against rivals.

In this regard, the Board reminded the classification adopted in the Commission Discussion Paper as to market foreclosure and stated that vertical foreclosure may arise if refusal is made where dominant undertaking operates in the downstream market in competition with its customers by referring to the Commission’s Commercial Solvents decision. In this regard, the Board emphasized that there are few cases discussing horizontal foreclosure stemming from a refusal to supply conduct against non-rival customers by referring to the Commission’s United Brands and Boosey and Hawkes decisions. To that end, the Board stated that such practices may be evaluated under horizontal foreclosure in cases where (i) refusal is made in order to discipline dominant undertaking’s distributor to not promote rivals’ products and (ii) dominant undertaking refuses to supply to a potential competitor.

Moreover, the Board emphasized that there is no meaningful competition between a dominant undertaking and a mere reseller of its products, implying that refusal to supply against mere resellers would not be problematic in terms of competition law. All in all, the Board noted that dominant undertaking’s conduct should be aimed at a downstream or upstream rival in order to determine an abusive conduct by way of refusal to supply.

The Board then assessed as to whether Allergan’s conduct leads to anticompetitive refusal to supply in light of the criteria set out in the Board’s Guidelines on Abuse of Dominance.

In terms of indispensability, the fact that warehouses act merely as resellers has been considered as a factor indicating that Allergan’s products do not serve as an input for warehouses. Moreover, the Board stated that while there are 69 warehouses focusing on community pharmacies, only 12 of them has a distributorship relationship with Allergan, inferring that Allergan’s products are not indispensable in terms of competition in the downstream market. Low share of Allergan’s products among Denge’s overall activities has also been considered in that regard.

As to the element on the elimination of effective competition, the fact that Allergan is not active in terms of pharmaceutical warehousing has been considered to eliminate any vertical foreclosure allegations. Nevertheless, the Board conducted an analysis as to whether effective competition has been hindered due to Allergan’s conducts and concluded that Allergan’s conducts did not result in the elimination of effective competition due to Denge’s marginal presence in the market as well as the ability to procure Allergan’s products from other warehouses. Similarly, the Board found no consumer harm associated with Allergan’s conduct as Allergan is not active in terms of warehousing activities and due to the fact that the pricing of products in question is heavily regulated.

Consequently, the Board dismissed all of the allegations and decided not to initiate a full-fledged investigation against Allergan.

Conclusion

The Board’s decision shows that the pharma manufacturers’ conducts involving refusal to supply to pharmaceutical warehouses, which merely re-sell the relevant products, are highly unlikely to violate competition laws as the requirements of the relevant applicable test are very strict and may only be fulfilled in very exceptional situations. In this regard, the decision also provides detailed assessments on the evaluation of refusal to supply in competition law, by referring to the legislative framework and the decisional practice in Turkey as well as EU. 

By Gonenc Gurkaynak, Partner, Kagan Ucar, Counsel, Hakan Demirkan, Associate, and Leman Hilal Ozturk, Associate, ELIG Gürkaynak Attorneys-at-Law

Paksoy has advised Global Founders Capital on its USD 1 million investment in Avane Cloud Kitchens. Solo practitioner Mustafa Goluoglu reportedly advised Cloud Kitchens on the deal.

Global Founders Capital is a seed and growth investor fund. Avane Cloud Kitchens is a multi-brand cloud kitchen developer. 

Paksoy’s team included Partner Elvan Aziz, Senior Associate Hazal Korkmaz, and Associate Yeseren Sozuer.

Law No. 805 on Compulsory Use of Turkish Language in Economic Institutions [“Law No. 805“] has been in effect for very long time, i.e., since April 22, 1926. Even though it is an old regulation with only 9 articles, it has sparked debate regarding international contracts over the years, particularly in the field of arbitration, and it has even become a roadblock in our legal system regarding the validity of contracts.

While the Law No. 805 obliges Turkish language to be used in books to be kept concerning all kinds of transactions and contracts concluded within Turkey by Turkish companies, it only requires international companies and institutions to use Turkish in correspondence, transactions, and contacts with Turkish institutions and citizens of the Republic of Turkey, as well as documents and books to be submitted to the Republic of Turkey’s government offices. Although some argue that contracts, which are a type of bilateral legal transaction, are likewise covered by Law No. 805; the absence of the term “contract” in the second article, which is explicitly mentioned in the first article of the Law, indicates that there are no linguistic restrictions and that these agreements can be made in any language desired.

Question: Is Law No. 805 Applicable to International Arbitration Agreements?

The applicability of Law No. 805 to international arbitration agreements is also specifically debated, in addition to whether it may be applied to contracts established between Turkish and foreign companies. Pursuant to the International Arbitration Law No. 4686 [“IAC“], there is no precondition that arbitration agreements be concluded in Turkish, even if both parties are Turkish, provided that there is an element of foreignness.

