Turkey: Litigation Capacity For Joint Ventures

Last Updated: 26 June 2019
Article by Kübra Öztürk

1. Concept

In recent years, the definition of "joint venture" is heavily preferred with different names to be used in different places for the concept of joint venture. However, this definition is used, as "joint business partnership" in some decisions of the Supreme Court of Appeals, as "business partnership" 11th Corporate Tax Law ("law no 5520") article 2, and in the Public Procurement Law no: 4734 ("law no: 4734") the definition of "joint venture" is used as the sub-headings of "partnership of business" and "Consortium" under the title of "joint venture".

In the Law No. 5520, 2. Article 7. in the paragraph entitled "Taxpayers", the joint venture is defined as business partnerships and business partnerships are defined as those who demand to establish a liability in this way from the partnerships established in order to jointly undertake and share a certain business with each other or with individuals or real persons, as defined in Law No. 5520. Furthermore, it has been determined that the lack of a legal entity of joint ventures will not affect their obligations.

According the Law No. 4734 14. article entitled "Joint Ventures"; the joint ventures may be established by more than one natural or legal entity as (I) business partnership or (II) consortium. In the same article, it is stated that the members of the consortium will be able to do all of the work together with the rights and responsibilities of the business partners and the members of the consortium will be able to do all of the work together with the rights and responsibilities of the business partners.

In addition, the relevant article of Law No. 4734 clearly stipulates that the real or legal persons forming the business partnership are jointly and severally responsible for the fulfillment of the commitment, and that the consortium and the consortium of real or legal persons who form the business partner shall be jointly and severally responsible for the fulfillment of the commitment.

2. Legal Nature

Joint ventures are considered as ordinary partnerships. Ordinary partnerships arising from bringing together more than one person to realize their common purpose do not have legal personality. Therefore, although joint ventures may be taxpayers within the scope of Corporate Tax, they do not have legal entities.

Since joint ventures are considered as ordinary partnerships, unless otherwise agreed in the joint venture agreement, the issues between them are subject to 520 et al. Articles of Association of the Republic of Turkey are applied.1

3. Capacity to Sue of the Joint Venture

Article 51 of the Code of Civil Procedure No. 6100 ("Law No. 6100") stipulates that the capacity of the case will be determined according to the capacity to exercise civil rights. Since ordinary partnerships do not have legal personality, they do not have a capacity to act and a party

license. Therefore, joint ventures considered as ordinary partnerships (except in cases where special authorization is given to the managing partner) - as joint ventures - do not have the capacity to act and party. Therefore, it is necessary to consider whether it is compulsory to include each person in the joint venture in the petition.

In terms of lawsuits to be filed by the joint venture, the persons forming the ordinary partnership must act together as a party. In other words, all cases related to ordinary partnership should be replaced by all partners2.

According to article 59 of the Law No. 6100, titled as "Compulsory court friendship";

"According to substantive law, if a right is to be used together by more than one person or if it is required to be claimed against more than one person and only one sentence must be given for all, there is compulsory friendship."

Pursuant to the aforementioned law, in a case to be filed by the joint venture, if there is a single provision for all of the partners in accordance with the material law, it is necessary to be included in the lawsuit petition of each person constituting the partnership since there is compulsory court friendship among the parties (except the special authority to sue the executive partner).

In cases where the joint venture is a defendant, the receivable is subject to a lawsuit and the creditor / plaintiff may request all of the debts from each of the debtor / defendants since each person constituting the partnership has several responsibilities. However, if the subject of the case is other than money, then the case must be managed against all the partners that make up the joint venture. In this case, there is compulsory litigation friendship between the persons forming the partnership as mentioned above 3.

4. Judicial Decisions

If we look at the judicial decisions related to capacity to sue of the joint ventures;

- 11.10.2016 dated and 2016/8570 E., 2016/8016 K. numbered decision of the 11th Law Office of the Supreme Court of Appeals:

"In the present case, the creditor requested a precautionary foreclosure against both the ordinary partnership and the companies that make up the ordinary partnership, based on the checks in which the ordinary partnership was circulated, and the court ruled on demand. However, the capacity to sue, according to Article 61/1-d of the CCP No. 6100 in terms of the case, even if it was not claimed by the parties, the court should take into consideration. In this respect, it is necessary to abolish the precautionary lien decision against the joint venture because the precautionary lien decision given against joint venture is become effective by giving a decision on precautionary lien decision against all of the three companies, therefore conditions for suing a lawsuit have not formed. Decision which is given as written and based on wrong evaluation is not correct, for this reason the decision should be reversed."

- 10.10.2018 dated and 2017/15153 E., 2018/21707 K. numbered decision of the 22nd Law Office of the Supreme Court of Appeals:

"As emphasized in the decision of the General Assembly of the Law 08.10.2003 dated, 2003/12-574-564 numbered, the joint venture is a type of partnership in which two or more real or legal persons join in order to achieve a certain purpose and this partnership does not have a legal entity on its own.

