A battle of the Codes arising in Turkey?

The Turkish Commercial Code that recently entered into force purposely grants contractual parties freedom of contract to use standard terms for maritime contracts and marine insurance policies. Recent developments in the Working Committee considering the Code of Obligations may result in interference with this freedom.

The New Turkish Commercial Code (code no 6102, TCC in short) has been in force since 1 July 2012 and was expected to bring a new dimension to maritime law practice which the Turkish judges should follow.This new dimension can be seen in the omitted provisions concerning the special marine risks insurance. BookVI of the Code leaves the contents of insurance contracts for marine risks to the parties involved. Per book V, the Code also allows the parties of maritime contracts to use standard contracts, such as Barecon, Gencon, NYPE, Baltime etc. Therefore, the principle of freedom of contract had been expected to apply more often without getting into the governing framework of the general principles of Turkish Civil Law. The drafting committee behind the TCC was probably expecting that through that freedom being applied to those contracts, so-called “private conditions”, such as Barecon, Baltime and/ or Institute Time Clauses – Hulls, made between multinational parties, would be better understood and disputes easier resolve.

It is common for maritime and marine insurance actors to use English contractual provisions and/or well-known standard forms. Before the new TCC came into force, such “private conditions” had been found difficult to construe by judges indispute resolution in practice.Most standard forms in maritime practice had not been recognised by the previous TCC (code no 6762), for instance, time charterparties. Additionally, bareboat or demise charterparties were not mentioned in the previous Code, but were covered by the provisions on hire contracts in the general principles of the Code of Obligations. However, the drafting committee thought that this would bring some difficulties in applying English contractual terms which in the past has caused some perplexity amongstTurkish judges who have had to deal with such cases.

For that reason the intention of the drafting committee was to mend some gaps from the previous Code.Therefore, for the fields that were not regulated by an international convention – such as bareboat charter and time charter contracts – new rules have been provided. French, Dutch and Norwegian legislation as well as English court decisions and standard international contracts such as Barecon 2001 were taken into account in the preparation of the new provisions on bareboat charters (code 6102 TCC sections 1119 to 1130). Concerning the provisions of time charter contracts, the same foreign legislation cited above as well as English court decisions and international standard terms such as NYPE 93 have inspired the Turkish legislator (code 6102 TCC sections 1131 to 1137).

However, something unexpected has been going on and the drafting committee may well find that it has missed its main aim.To explain the situation, it should be recalled that the TCC contains a section, 1/1, which did exist in the previousCode, and which indicates that the Code itself is a part of the Turkish Civil Code including the Code of Obligations.

“TheTurkish Commercial Code is an integral part of the Turkish Civil Code.The provisions of this Code and the special provisions of other Laws concerning transactions, acts and affairs interested in any trading house, factory or establishment operated commercially are regarded as commercial clauses.”

And if there is no commercial provision in the TCC applicable to the dispute then the judge can apply the general rules in the Turkish Code of Obligations (section 1/2).

“In commercial affairs for which there is no commercial clause the court shall decide according to commercial usage and customs and, in the absence of the same, according to general provisions.”

It is clear that the above section of the TCC establishes a strong tie with the general principles ofTurkish law.At that point the Turkish Code of Obligations section 20/1 needs to be examined. This section provides a definition of “standard terms” as follows:

“Standard Terms are contractual stipulations which have been drafted solely by a party and submitted to the other party in advance of a contract is concluded so as to be used in many similar contracts subsequent. When classifying these terms, no regard should be made upon their scope, font type or shape or whether they are located in the text or annex of the contract. 
It does not preclude the provisions of a contract be deemed as standard even the text of the contracts which are concluded for the similar purposes are not equivalent with each other. 
Where a contract with standard terms involves in its text or in another contract provisions that each of the term or condition has been accepted upon negotiation do not solely exclude them of being standard. 
The provisions regulating the standard terms apply also to the contracts, notwithstanding their nature, submitted by legal or natural persons who provide services upon a statutory or official permission.”

On 27 to 29 June 2013, the Working Committee was assembled under the lead of the “General Directorate of Laws”in the Ministry of Justice.The members of theWorking Committee showed an inclination to establish a mechanism which monitors all of the TCC provisions and intervenes if any of them is applied contrary to the general principles of the Code of Obligations. If so, the use of those standard forms which should normally be construed according to English legal principles will turn out to be under the control of the general principles of the Turkish Code of Obligations. This approach would cause some reluctance among the foreign entities entering maritime and/or marine insurance contracts, since all those internationally used standard contracts would be monitored by section 20 of the Code of Obligations. Therefore this issue will yet again need to be resolved.

Author: Prof Dr Vehbi S Ataergin