Moreover, numerous international conventions to which Turkey is a party, such as the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards and the 1961 European Convention on International Commercial Arbitration, also regulate formal requirements of arbitration agreements but do not impose a language restriction. As a result, it can be concluded that international arbitration agreements are not within the scope of Law No. 805, and are regulated under the IAC and international conventions, which are deemed lex specialis.

Until recently, however, Court of Cassation avoided making these determinations, sometimes resulting in the invalidation of international arbitration agreements. Since no consistent jurisprudence on the application of Law No. 805 and the IAC could be found in the decisions, the question of the arbitration agreement’s validity was answered differently in each case. In a judgement issued in 2007, the 11^th Civil Chamber of the Court of Cassation examined the validity of an arbitration clause in a contract where one of the parties was foreign and the contract was drafted in English; and determined that the arbitration clause was valid and applicable, since foreign enterprises are not required to execute contracts in Turkish, citing Article 2 of Law No. 805. Despite the fact that Court of Cassation ruled the arbitration agreement to be valid, it examined the arbitration clause not within the scope of the IAC, but within the scope of the Law No. 805, contrary to what we noted above.

Again, Court of Cassation’s 11^th Civil Chamber concluded in 2014 that the arbitration clause in a contract in which one of the parties was a foreign company was in violation of Law No. 805, because the contract was written in English. In a similar case, the same Chamber decided that the arbitration clause could not be relied upon due to the fact that the contract including the arbitration clause was drawn out in English. In both cases, an examination was undertaken under the provisions of Law No. 805, and the arbitration agreements were found to be invalid. While contracts involving a foreign company drafted in a foreign language is also not prohibited under Law No. 805, compliance with Law No. 805 should not even have been examined regarding arbitration clauses.

As can be seen, in the past, a stable Court of Cassation jurisprudence could not be established in terms of the validity of arbitration agreements. Moreover, whether or not Law No. 805 could be applied to arbitration agreements containing foreign elements and so falling within the scope of the IAC had not even been a point of debate in the aforementioned rulings. This in turn caused a great deal of confusion for companies that aimed to draft contracts with arbitration clauses, and it could even preclude Turkish companies from signing contracts with foreign companies in some cases.

Importance of Recent Court of Cassation Decisions on Arbitration Agreements in Foreign Languages

The above-mentioned approach of the Court of Cassation has begun to shift in recent decisions, and it has become more arbitration-friendly, as arbitration agreements are kept alive where it is appropriate by using the relevant section of the IAC. In this context, the 15^th Civil Chamber of Court of Cassation, in a decision dated October 2, 2020 and numbered 2020/1714 E., 2020/2652 K., examined for the first time the objection made about the language of the contract within the scope of the IAC, and despite both parties being Turkish companies, has decided that the arbitration clause concluded in English does not constitute a violation of Law No. 805 as the foreign element of the dispute was present in accordance with article 2 of the IAC.

Likewise, in following Court of Cassation decisions, the presence of a foreign element is considered and, contracts are only deemed invalid in accordance with Law No. 805 in cases where there is no element of foreignness. In this context, it can be said that the Court of Cassation’s approach of examining contracts containing foreign elements within the scope of Law No. 805 in all cases has been replaced by a new approach of evaluating contracts containing the element of foreignness -even if both parties are Turkish- within the scope of the IAC. Therefore, in line with the relevant regulations and the necessities of business life, arbitration agreements and arbitration clauses in contracts involving foreign elements will be allowed to be drafted in the preferred language considering the new approach of the Court of Cassation.

Points of Consideration When Drafting Arbitration Agreements

Taking litigative action in the event of a possible dispute or an unfavorable arbitration decision on the grounds that the arbitration agreement violated Law No. 805 had become a typical occurrence, potentially invalidating the arbitration agreements. Court of Cassation’s recent judgments demonstrate that it now prioritizes the evaluation regarding the element of foreignness in the case and makes conclusions accordingly.

In light of these developments, in cases where both parties are Turkish companies, and there is no element of foreignness, Law No. 805 will apply, and if the arbitration agreement is written in a language other than Turkish, the arbitral awards may be subject to state judicial annulment. However, even in cases where parties are Turkish companies, it now seems feasible to conclude the arbitration agreement in a foreign language if there is a foreign element in the case, such as if one of the parties’ partners is a foreign company.

By Zahide Altunbas Sancak, Partner, and Aziz Can Cengiz, Attorney, Guleryuz & Partners

The Advertisement Board rendered an advertisement ban decision and concluded that the use of registered trademarks on a business sign without a contractual relationship with the proprietor of displayed trademarks is an unfair commercial practice. The Advertisement Board’s reasoning is that such use on the business sign without any legal contractual relationship, such as license agreements, creates the wrong impression over the consumer that this particular business is an authorized service shop of the business products bearing the displayed trademarks. The decision of the Advertisement Board is published on the Advertisement Board Meeting Press Bulletin dated May 4, 2021 and numbered 309.

