Turkey: The Turkish Update - September 2007

Last Updated: 10 October 2007
Article by Guner Law Office

This is the September 2007 edition of our email news service – The Turkish Update – which is issued every month. Our aim is to provide a concise and easy-to-read summary of developments in Turkey which may be of interest to our clients. If you have any comments please click on the 'Do you have a question for the author?' button to let us know your thoughts and any ideas that could enhance this service.

General

Abdullah Gul was elected to the Presidency of Turkey (with 399 affirmative votes) in the third round of parliamentary elections on 28 August. Gul was previously the foreign minister in the Turkish Government.

Media

In April, the SDIF took over Sabah and ATV when the fund found out that former owner of the companies, Dinc Bilgin, and the last owner, Turgay Ciner, concealed some protocols and contracts from the SDIF. Following this takeover the SDIF decided to sell the Sabah-ATV Group and set the date of the auction to 7 November. The estimated sale value of the group, which contains the daily Sabah, the TV channel ATV, four other smaller newspapers, one radio station, some magazines, one printing house, broadcasting rights and some other assets, is US$1.1bn. The pre-qualification application deadline is 15 October and final bids will be collected on 6 November.

Competition

Opinion of the Turkish Competition Authority (TCA) within the framework of the Communiqué no. 1998/4 regarding the sale of Merkez Group Media Companies by the Saving Deposit Insurance Fund (SDIF), 10 August 2007. With its opinion, the TCA has barred Dogan and Cukurova Groups from participating in the tender sale of Merkez Group’s media companies.

The TCA declared that it would not give consent to the acquisition of Merkez Group’s rights and assets by Dogan Group in the markets of television broadcasting, marketing services for advertisement places, production services, newspaper and magazine publishing, printing and distribution. For Cukurova Group the TCA’s concern is limited to the acquisition of Merkez Group’s rights and assets related to its ATV channel, marketing services for advertisement places and production services related to the ATV channel.

Corporate And Commercial/Capital Markets

Communiqué amending the Communiqué on the Companies that will provide Valuation Service pursuant to Capital Market Legislation and on the Principles of Entering these Companies to the List by the Board (Official Gazette No. 26601, 2 August 2007) lists the companies that will provide real estate valuation services and sets out the general principles that such companies will adhere to.

Energy And Infrastructure (Including Oil And Gas And Electricity)

Regulation on Elektrik İşleri Etüt İdaresi Genel Müdürlüğü Sale and Leasing (Official Gazette No. 26616, 17 August 2007) The purpose of this regulation is to regulate all issues pertaining to selling and leasing all kinds of instruments, devices, furniture, buildings and land belonging to the Elektrik İşleri Etüt İdaresi Genel Müdürlüğü.

Regulation Amending the Regulation on the Principles of Granting Generation Facility Establishment and Operating Permit to the Institutions other than the Turkish Electricity Generation and Transmission Company (TEIAS) and Turkish Electricity Distribution Company (TEDAS) (Official Gazette No. 26610, 11 August 2007) The regulation abolished Article 8 sub-clause (b) subsection 4 of the Regulation on the Principles of Granting Generation Facility Establishment and Operating Permit to the Institutions Other than the Turkish Electricity Generation and Transmission Company (TEIAS) and Turkish Electricity Distribution Company (TEDAS).

Regulation Amending the Regulation on Petroleum Market Licence (Official Gazette No. 26616, 17 August 2007) requires that the licence number of the person to whom a petrol or fuel sale is made is noted in order for such a sale to be effected.

Banking

Communiqué on Accounting Provisions to be allocated by Financial Leasing, Factoring and Financing Companies in relation to Uncollected Debts (Official Gazette No. 26580, 20 July 2007) introduces accounting standards to be strictly complied with by these companies. The companies must make accounting provisions in order to compensate potential loss arising from uncollected debts of between 20 and 100 per cent of such debts. Pursuant to Provisionary Article 1 of the Communiqué, all of these companies must revise their accounting systems in order to ensure full compliance by the end of 2007.

Insurance

Regulations on insurance law have been promulgated in the past three months following the enactment of the new insurance law (Insurance Law No. 5684) on 3 June 2007 in order to reflect and implement the changes in the law. One of the important regulations, the “Regulation on Principles of Establishment and Operation of Insurance and Reinsurance Companies (Official Gazette No. 26623, 24 August 2007)”, was promulgated in August. This regulation sets out the basic standards, requirements and provisions relating to establishment, licensing, organisation, corporate governance and other insurance-related matters in respect of insurance and reinsurance companies established in Turkey and Turkish organisations of insurance and reinsurance companies established outside of Turkey.

IP/technology

In a case where the filming of a television series was interrupted half-way through completion of the third episode, the production company challenged the film director’s right to receive copyright royalties for the episode that was left incomplete. The Court of Appeal held that, although a work should in principle be completed and delivered for the right to royalties to arise, there was an exception where the work (i) by nature constitutes a work of art under the Intellectual Property Law, (ii) has reached a certain level (of completion) and (iii) reflects the personality of its author.

Employment

In a recent judgment, the 9th Chamber of the Turkish Court of Appeals (Yargitay) insisted on the equal treatment obligation of employers towards their employees. According to this decision, in accordance with Article 5 of Labour Law, an employer has an obligation of equal treatment in respect of its employees (i.e. employees who are in equivalent conditions (i.e. job title, job description etc.) must be treated equally by their employer). Further, the employer cannot discriminate amongst its employees with regards to wages or working hours. If an employer does not comply with Article 5 of Labour Law, the employee will be entitled to an indemnity amounting to four times his/her salary in addition to the rights that he/she has been deprived of.

However, the equal treatment obligation of the employer does not apply when the relevant employees are not in equivalent conditions. In other words, some staff may have terms of service different in some respects from the standard terms provided that there is a valid reason justifying the difference.

Telecoms

Turkcell, the largest GSM operator in Turkey, was the sole bidder in the tender of 7 September, where it won the A-type licence for €321m plus VAT. The tender led to controversy as other operators in the market (Avea and Vodafone) argued that number portability (which allows users to switch operators without changing their mobile telephone numbers) should have been introduced into the market before the 3G licences were granted. Otherwise, only Turkcell would benefit from 3G services, strengthening its position and breaching competition. The Telecom Technical Staff Association (TETED) has already applied to the court in an attempt to suspend the 3G licences tender with the same arguments.

According to the press, officials from the Telecommunications Authority (TA) state that the TA will not approve the tender result as there was only one bidder. Even if the TA does approve the tender, the Council of State (the highest administrative court in Turkey) is likely to block the deal on competition grounds, says an official, who also notes that the Government will not launch a new tender next year if the deal is scrapped.

Guner Law Office was established in 1996 and has since grown into one of the major corporate, M&A, banking, litigation, energy and TMT practices in Turkey. Guner Law Office is headed by Ece Guner and works with international law firm Denton Wilde Sapte.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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