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Court of Cassation Decides Cooperatives Are Qualified as Merchants

Court of Cassation Decides Cooperatives Are Qualified as Merchants

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The Joint Chambers of Civil Court of Cassation's ["Court of Cassation"] decision dated November 12, 2021 and numbered 2020/2 E. 2021/3 K. ["Decision"], put an end to the debate regarding the nature of cooperatives. The Court of Cassation concluded that cooperatives, which include partnerships such as consumption, production, credit, and building cooperatives shall be regarded as commercial entities.

Background of the Debate

The term "venture" used in the definition of cooperatives in the Cooperatives Law dated 1969 and numbered 1163 sparked discussions about cooperatives as merchants, which have been the subject of various legislative action and Court of Cassation decisions since the 1920s. Despite attempts to resolve the disagreements by altering this term to "partnership" in 2004, different chambers of the Court of Cassation had been rendering incompatible judgments until today. This predicament emerged from the unique function of cooperatives rather than the uncertainty of legal regulations. The chambers which maintained that cooperatives did not have the title of merchant, emphasized that the term "partnership" alone did not indicate the existence of a commercial characteristic and that these unique partnerships with a social function could not be merchants by their nature, even if they were listed among commercial entities in the law.

Summary of the Decision

In its Decision, the Court of Cassation reviewed the past and present applicable legislation in order to determine the will of the legislator and made evaluations on whether cooperatives qualified as merchants.

The Decision mainly revolves around the decision dated 1945 and numbered 1944/8 E. 1945/14 K., in which the Court stated that "... cooperatives are one of the commercial companies, regardless of the title and actions of their partners, and the competent courts for the disputes that arise from them are commercial courts..." and the first paragraph of Article 124 of the Turkish Commercial Code No. 6102, where cooperatives are classified as commercial entities, which is an intended classification as suggested by the reasoning of the article.

Furthermore, provisions in the Bankruptcy and Enforcement Code No. 2004 stating that cooperatives are subject to bankruptcy and concordat, as well as provisions in the Cooperatives Law No. 1163 such as the obligation of registry to the local Trade Registry Office or the consideration of lawsuits as commercial cases, reveal the legislator's intent for cooperatives to have the title of merchant.

Within this framework, the Court of Cassation concluded that cooperatives are commercial entities that qualify as merchants regardless of managing a mercantile business, thus putting an end to the long debate.

Effect of the Decision

With the decision, which declares cooperatives to be merchants, it is clear that the provisions and consequences of being a merchant will also apply to cooperatives. As a result, it was concluded that all legislation pertaining to the title of merchant, from the obligation to act as a prudent businessman to issuing invoices apply to cooperatives, surmounting the need for specialized regulation.

By Baris Ulker, Senior Associate, and Aziz Can Cengiz, Associate, Guleryuz & Partners

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