The summary of the decision

The Advertisement Board focused on the business sign of an electrician, which displays the pioneer trademarks of electronics sector, i.e. Beko, Siemens, Arçelik, Termikel and Philips, upon a complaint evaluated under the case numbered 2019/9536. The Advertisement Board determined that the logos and several elements of trademarks “Beko, Siemens, Arçelik, Termikel and Philips” are used on the subject-matter business sign.

The Advertisement Board evaluated that such use of the mentioned trademarks without any authorization for legally-authorized use of those trademarks and/or any contractual relationship with the proprietors of the mentioned trademarks is an unfair commercial practice as well as deceptive and misleading. The Advertisement Board states that such use creates the perception that the business in question is an authorized service shop of the displayed trademarks, i.e. Beko, Siemens, Arçelik, Termikel and Philips, due to those trademarks on the business sign.

Based on this evaluation, the Advertisement Board concluded that the subject-matter business sign displaying registered trademarks of third parties are against law and ruled for the advertisement ban due to these uses as per articles 63 and 77/12 of Consumer Protection Law numbered 6502. Nevertheless, the Advertisement Board did not include the trademark-law-related aspect of the subject-matter trademark use on the business sign in the decision.

The evaluation of the issue from trademark law perspective

i. Honest use of a trademark by a third party

Under Turkish law, trademark protection aims allocation of use of a certain mark to the proprietor of the trademark. Accordingly, the Industrial Property Code numbered 6769 (“IPC”) grants several authorizations for the proprietor of a trademark in order to provide this allocation between the goods and services bearing a certain trademark and the proprietor of the trademark. For this very reason, the major portion of trademark protection tools for preventing confusion between trademarks.

On the other hand, Article 7/5 of IPC acknowledges that an honest use of a trademark by a person other than the proprietor of it cannot be prevented based on trademark registration, even though there is no contractual relationship between the user and the proprietor of the used trademark. The particular matters wherein an honest use is accepted to exist are listed under Article 7/5 as (i) indication of the name or address of real persons, (ii) explanations concerning the type, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of the goods or services, and (iii) situations where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts or equivalent products. Accordingly, above-mentioned uses of a trademark cannot be prevented by the trademark proprietor, provided that the uses are indeed honest use of the particular trademark. 

Based on above-explanations, the use of an automotive trademark (for example BMW or Ford) by a mechanic or a spare part seller, whose practice concerns cars bearing that trademark, cannot be prevented by the proprietor of the automotive trademark based on Article 7 of IPC. Indeed, such uses are assessed in several precedents of High Court of Appeals and CJE as well. The high courts upheld the honest use principle in cases where the subjected uses of the registered trademarks can be considered as honest use of the trademark. As a result, it has been set forth that if the use of a trademark is indeed necessary for the marketing and advertising of the services that are being provided regarding the products bearing the registered trademark, such uses should be accepted to fall into the scope of honest use of the trademark, provided that there is no likelihood of confusion between the products bearing the trademark and the services provided regarding the products bearing that trademark.

ii. Trademark infringement in case of honest use

Trademark infringement is the very tool that is frequently claimed by the proprietor of alleged-to-be infringed trademark when the subject-matter trademark is used by an unauthorized third party in the forms listed under Article 29 of IPC. Trademark infringement lawsuits poses a great importance for the proprietors since, as per Article 149 of IPC, in case of a trademark infringement the proprietor of the trademark would be entitled to claim pecuniary and non-pecuniary compensation in addition to (i) the determination of the existence of infringement, (ii) prevention of the possible infringement, (iii) cease of the infringing actions, (iv)  seize of the products causing infringement or requiring penalty, as well as instruments, such as devices and machine exclusively used in their production, without preventing the production of products other than infringing products, (v) granting property right on products, devices and machines seized, (vi) taking measures to prevent the continuity of infringement, in particular at the expense of the infringer to change the shapes of products and instruments such as device and machine seized, to erase the trademarks on them or to destroy them if it is inevitable for preventing the infringement of industrial property rights, and (vii) announcement of the final judgment at the expense of the opposite party fully or in summary through the daily newspapers or other means or notification to relevant parties, if there is any justified reason or interest. 

Under Article 29 of IPC, where trademark infringement cases are regulated, using the trademark as set out under Article 7 of IPC without the consent of the trademark proprietor is considered as trademark infringement. In consideration of the exemption that is acknowledged for honest use of a trademark under Article 7/5 of the IPC, it follows that the honest use of a trademark is not an act of trademark infringement as well.