Turkish Law of Obligations No. 6098 620. (No. 818 Of The Turkish Law of Obligations 520.) as explained in the article, the partners are directly and unconditionally responsible for all their assets due to the debts of the partnership because of the fact that the ordinary partnership does not have a judicial personality. Therefore, the ordinary partnership does not have an active and passive litigation license. Therefore, in cases of ordinary partnership, those who form a common partnership should act together as a party. In accordance with the rules of co-ownership of the cases to be filed by the ordinary partnership (Tbk no.6098), 638. BK 534 , 818., TMC's 702. All partners must act together as an obligatory case companion. Party driver's license is from public order and must be considered by the court itself."

- The Supreme Court of Appeals 22. Department of law dated 09.05.2018 and E. 2017/45660 K. 2018/11309 numbered advertisement:

"File contents of the case ... Construction and Trade A.S. Opened against the ordinary partnership the ordinary partnership prior to the decision of all communications made to where a provision is made against the partnership also ordinary where and where all communications after the decision is made to the ordinary partnership, ordinary partnership, as shown in the title with a decision as a defendant, however, the terms in the section "joint collection of the defendant severally in the form of" it was seen that it was decided.

According to the above-mentioned provisions and explanations, the companies that make up the joint venture should be notified separately and after the formation of the parties, the conclusion of the trial and each of the companies that make up the joint venture should be disclosed separately in the decision.

In this case, the work to be done by the court should be notified to the companies that make the joint venture, the formation of the parties should be ensured, the power of attorney or the approval documents related to the representatives should be completed and the companies that make the joint venture should be shown separately in the provision. It is wrong to establish a ruling on a joint venture that does not have legal personality in writing before the entity is established."

* State Council 7. Dated 05.06.2007 and E.2004/1887 K.2007/2607 numbered advertisement:

"There is no legal entity of ordinary partnerships that do not possess this attribute, and therefore no party license. As a matter of fact, the general assembly of the Supreme Court of Appeals dated 8.10.2003 E:2003/12-574 The Decision No: k2003/564 also states that ordinary partnerships are not legal entities and that they do not have party licenses. For this reason, in

cases related to the ordinary partnership, the parties who form the partnership act together and these cases act together, the law of obligations 534 and Civil Code 630. in accordance with the articles of association, in accordance with the property rules in case of participation by all partners together, and not on behalf of the ordinary partnership, but on behalf of all partners personally or by the attorney with the power of attorney of each of the partners to be opened, must know-see. In fact, if one of the partners is authorized to administer the joint venture, all partners shall appoint another partner to administer the joint venture on behalf of them. However, since administrative proceedings by proxy can only be filed by the attorney in the administrative court, it is not possible for the attorney to file administrative proceedings as the representative of the ordinary partnership, which is not authorized by the other partners, or which is not directly or indirectly a party, as the representative of the ordinary partnership. If a partner is appointed as a lawyer on behalf of the other partners, the power of attorney granted to him only depends on the explicit authority in this respect. Since the representation of the ordinary partnership which does not have the capacity to be a party to legal proceedings is not possible, there is no possibility of opening administrative proceedings with the power of Attorney given on behalf of the ordinary company. For the performance of a particular business, a partnership established by more than one company is called joint venture. In our law, there is no special arrangement that deals with contracts related to these partnerships as a whole. These partnerships are under the name of "business partnerships" in the corporate tax law and they are subject to this law in terms of tax liability. However, it is legally impossible for the taxpayer to gain personality to these partnerships, as explained above, even if they are recognized as ordinary partnerships."

5. Result

In the above-mentioned Supreme Court judgments, the fact that the joint competence capacity of the joint ventures is being addressed shows that there has been still confusion about this issue by the parties' lawyers and the Local Courts. However, in order to summarize the issue briefly, it is unlawful to establish a provision on behalf of the joint venture which has no legal personality and is considered as an ordinary partnership. Therefore, if the joint venture is to be represented as a party in the case, each party to the joint venture must be represented as a party in the case, and notification must be made to the parties to the joint venture.

In cases where a lawsuit is requested to be filed on behalf of a joint venture, each party making the joint venture must be notified as a plaintiff as there is a mandatory litigation friendship among the persons who make the joint venture. However, if it is desired to file a lawsuit against the joint venture, then it is the responsibility of the creditor/plaintiff to open the case against whom the joint venture has a mutual joint responsibility. In this case, if the plaintiff wishes, the plaintiff may direct the case to one of the parties who made the joint venture, as well as show all the parties who made the joint venture as the plaintiff. However, in cases where the joint venture is the defendant and the subject of which is nothing other than money, the case must be directed against all the persons who constitute the joint venture.

Footnotes

1 Dr.Ömer Korkut, Türk Hukuku Bakımından Ortak Girişim (Joint Venture) ve İş Ortaklığı,

2 Asst. Prof. Dr. Fatih Bilgili, "Adi Ortaklıkların Fiil Ehliyeti ve Alman Federal Mahkemesi'nin Verdiği Yeni Bir Karar Karşısında Ortaya Çıkan Durum", Article.

3 Asst. Prof. Dr. Fatih Bilgili, "Adi Ortaklıkların Fiil Ehliyeti ve Alman Federal Mahkemesi'nin Verdiği Yeni Bir Karar Karşısında Ortaya Çıkan Durum", Article.

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