Public procurement contracts in defense industry are highly vital for contractors due to the volume of the contracts and dominance of the government agencies. Moreover, nonperformance or delay in the contracts highly force contractors to pave the way for remedial conditions whilst avoiding the risk of debarment. This article highlights the force majeure conditions in government contracts under Turkish law.
Public Procurement Law Perspective
The Law on Public Procurement Contracts of Turkey limits the force majeure conditions with natural disasters, legal strikes, epidemic cases, and an announcement of partial or general mobilization. The law also refers that the Public Procurement Authority (‘the Authority’) in some cases may also determine ‘similar’ circumstances as force majeure when necessary which depends on the application of the contracting authority to the Authority in this respect.
For the contracting entity to be able to accept any of the circumstances stated above as force majeure, including cases of time extension and contract termination; it shall be absolutely necessary that the concerned case did not arise from the contractor’s fault, that it constituted an obstacle in fulfilling the contractual obligations, that the contractor could not afford to remove such obstacle, that the contractor has notified the contracting entity in writing within twenty days as of the date which the force majeure has occurred, and that it has been documented / certified by competent authorities.
In military procurement regime, the contracting authorities uses framework contracts that are stipulated in accordance with the Directive MSY 310-2, National Defense Ministry’s Directive on Goods and Services Purchase under Exceptions (3.B) of Public Procurement Law numbered 4734. These contracts provide more detailed provisions in terms of force majeure. Contracts may also refer to the administrative specifications in case of a need for specific information for determining a force majeure. This still does not change the fact that the contracting authority is authorized on assessment of a claim that is based on either relevant law or the contract.
The Law on Public Procurement Contracts imposes the responsibility of accepting a force majeure condition to the contracting authority. Nevertheless, since the content of the force majeure is open to ‘similar’ circumstances, the contracting authority has right to apply to the Authority for evaluation of a particular situation. The contracting authority shall state its remarks on the concerned subject while making such application. These written applications shall be examined by the Authority in the light of unpredictability and unavoidability conditions of the circumstances in question. As it is prescribed in detail by the General Communique on Public Procurement, a contractor cannot argue force majeure in case the facts on force majeure claim are relates to be a prudent merchant.
For instance, in recent decisions of the Authority, unexpected foreign trade regime changes or legislative amendments have been regarded as force majeure however inflationist pressure, and devaluation have not deemed so.
Civil Law Perspective
From the civil law perspective, a contractor may terminate the contract without any contractual penalties in case of a force majeure that creates impossibility of performance. However, such termination is only possible if the contracting entity accepts the claim. In case of a rejection, a legal dispute would arise. Council of State clearly concluded disputes that arose after landing a public procurement contract are within the scope of civil courts.
Although there is no specific provision of the Law on Public Procurement Contracts Law regarding the impossibility of performance, article 36 of it refers to relevant provisions of the Code of Obligations for cases which are not contained. Whilst Code of Obligations do not stipulate force majeure but stipulates impossibility of performance.
In civil law perspective the impossibility may either be legal or factual. The legal impossibility may be caused due to an unexpected legislative amendment or an act of relevant authority which would result with impossibility of the performance of the contractual obligations; whereas factual impossibility may be caused by natural incidents or conditions which would also lead to the impossibility of performance. Even the reason behind the impossibility may differ, its consequences are identical.
In case of such a condition, the contractor may apply to the civil court of the first instance for the termination or amendment of certain provisions of the contract in case of a force majeure that constitute impossibility of performance. The Court may terminate or amend the contract if circumstances arise from an unexpected and unforeseeable event that was not caused by the actions of the party providing the claim complies with the provisions of the contract and notices are made properly as defined in the contract. Pursuant to the case law of the Supreme Court, the contractor bears the responsibility of proving that impossibility occurred against all the measures that can be expected from a prudent merchant.
In assessment of being a prudent merchant we see that it is mostly construed under case law as there is no specific definition in Turkish codes. The recent precedents show that the contractors must complete its preparation as soon as possible before being awarded in order to perform all obligations as expected from a prudent merchant. This preparation phase also includes the assessment of possible obstacles and how to avoid them which complicates the process from contractor’s point of view. If the contractor comes across with a force majeure event with the all assessments and precautions, the contractor must notify the administration in no later than 20 days subsequent to the occurrence of force majeure. All possible documents that justify force majeure claim must be presented together with the application. In case of approval of the application by the administration, the process ends with an extension of time or termination of the contract.
Considering the administration’s discretionary power regarding acceptance of a force majeure claim, a rejection is quite possible as well. In such situation, the contractor may perform the contract deficiently or may not be able to perform it at all. This may result with encashment of the security and debarment one to two years. However, since public procurement contracts are governed by private law, a contractor may file a lawsuit at civil court of the first instance in order to cope with such consequences. Applicants must bear in mind that the Turkish Supreme Court accepts force majeure claims only in extraordinary cases as result of pacta sunt servanda and prudent merchant principles.
Author: Kaan Erdoğan