Accordingly, if a trademark use took place in the forms listed under Article 7/5 of IPC, which can be categorized as trademark infringement, can be considered as honest use of the trademark; then, this use cannot be considered as trademark infringement as well. As a result of this exemption, the proprietor of the used trademark will not be entitled for any of above-listed claims, most important one of which is cease of the infringing actions for protection of the trademark from damages that may occur in future.

iii. Evaluation of the subject-matter uses on business sign from the honest use perspective

It has been explained under above sections that if the subject-matter use of a trademark is deemed to be falling into the scope of the exemption regulated under Article 7/5 of the IPC, then the use should be considered as honest use of the trademark. Accordingly, the proprietor of the used trademark cannot prevent the use of the trademark by relying on a trademark infringement claim. On the other hand, the Advertisement Board ruled that the use of the trademark without a contractual relationship creates the wrong impression over the consumers that the business in question is an authorized service shop of the displayed trademarks, which is the quite opposite of what the honest use principle of trademark law entails.

For proper assessment of the decision of the Advertisement Board, the subject-matter uses should be evaluated first. This is because, as explained under Section III.(i), it is not merely sufficient for a trademark use to occur as listed under Article 7/5 of IPC; the use is also required to be able to categorized as honest use. The consideration of whether the use is indeed an honest use requires the evaluation of the proportion and positioning of the trademark use on the business sign as well as the overall impression of the trademark on the business sign. As there is no visual of the subjected business sign included into the decision of the Advertisement Board, it is not possible make such evaluation. Thus both possibilities will be evaluated under below section.

The effects of the decision on trademark infringement cases

As explained under Section III above, the uses of a trademark by an unauthorized third party in situations where it is necessary to indicate the intended purpose of a product or service (for example the services provided by spare part sellers or mechanics) falls into the scope of the honest use principle. As a result, these uses cannot be prevented by the trademark proprietor and trademark infringement claims cannot be raised against those uses.

Since it is required to conduct an overall evaluation on the subject-matter uses in order to determine whether it can be deemed as an honest use of trademarks or not and since it is not possible to conduct this evaluation due to lack of visual of the subject-matter use, we hereby study both possibilities.

i. First possibility: The subject-matter use does not fall into the scope of honest use principle

As described earlier, the trademark use subjected to the Advertisement Board’s decision should be indeed necessary for the marketing and advertising of the services that are being provided regarding the products bearing the trademarks and it should not create likelihood of confusion between the products bearing displayed trademarks and the services provided regarding the products bearing displayed trademarks.

Considering the data provided in the decision of Advertisement Board, it is not possible to evaluate the actual trademark uses on the business sign. However, based on the assumption[5] that (i) the uses on the business sign suppress the actual service that is being provided or (ii) the business sign creates the wrong impression that the business in hand operates as an authorized reseller of the products or (iii) it misleads the consumers that the commercial activities are in any way consented or authorized by the proprietors of the trademarks displayed on the business sign; then, it cannot be possible to reach the conclusion that the subject-matter uses fall into the scope of the honest use principle.

If a trademark use on a business sign does not fall into the scope of the honest use principle, then these uses would constitute trademark infringement and the trademark proprietors would be entitled to claim for prevention of the trademark use. Under this possibility, the decision of Advertisement Board determining the subject-matter business sign as an unfair commercial practice remains to be in compliance with the principles and implementation of Turkish trademark law; although this trademark law perspective is not included into the reasoning of the advertisement ban decision.

ii. Second possibility: The subject-matter use falls into the scope of honest use principle

The Advertisement Board decided for an advertisement ban, which is a legal outcome that can be obtained through enforcement of the right provided under Article 7 of IPC in a trademark infringement lawsuit filed against the subject-matter business sign. Nevertheless, if the business sign in hand can be deemed as an honest use of trademarks displayed on the business sign, then it would not be possible to enforce these rights provided to the proprietors of the trademarks and to file an infringement action against the business sign as per article 7/5 of IPC.

By virtue of the Advertisement Board’s decision, the legal outcome of cease of the infringing uses (which can only be obtained through the enforcement of Article 7 of IPC in a trademark infringement lawsuit but might not because of honest use principle) is achieved through enforcement of trademark right by resorting to the Advertisement Board for an advertisement ban. Such practice of Advertisement Board in a way creates a side door for proprietors of trademarks, who are not legally entitled (from a trademark law perspective) to claim for cease of infringing uses and to enjoy a legal outcome that would not be possible to achieve due to Article 7/5 of IPC. In other words, while the uses mentioned here cannot be prevented as per article 7/5 of IPC, the Advertisement Board has given the right to claim for “cease of use” back to the proprietors of the trademark displayed on the business sign.

