1. Introduction
The equalization claim—commonly known in practice as portfolio compensation—is a special and exceptional balancing mechanism regulated under Article 122 of the Turkish Commercial Code. In recent years, there has been a noticeable increase in such claims, particularly following the termination of dealership, distributorship, and agency relationships. A significant number of these claims are brought before the courts; however, uncertainties often arise in practice as to in which contractual relationships and under what circumstances portfolio compensation may be claimed. As a result, prolonged judicial proceedings frequently end without achieving the desired outcome.
According to the law, if the company continues to derive benefits from the business clientele developed by the agent through its own efforts even after the termination of the contractual relationship, and provided that other conditions are met, the agent may be entitled to appropriate compensation. The provision also stipulates that portfolio compensation may be claimed in exclusive distributorship or similar continuous contractual relationships granting exclusivity.
However, acceptance of such claims depends on the cumulative fulfillment of certain conditions stipulated by law. In recent years, court decisions have particularly underlined that these conditions must be carefully examined in each case.
2. Under What Conditions Can Portfolio Compensation Be Claimed?
To be entitled to portfolio compensation, there must first be a contractual relationship between the parties.
It is not sufficient for the relationship to be established merely under the title of a “dealership” or “distribution” agreement; rather, the contract must grant exclusivity, such as an exclusive distributorship or a similar arrangement. For instance, in one case, the fact that the dealer had operated for a long period with a large customer base was not deemed sufficient on its own to transform the relationship into one of exclusivity. The court ruled that, since the dealership agreement did not grant exclusivity and there was no mutual intention to establish such exclusivity, no exclusive distributorship existed, and the claim for portfolio compensation was therefore dismissed. In practice, particularly in dealership arrangements, protection under the law is recognized only where the parties’ intention to establish exclusivity is clearly demonstrated. For this reason, the party seeking portfolio compensation must first establish that the contract was indeed exclusive in nature and that it provided a framework capable of affording such protection.
Another requirement for awarding portfolio compensation is that
the contract must have been terminated in a manner that allows for such a claim. If an agent terminates the agreement of its own accord without any fault attributable to the company, or if the company validly terminates the agreement due to the agent’s misconduct, no claim for portfolio compensation can be made. In a recent decision, the court found that the claimant agent had breached its contractual obligation of notice and that the termination by the counterparty was therefore justified. The ruling clearly stated that the agent’s conduct directly caused the termination of the agreement, and in such a case, the agent could not seek portfolio compensation. Accordingly, the party claiming portfolio compensation must be able to demonstrate, in concrete terms, that no fault can be attributed to it in connection with the termination of the contract.
In addition, for portfolio compensation to be awarded,
the agent must have brought a new customer base to the company, and the company must continue to obtain significant benefits from this clientele after the termination of the agreement. Merely maintaining relationships with existing clients or carrying out efforts directed at potential clients may not be sufficient to meet this requirement. In assessing a claim for portfolio compensation, it must be concretely examined whether the clientele brought in by the agent continued to be used by the company following the termination of the agreement. In this respect, it is not enough to simply assert that new clients were acquired; it must also be demonstrated, with concrete evidence, that those clients continued doing business with the company after the termination and that the company generated revenue from those relationships.
Another condition underlying the equalization mechanism is that,
due to the termination of the agreement, the agent must have lost the right to claim remuneration for transactions with new clients. According to the Turkish Commercial Code, one of the essential conditions of equalization is that the agent is deprived of the commissions it would have earned had the agreement continued. In practice, this condition is deemed to be automatically satisfied once the contractual relationship ends.
Finally,
the compensation claim must also comply with the principle of equity. Portfolio compensation may only be granted if, and to the extent that, it is justified by equity. In this context, all the circumstances of the case must be considered in determining whether equalization would lead to a fair result. In a recent decision, the court emphasized that when assessing equity, not only the benefit obtained should be considered, but also contractual benefits, risk allocation between the parties, the agent’s income level, extra-contractual gains and losses, personal circumstances, any breach of non-compete obligations, the brand’s attraction, and the manner in which the agreement was terminated, all of which must be considered together.
In addition, for a portfolio compensation claim to be validly brought,
it must be made within one year following the termination of the agreement.
3. Current Practice and Sectoral Assessment
Claims for portfolio compensation are frequently encountered in long-term contractual relationships such as dealership, franchise, and authorized dealership agreements, which typically involve operating with a defined customer base. Since such commercial collaborations usually entail brand loyalty, obligations to operate in a specific region, and the creation of a customer network, they provide a more suitable ground for meeting the statutory conditions.
From a sectoral perspective, in the automotive industry, if the agreement expressly states that the party is not granted exclusivity in a particular region and there is no contrary practice, portfolio compensation is generally not awarded.
In the retail sector, however, court decisions more frequently grant portfolio compensation where the agent has developed a clientele through long-standing activities, provided that other conditions are also satisfied
In distributorships operating under chain brands, particular attention is paid to whether direct sales are allowed in chain stores and whether exclusivity rights have been granted to the parties, as these factors are central in evaluating portfolio compensation claims.
In the fuel distribution sector, portfolio compensation claims are often rejected on the grounds that the conditions are not met, especially when they are not supported by concrete evidence. This is largely due to the fixed-term and renewable nature of such agreements, the operation of distributor companies through extensive dealership networks, and the frequent absence of explicit exclusivity clauses.
Insurance agencies, on the other hand, constitute the clearest and most consistent example of portfolio compensation in practice, as they are subject both to the Turkish Commercial Code and to the Insurance Law, which provides specific regulation.
4. Conclusion and Assessment
Portfolio compensation is no longer merely a theoretical concept for traders operating in sectors such as automotive, insurance, retail, and distribution; it has become a concrete source of commercial disputes with financial and operational consequences. With the growing prevalence of franchise systems, the diversification of authorized dealership relationships, and the development of loyalty-based customer structures, claims for portfolio compensation have become increasingly visible in practice. However, the Court of Cassation makes it clear that such claims can only be upheld if specific conditions are met.
In this respect, elements such as whether the contract grants exclusivity, the origin and development of the customer base, whether that clientele continues to generate revenue after the termination of the agreement, whether the agent bears any fault, and whether the overall relationship complies with the principle of equity must all be assessed separately, taking into account the specific dynamics of each case.
For companies seeking to minimize the risk of disputes, it is crucial to draft contractual provisions on exclusivity, non-compete obligations, customer contribution, and termination in a clear and proportionate manner. When planning strategic decisions, companies should also anticipate potential portfolio compensation claims and prepare accordingly from both a legal and financial perspective.
Selin Su, Managing Associate
Ebrar Turan, Associate
Selen Kaya, Trainee Lawyer