The Certification Requirement in Supply Contracts

In the precious metals and stones chain, the certification obligation in practice arises not from legislation but from the contract. The certification clause that chain brands and corporate buyers insert in their supply contracts becomes a contractual obligation as soon as it is accepted; from that point on, non-conformity is not an administrative irregularity but a breach of contract.

The clause is often written in a single sentence: the supplier is to be RJC certified. This sentence carries three uncertainties, and all three give rise to disputes: the nature of the obligation, the scope of the certificate and the consequence of breach. These three points are where the negotiation should take place.

What Obligation Does the Clause Create?

The first distinction is between obtaining the certificate and maintaining it. If only obtaining it has been agreed, the obligation ends once it has been performed. Yet what the buyer expects is the existence of a valid certificate throughout the term of the contract; this is a continuing obligation and is required anew at each delivery.

The second distinction is whether the obligation is primary or ancillary. Has the certification clause been framed as an undertaking as to the quality of the goods sold, relating to their freedom from defects, or as an independent undertaking relating to the supplier's business? The distinction determines which legal remedies can be used in the event of breach and which time limits will run. Unless it is written in the contract, this distinction is resolved by interpretation.

Where Does the Uncertainty of Scope Lie?

Here a technical detail has commercial consequences. Under the Code of Practices and the Laboratory-Grown Materials Standard, the member is certified as a whole and for all materials within scope; certification is not carried out facility by facility or material by material.

However, the boundary of the scope depends on the control criterion. Control means being the beneficial owner of 50% or more of the issued capital, or holding the power to direct the management of the company. Therefore, an affiliate with a 49% shareholding or a joint venture that is not controlled may fall outside the scope of certification.

Under the Chain of Custody standard, the scope is even more flexible: it does not have to cover the member's entire business or all of its precious metals sourcing; the member may bring only certain facilities or certain types of material within scope. For this reason, the scope of the certificate is written on the certificate and published on the organisation's website. The buyer should read the certificate, not the undertaking.

What Happens If the Certificate Is Suspended?

The validity of the certificate is not uninterrupted. Its scope may be narrowed, and it may be suspended, withdrawn or terminated. The grounds for suspension include failure to complete the surveillance audit on time, a finding of a critical breach, a major non-conformity and suspension of membership by the organisation.

During suspension, the member may not use the organisation's logos; the certificate and logos are removed from the member's profile page. For a contract, this means that the undertaking is in effect left without substance. Even so, the consequences of suspension are often not addressed in supply contracts.

Three points need to be addressed: the supplier's obligation to notify the buyer of suspension or withdrawal, and the time limit for doing so; the remedies available to the buyer after notification; and the cure period allowed for the certificate to be reinstated. If these three are not written down, the consequence of breach remains open to dispute.

How Should the Representation and Warranty Clause Be Drafted?

The clause should have three elements. The first is the existence of the certificate: the name and version of the standard and the certificate number. The second is its scope: which company and facilities, which materials. The third is the validity dates: start, end and any extension period.

A change notification is added to this. The member is obliged to notify the organisation of structural changes in its business; it may be agreed that the same notification will also be made to the contractual counterparty. A change in scope then no longer comes as a surprise to the buyer.

How Far Does Confidentiality Go?

The member may ask the auditor to sign a confidentiality agreement. There is a limit, however: information that must be passed to the organisation, including critical breaches, falls outside the scope of the confidentiality agreement.

This limit also affects the information-sharing clause in the supply contract. A buyer's request for the full audit report means sharing a document that contains the member's trade secrets and employee statements. A reasonable solution is confirmation of the certificate and its scope, together with summary information on whether any non-conformities exist, instead of the full report.

Where Is the Dispute Resolved?

Two separate forums should not be confused. Complaints relating to the application of the standard and to the certification process are first taken to the audit firm and, if they cannot be resolved, to the organisation's complaints mechanism. Members and audit firms agree to be subject to this mechanism and to be bound by its decisions.

By contrast, the organisation's Complaints Mechanism contains an express caveat: the complaints procedure does not replace or limit legal remedies. Therefore, a dispute between buyer and supplier, even if based on the certification clause, is subject to the contract's dispute resolution clause. If there is no such clause, the general rules of jurisdiction apply.

What Should Be Done?

• Do not leave the clause as a single sentence; state clearly whether the obligation is to obtain or to maintain the certificate.
• Attach the scope of the certificate to the contract as an annex; rely on the certificate itself rather than the text of the undertaking.
• Anticipate that uncontrolled affiliates and joint ventures may fall outside the scope; if you are the buyer, ask separately about the units outside the scope.
• Set out in a separate clause the notification obligation, the time limit and the consequences in cases of suspension, withdrawal and termination.
• Build the representation and warranty clause on the name and version of the standard, the certificate number, its scope and its validity dates.
• Agree on confirmation of scope and the sharing of summary information instead of the full audit report; observe the limits of confidentiality.
• Add a dispute resolution clause to the contract; note that the complaints mechanism does not replace this clause.

Warning. The information in this article is for general information purposes and does not constitute a legal opinion. Foreign exchange and precious metals legislation is a frequently changing area; the amounts, rates, thresholds, time limits and dates in this article may change in line with the legislation in force. Verify the latest version of the legislation before every application and transaction. Current texts are available at mevzuat.gov.tr.

Source: RJC Member Certification Handbook v1.0, February 2025 (§ 3.1, § 4.1.6.3, § 4.1.6.4, § 5.3 Table 11, § 5.9) · RJC Complaints Mechanism, 2025 (A.1) · RJC Code of Practices Standard, December 2024 (COP 14) · RJC glossary (definition of control) · Turkish Code of Obligations (Law No. 6098) (general provisions and liability for defects)

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