As explained herein, there are many claims that can be raised by a proprietor of an infringed trademark, including financial claims such as pecuniary and non-pecuniary compensation claims. Keeping in mind that the financial claims pose great importance for a proprietor of an infringed trademark in terms of indemnification of the damages incurred due to the infringing actions; another fact is that cease of the infringing actions is just as important for a proprietor of an infringed trademark. This is because stopping the infringing uses will prevent escalation of damages incurred due to the infringement. However, while uses that fall into the scope of honest use principle are not considered as “damaging for the trademark”, the mentioned decision of the Advertisement Board provides one of the most important outcomes of enforcement of trademark right (i.e. stopping the subject-matter uses).

Conclusion

In the advertisement ban decision in question it is stated that (i) the use of trademarks on the business sign creates the impression that the relevant business is the authorized service shop of the displayed trademarks, i.e. Beko, Siemens, Arçelik, Termikel and Philips, (ii) such uses can be considered as unfair commercial practice and (iii) it is deceptive and misleading.

However, under Turkish trademark law, the exemption of honest use of a trademark is acknowledged under article 7/5 of IPC. Accordingly, an honest use of a trademark in situations where it is necessary to indicate the intended purpose of a product or service, in particular as accessories, spare parts, or equivalent products, by a person other than the proprietor of it cannot be prevented based on trademark right. In other words, the proprietor of the displayed trademark is not entitled to claim for cease of the uses in cases of honest use of the trademark. The evaluation of whether uses can be deemed as honest use or not should be conducted based on the evaluation of the actual use in question and the proportion and positioning of the trademark as well as the overall impression of the business sign.

Based on the foregoing;

(i) if the business sign cannot be considered to be falling into the scope of the honest use principle, then the advertisement ban decision of the Advertisement Board remains in compliance with the requirements and principles of trademark law although this aspect of law is not evaluated in the decision,

(ii) if on the other hand the business sign falls into the scope of the honest use principle, then the advertisement ban decision of the Advertisement Board evidently provides the legal outcome of an infringement lawsuit (i.e. cease of infringing uses) and gives the proprietors of trademarks a second option for achieving this outcome through another legal tool, since it is not possible to obtain that through enforcement of trademark rights because of the honest use principle acknowledged under Article 7/5 of IPC. 

By Gonenc Gurkaynak, Partner, Tolga Uluay, Partner and Doruk Altin, Associate, ELIG Gürkaynak Attorneys-at-Law

Egemenoglu has advised Derindere Turizm Otomotiv on the second round of consolidated and syndicated loan restructuring for its EUR 350 million debt. Cetinkaya Taktak Semiz Baltali Yorukoglu reportedly advised the banking consortium.

According to Egemenoglu, the transaction is “the second phase of the financial restructuring project developed by our restructuring team.” The second round involved 29 financial institutions, including Credit Europe Bank and the Islamic Corporation for the Development of the Private Sector.

The Derindere Group specializes in the fleet vehicle leasing industry in Turkey. The company has a portfolio of 5000 corporate customers and an active fleet exceeding 20.750 vehicles.

Egemenoglu previously advised Derindere on the first round of its consolidated and syndicated loan restructuring (as reported by CEE Legal Matters on August 14, 2019).

The Egemenoglu team was led by Managing Partner Yunus Egemenoglu.

Editor’s Note: After this article was published, Cetinkaya Taktak Semiz Baltali Yorukoglu confirmed it had advised the lenders’ consortium. The CCAO team included Partners Onur Taktak and Begum Yorukoglu, Associate Onur Gorkem Koksal, and Junior Associates Nilufer Kir and Fatih Ipin.

Cakmak has advised Plaskolite on the sale of its shares in joint-venture PIA Akrilik to JV partner Sirius Plastik. Akol Law advised Sirius Plastik on the deal.

Plaskolite is North America’s largest manufacturer of engineering thermoplastic sheet and profile products.

PIA Akrilik is a Turkish manufacturer of cast acrylic sheets, established in 2013 as a Plaskolite-Sirius joint venture.

Cakmak’s team included Partner Gulsen Engin and Senior Associate Ilke Isin Suer.

Akol’s team included Partners Meltem Akol and Ceyda Akbal Schwimann and Associate Sebnem Kavasoglu.

KPMG’s Turkish affiliated law firm KP Law has appointed five new Associate Partners. Ozge Tuncel, Ekin Kotan, Secil Kisakurek, Isil Doganay, and Ece Kocabas have all joined the partnership, as of January 1, 2022.

Tuncel leads the firm’s Corporate & Deal Advisory team. She joined KP Law in 2016 as a Senior Counsel and was promoted to Director in 2020. Prior to that, she was an Associate with the Guzeldere & Balkan Law Firm (2015-2016), GSI Goksu Safi Isik Attorney Partnership (2014), and the Yildirim Law Firm (2012-2013).

