EN 
TR 
Governments allocate large budgets to maintain and strengthen their security capabilities whilst defense manufacturers explore new markets continuously to expand their sales in this heavily regulated industry. The market dynamics such as distorting competition, military alliances, heavy regulations, political conditions and diversity of acquisition models not only make some companies reluctant to step into this industry but also are challenging for existing players. As a result of globalization and shifting of the manufacturing from high cost to low cost locations, standardization and conformity of the defense items became much more critical in defense contracts.
In this paper, we aim the readers to gain insight on liability perspective of most two essential certificates, Certificate of Conformity (“CoC”) and Declaration of Conformity (“DoC”), which are generally to ensure the item being manufactured meets requirements in defense contracts,
CoC also called as Certificate of Compliance, shall be defined basically as a document generally issued by independent entities or government authorities (Turkish Standards Institution of Turkey and Performance Review Institute through its NADCAP program for aviation, defense and space industries) stating that items meet the required standards or specifications.
The issuance of a CoC requires prior inspection on item itself together with safety and test procedures and bears the identification, manufacturing date and place of the item, identification of manufacturer (or importer when subject to import), safety, test related statements. The content of or the requirement for a CoC may vary depending on each country’s requirements for custom clearance purposes and custom proceedings might be risky in case the CoC requirements are not met. CoC shall be requested either for batch of the item or for each party and component having its own serial number separately.
DoC unlike CoC is a declaration by the manufacturer or its representative only stating that item meets all applicable requirements. It is essential for buyers to understand the difference between CoC and DoC which is the issuer as to such difference regard to inspection as well. The inspection prior to issuance of a CoC requires accreditation of the inspector whilst it is only conducted by the manufacturer for DoC purposes. Undoubtedly that such notable difference in issuers may likely result with disputes in case of a claim related to the item itself even the legal purposes of both certificates seem similar.
There are not many defense manufacturers or suppliers arguing on CoC or DoC in case the defect claims constitute the subject matter of a litigation. The response of the Turkish courts in general is to seek applicable clauses depending on type of the contract (whether it is sale and purchase or work and service contract with purpose of making a customized item/platform) and the time of transfer of risk and title as different chapters of Code of Obligations become applicable accordingly.
In rulings of courts in Turkey, DoC is simply deemed as an acknowledgment by the manufacturer representing that the item meets required features and it is neither a quality certificate nor a guarantee for safety. However, it allows the suppliers (manufacturers or independent contractors) in the distribution chain and the buyer to presume that there is no obvious or known defect. Hence, if the item does not match up to its features, DoC shall be considered as misrepresentation and breach of contract. It is entirely clear in cases where the manufacturer is also acting as the contractor however in defense contracts in which the contractors are acting as intermediary (independent seller) the burden of liability may shift and it becomes highly complicated for the non-manufacturing contractor as it rely on the DoC (and CoC in some cases) of the manufacturer before resale of an item. The cost of such a failure does not only come at the expense of the contractor, it also bears the risk of debarment in defense contracts. In CoC practices, manufacturer and buyer both rely on a third party’s assessment. It is clear to say that inspector/issuer of the CoC is legally liable for conducting an inspection in duty of care and diligently. However, the liability which is highly and mostly related to duty of care between contractor and the buyer or (assuming that there is a contract among parties for inspection), the contractor and the issuer of the CoC is a matter of contracts law and may only be claim of negative and positive damage as consequence of breach of a contract. The possible claims by buyer to the inspector/issuer of the CoC will be subject of tort law to provide a civil remedy as result of negligence.
There is another fundamental issue both for CoC and DoC concerning the defect liability is the time of notification. As part of duty care responsibility, inspector for CoC purposes shall notify the manufacturer about non-conformity on timely manner. Unless the inspector made its notification in due course as defined under the law, the manufacturer is entitled to claim for loss and damages if any incurred. Likewise, the manufacturer shall also pay attention to the time of notification where a defect is detected by itself which regards to inspection services or the item itself. 19th Chamber of Civil Law of Turkish Court of Cassation ruled in May 5, 2003 that the manufacturer is not entitled to claim to compensation from the inspector in case the notice of defect is not in due course and form as defined in law.
Far from being strict relevant to defect claims as stated above, in some cases parties of a defense contract may likely argue that, defect notified following the risk of transfer and title is whether subject to warranty or it means non-performance of a contract in due manner. There are different approaches on several defense contracts regarding this matter however completion of the works or delivery of the item in a proper and workmanlike manner as shown on the contract documents without any deficiency on quality, quantity, time and customary use regards to primary performance obligation of a contractor and in no case shall be related to warranty commitments which is deemed as secondary performance obligation under Turkish law. In other words, the secondary obligation of the contractor to the buyer derive from primary obligation and in no case unless primary performance obligations exist and are satisfied, the secondary obligations will exist. In this regard the most significant points which are source and time of failure is therefore highlight a cycle of the pursuit of the liability in such heavily regulated contracts and contract officers are suggested to re-think about the possible liability conditions especially in multilateral defense contracts and to mitigate the risk with other linked work and service contracts to the extent possible as the government contract itself will not allow to do so in most cases.
Author: Şafak Herdem