Kotan is a member of KP Law’s Corporate & Deal Advisory team. She focuses on technology, e-commerce, capital markets, and retail and also represents clients in litigation matters and commercial disputes. She has been with KP Law for four years, having first joined as a Senior Associate in 2018. Kotan previously spent six years with the Bener Law Office. 

Kisakurek leads the firm’s Data and Compliance team and focuses on highly regulated sectors. She joined KP Law in 2016 as a Senior Counsel. Before that, she spent a year as a Senior Associate with the Eryurekli Law Office (2014-2015) and six as an Associate with Birsel Law Offices (2008-2014).

Doganay leads the firm’s Dispute Resolution team and co-leads the Contracts and Employment one. She joined KP Law in 2019 as a Lawyer. Before that, she was an Attorney-at-Law with the Okutgen Law Office (2017-2019) and a Senior Lawyer with the Undes Law Office (2011-2016) and the Naipoglu Law Firm (2007-2011).

Kocabas leads KP Law’s Execution and Bankruptcy team and specializes in enforcement, bankruptcy law, and commercial law. She joined the firm in 2020 as a Senior Counsel. She previously spent seven years with the BAB Law Office (2013-2020) and another two with the Alparslan Gunal Law Office (2011-2013).

Capital market activities as defined under Article 34 of the Capital Markets Law No. 6362 (the “CML”) are activities of capital market institutions falling within the scope of CML, investment services and activities and other ancillary services falling within the scope of the CML. In order to carry out capital market activities, permission of the Capital Markets Board of Turkey (the “Board”) is required. Obtaining permission is particularly important given that the consequences of determination by the Board that such activities are carried out without the permission from the Board may have severe consequences.

Capital Market Activities

According to Article 2 of the CML, “capital market instruments, issuance of these instruments, public offerors, capital market activities, capital market institutions, stock exchanges and other organized markets where capital market instruments are traded, market operators, Turkish Capital Markets Association, Turkish Appraisers Association, central clearing houses, central custody institutions, Central Securities Depository and Capital Markets Board” are subject to the CML.

On the other hand, capital market activities are not numerus clausus, therefore they cannot be conclusively listed. They are defined under Article 34 of the CML as “activities under the Law and investment services and activities and other ancillary services falling within the scope of the Law”.

With the reference of Article 34, Article 37 of the CML lists the investment services and activities as follows:

1. Receiving and placing orders relating to capital market instruments,
2. Executing orders relating to capital market instruments for and on behalf of customer or on behalf of itself and for customer,
3. Purchase and sale of capital market instruments from its account,
4. Portfolio management,
5. Investment consultancy,
6. Intermediating sales through underwriting during capital market instruments’ public offering,
7. Intermediating sales without underwriting during capital market instruments’ public offering,
8. Operating multilateral sale and purchase systems and other organised over the counter markets,
9. Custody and management of capital market instruments on behalf of customer and portfolio custody,
10. Carrying out other service and activities determined by the Board.

The ancillary services which may be carried out by investment enterprises and portfolio management companies are set forth under Article 38 of the CML as follows:

1. Providing consultancy services regarding capital markets,
2. To loan or lend and provide foreign currency services on services and activities to be determined by the Board, including project finance, without prejudice to foreign exchange regulations,
3. Investment research and financial analysis regarding transactions or providing general advice concerning capital market instruments,
4. Providing services regarding carrying out underwriting,
5. Providing brokerage services on borrowing or otherwise funding,
6. Wealth management and financial planning,
7. Other services and activities to be determined by the Board.

Capital Market Institutions

As per Article 35 of the CML, the list of capital market institutions which are allowed to carry out capital market activities are as follows:

1. Investment enterprises
2. Collective investment institutions
3. Independent audit, valuation and rating agencies which will carry out activities in capital market
4. Portfolio management companies
5. Mortgage finance institutions
6. Housing finance and asset backed funding
7. Asset leasing companies
8. Central clearing houses
9. Central custody companies
10. Trade repository institutions
11. Other capital market institutions as determined by the Board

Accordingly, the capital market institutions have not been listed as numerus clausus and the Board is entitled to define additional capital market institutions, as the case maybe.

Mandatory Permits for Investment Services and Activities

As per Article 39 of the CML, in order to provide investment services and carry out capital market activities listed above regularly, obtaining permission from the Board is mandatory. Accordingly, investment services and activities can only be provided and carried out by investment enterprises, established pursuant to the Communique on Rules of Establishment and Activities of Investment Enterprises No. III-39.1, provisions on investment trusts, portfolio management companies and stock markets are reserved.

The permit application varies depending on the activity and service applied for. A certificate of authorization will be issued by the Board, showing the investment services and activities to whom the permission is granted. The list of the activity permit holder investment enterprises and the type of activity permits can be found on the web site of the Board.

On the other hand, in order to carry out ancillary services, instead of permit, notification to the Board is required. Pursuant to Article 7 of the Communiqué on Principles Regarding Investment Services and Activities and Ancillary Services No. III-37.1 (the “Communiqué”), ancillary services can be provided by investment enterprises without having to obtain certificate of authorization in accordance with the principles determined by the Board. The ancillary services must be notified to the Board. Unless otherwise expressed by the Board within 20 (twenty) days following the notification, the ancillary services may be carried out in accordance with the Communiqué.

Unauthorized Activities 

If the Board identifies activities are carried out in the capital markets without permission, the Board files a criminal complaint against the persons to the Office of Chief Public Prosecutor. Under Article 109 of the CML, persons who carry out unauthorized activities in the capital markets can be convicted with 2 (two) to 5 (five) years of imprisonment and judicial fine from 5,000 (five thousand) to 10,000 (ten thousand) days. This judicial fine would be at least TRY 100,000 (~ EUR 6,750) when calculated over the minimum daily amount is TRY 20 (~ EUR 1,35) depending on the court’s decision.   

Furthermore, as per Article 99 of the CML, the Board is authorized to take any kind of measures in order to stop the activities carried out without permission, and to bring action to cancel all the consequences arising out of unauthorized capital markets activities and transactions and to return the cash or capital markets instruments to the beneficiaries within 1 (one) year from the date the Board has identified such activities and in any case within 5 (five) years from the date of occurrence.

Moreover, pursuant to Article 8 of the Turkish Criminal Code No. 5237, an offender outside Turkey, who carried out capital market activities subject to the Board’s approval can be held liable for its activities concerning Turkey.

Conclusion

Capital markets are heavily regulated and serious sanctions including imprisonment and judicial fines may be imposed upon breach. This includes investment services and activities in capital markets, which can only be carried out by duly established investment enterprises, crowd funding, capital market instruments, brokerage activities and so on. If one is unsure whether a party is authorized to carry out the activities, they may check the status from the web site of the Board which is publicly accessible.

By Gonenc Gurkaynak, Partner, Nazli Nil Yukaruc, Partner, Selen Ermanli Sakar, Associate, Irmak Yetim, Legal Intern ELIG Gürkaynak Attorneys-at-Law

Efra Aydin Can and Didem Keles Pinar have been promoted to Partner at Egemenoglu, as of January 1, 2022.

Aydin Can joined Egemenoglu in 2015 as a Senior Associate and advises on M&A, corporate matters, financing, and capital markets transactions. Prior to joining the firm, she worked as an Associate at Allen & Overy (2012-2015), Herguner Bilgen Ozeke Attorney Partnership (2011-2012), and Verdi & Yazici Law Firm (2007-2010). She graduated from Istanbul Bilgi University Faculty of Law in 2007.

“Apart from her professional skills, she has shown a significant effort in our office for many years and we wish her success in her new position,” Partner Egemen Egemenoglu said of the appointment. 

Keles Pinar has been with Egemenoglu since 2003 when she first joined the firm’s Dispute Resolution department as a Lawyer. She specializes in civil, inheritance, obligations, and commercial law. She graduated from Ankara University Faculty of Law in 2000.

“We are very proud of the work Didem has done in leading her team’s growth and we are very pleased about her promotion in the Dispute Resolution department. She served for many years as a Senior Associate at our firm where she was involved in complex litigation matters,” Egemenoglu commented.

While inheritance is considered an extension and an aspect of the property right, a person may be deprived of this right due to their own consent or in some cases, unlawful actions. These possibilities are regulated by Turkish law under the titles of disinheritance, successional indignity, renunciation of inheritance, and the right to disclaim.

In this fourth [IV.] article of the Inheritance Law Series, we will examine the aforementioned legal institutions.

When Does an Heir Lose Their Right to Inherit?

There are multiple possibilities in which an heir might lose their right to inherit. Typically, these possibilities are realised when an heir violates their civil obligations to the legator or commits a serious crime against the legator or their family. The first state is a reason for disinheritance, while the second is a reason for successional indignity. Furthermore, the right to inherit may also be lost in cases where the heir renounces the right through an inheritance renunciation contract, which is a negative inheritance agreement, or in cases where the heir disclaims the inheritance.

Is Disinheritance Possible and How Is It Done?

Disinheritance is the complete or partial elimination of the reserved portion of a statutory heir as the result of a faulty act described in Turkish Civil Code. Disinheritance takes effect with the unilateral disposition of the legator. Legally, heirs with statutory entitlement can be disinherited for punitive purposes only in two circumstances: [i.] a felony committed against the legator or one of the legator’s relatives, and [ii.] violation of civil obligations to the legator or legator’s family members.

However, the presence of one of these circumstances does not result in disinheritance by itself, as the legator must demonstrate their will in this direction through a testamentary disposition. Again, the reason for disinheritance must be clearly stated in the testamentary disposition for the disinheritance to be valid.

Unless the legator makes a disposition to the contrary, disinherited heir’s statutory share will pass on to the heir’s issue; and to the legator’s statutory heir if the disinherited heir has no descendants.

Concept of “Successional Indignity” and Its Difference from Disinheritance

Successional indignity differs from disinheritance in that it becomes effective without the legator’s disposition upon the realization of one of the acts stipulated by law. In this respect, an heir, testamentary or otherwise, or a beneficiary of the will who exhibits one of the acts stipulated set out in law automatically loses the right to inherit. 

Acts that lead to successional indignity are as follows:

1. Willfully and unlawfully causing or attempting to cause the death of the legator,
2. Willfully and unlawfully rendering the legator permanently incapable of making testamentary disposition,
3. By malice, coercion or threat inducing the legator to make or revoke a testamentary disposition or preventing the legator from doing so,
4. Intentionally and unlawfully eliminating or invalidating a testamentary disposition in such a manner as to prevent the legator from drawing up a new one.

What is an Inheritance Renunciation Contract?

Since the legator cannot completely deprive heirs of their statutory entitlement unless the inheritance is renounced or the heir is disinherited, an inheritance renunciation contract is essentially an agreement that expands the legator’s disposition ability that is normally limited by statutory entitlement.

By nature, renunciation of inheritance cannot be made with the unilateral disposition of the legator, and it can only be a subject of an inheritance contract. Such a contract therefore allows a future heir to waive their inheritance right in whole or in part.

What is Complete and Partial Renunciation of Inheritance?

In case of complete renunciation, the heir loses heirdom. In partial renunciation, either the heir’s inheritance share is reduced, or the heir has no longer any statutory entitlement. While the heir may renounce their statutory entitlement altogether with an inheritance renunciation contract, renunciation of a specific good/asset can also be agreed upon.

Is the Inheritance Renunciation Contract Binding for the Issue of the Heir?

The effect of the renunciation on the heir’s descendants depends on whether the renunciation contract is onerous or not.

In cases where the heir is compensated for the renunciation in any way, as a rule, the issue of the heir also loses the right of inheritance. If no benefit is provided in exchange for the renunciation, however, it has no effect on the issue, and therefore the descendants will acquire the title of heir as a successor to the renouncer.

Can a Statutory or Testamentary Heir Disclaim the Inheritance?

Yes. The inheritance can be disclaimed by both statutory and testamentary heirs. Even a beneficiary of the will has the right to disclaim.

However, since it is not possible to disclaim a right before it arises, the inheritance can only be disclaimed upon the death of legator. If an heir wishes to disclaim inheritance while the legator is still alive, inheritance renunciation can be used as an alternative method.

Is Partial Disclaimer of Inheritance Possible?

While inheritance renunciation may be partial, partial disclaim of inheritance is not possible. The inheritance must be accepted or disclaimed as a whole.

What is the Legal Term to Disclaim Inheritance?

Statutory and testamentary heirs must use the right to disclaim within 3 [three] months after learning of the death of the legator. For those who are appointed as heirs by will, the 3-month period starts with the notification of the testamentary disposition. If the disclaimer right is not used within 3 months, the inheritance is acquired.

What If the Inheritance Is Not Disclaimed Within the 3-Month Period?

If an inheritance is not disclaimed within three months, it is presumed to be accepted under Turkish law.

As an exception, the inheritance is deemed to be disclaimed if the legator’s insolvency is evident or officially determined at the time of death. In other words, regardless of the legal period, the inheritance is deemed to be disclaimed if the deceased person’s assets do not meet their debts at the time of death.

What are the Consequences of Disclaimer of Inheritance?

If the person who disclaims the inheritance is a statutory heir, their statutory share passes to their descendants as if they were not alive upon the opening of the succession.

On the other hand, if an appointed heir disclaims the inheritance, the heir’s share is transferred to the closest statutory heirs of the inheritance. [e.g., if a person with only two children passed away and appointed their friend F as an heir with 1/10 share, F’s disclaimer of inheritance means that this 1/10 portion will be shared equally between the two remaining children, who are the statutory heirs.

Finally, if a beneficiary of the will disclaims the inheritance, the relevant asset is left to the person who was supposed to give these assets to the beneficiary. Nevertheless, the legator can decide for this asset to be shared equally between their heirs.

By Tarik Gueryuz, Partner, and Aziz Can Cengiz, Junior Attorney, Guleryuz & Partners