Turkey: The Turkish Update - January 2008

Last Updated: 3 March 2008
Article by Guner Law Office

This is the January 2008 Edition of our email news service – Turkish Update – which is issued every two months. Our aim is to provide a concise and easy-to-read summary of developments in Turkey which may be of interest to our clients. This edition covers developments in November and December 2007.

Corporate and Commercial/ Capital Markets

Regulation Amending the Regulation on the Establishment and Operational Principles of Over-the- Counter Securities Market published in the Official Gazette on 8 December 2007. States that "market-making" companies are obliged to apply to the Capital Markets Board (CMB) in order to obtain an operation permit and start carrying out their operations within one year following the CMB’s approval of their establishment. One-year extensions (which were previously allowed by the CMB) are deleted from the text of the Regulation. Communiqué Amending the Communiqué on the Extension of the Terms for Increasing the Minimum Capital Amounts of Joint Stock Companies and Limited Liability Companies published in the Official Gazette on 29 December 2007. The deadline for Turkish joint stock/ limited liability companies to increase their share capital to YTL 50,000 (approximately USD 42,000) for joint stock companies, and to YTL 5,000 (approximately USD 4,200) for limited liability companies is extended until 31 December 2008.

Energy and Infrastructure (including oil and gas and electricity)

On 8 November 2007, the Turkish Parliament enacted "The Law on the Establishment and Operation of Nuclear Power Facilities and Sale of Energy" (the Nuclear Law) which entered into force on 21 November 2007. The Nuclear Law states that the procedure for the establishment of nuclear power stations in Turkey will be determined by Ministry of Energy and Natural Resources.

The first tender for a nuclear power station in Turkey will be organised by TETAS (the state-owned wholesale company). Ministry of Energy and Natural Resources will determine the qualifications of the companies that will attend the tender, the election of the company, the assigning of the land to the facility to be established, the licence fee, the incentives regarding the infrastructure, the election period, supply of the fuel, generation capacity and the amount, term and unit price of energy to be purchased in a regulation to be enacted (the Tender Qualifications Regulation) in early 2008. TETAS is expected to organise the first tender one month after the Tender Qualifications Regulation. Energy Market Regulatory Authority of Turkey (EMRA) will issue a licence to the companies that win the tender, and these companies will sign an "offtake" contract (with a term of not more than 15 years) to sell to TETAS all the electricity they produce. Please note that any company that wins the tender will also be responsible for the removal of the nuclear generation plant.

Application Regulation of the Law on Geothermal Resources and Natural Mineral Water (the Geothermal Law) published in the Official Gazette on 11 December 2007. This regulation sets out various principles in relation to the application of the Geothermal Law. The regulation sets out how an operating licence may be obtained, issued, transferred and revoked; how the actions of a licensee shall be audited; how the resources and their environment may be protected; and how the land area in which the resources lie should be left at the end of the licence.

Decision of Council of Ministers of 30.12.2007 on Tariffs of Retail Electricity Sale. Starting from 1 January 2008, the final consumer charge will increase by 10 per cent for industry, agricultural watering and illumination subscription groups and 15 per cent for dwelling and business house subscription groups.

Regulation Amending the Regulation on the Tariff of Natural Gas Market published in the Official Gazette on 31 December 2007. Provisional Article 2 has been amended so that where there is no or insufficient competition in the natural gas market the EMRA Board may determine wholesale prices until the aggregate amount of annual import of BOTAS decreases to 20 per cent of the national annual consumption. The EMRA Board can also determine the prices and tariff relating to storage, until the storage capacity of the country reaches a satisfactory level.

Dispute Resolution/Arbitration

The International Private and Procedural Law numbered 5718 entered into force on 12 December 2007 with the intention to establish a system which is in compliance with the international agreements to which Turkey is a party and with national legislation. The law contains new conflict of laws rules (e.g. the law applicable on or jurisdiction arising out of disputes in relation to consumer or employment contracts) and procedural rules (e.g. recognition of foreign arbitral awards) in relation to several issues which were not covered by the old law. Some of the choice of law (e.g. law applicable to contractual obligations) or procedural rules (e.g. enforcement of foreign arbitral awards; recognition of foreign court decisions) in the old law have also been amended to comply with the international treaties and national legislation. The practical implications of this law (on various sectors) may be set out in more detail in future editions of Turkish Update in 2008.

Banking, inc. Asset, Trade Finance

The Council of Ministers’ Resolution on the Determination of the VAT Rates to be Applied to the Goods and Services published in the Official Gazette on 30 December 2007. Pursuant to the Financial Leasing Law numbered 3226, the Council of Ministers is entitled to decrease the rates to zero or increase the rates up to the rate of the corporate tax for the operations arising from the application of this law. Before this decision the VAT rate to be applied to the leasing agreements was 1 per cent. With the amendment made by the Council of Ministers’ decision, this rate is increased to 18 per cent. The provisions regarding the financial leasing operations will be effective for agreements executed after the promulgation of this decision.

Communiqué regarding Principles and Procedures to be applied for the Activities of Representative Offices Established in Turkey focuses more heavily on the activities of representative offices of foreign banks by introducing additional restrictions on their activities (i.e. intermediation) and increasing the reporting requirements of such offices to the Banking Regulation and Supervision Authority.

Competition

Discussion Paper on amendments to the Merger Communiqué. The Turkish Competition Authority (TCA) has published a discussion paper regarding the amendments to be made to the Merger Communiqué No. 1997/1. The amendments aim to find solutions to the problems faced at the merger notifications during the 10-year practice of the TCA. The TCA will make the amendments to the Merger Communiqué following the comments that it receives from competition law practitioners.

International Private and Procedural Law No. 5718 sets forth the rules to be applied regarding the claims on distortion of competition. In this respect, it regulates that the law of the country where the market directly affected by the hindrance of competition is situated shall be applied to such claims.

Media

A draft media law is currently being commented on. One of the key provisions of this draft law is that foreign entities will be entitled to own up to 50 per cent of the shares in a Turkish TV channel or radio station and up to 25 per cent of the shares in a second channel/station. Under the existing law, foreigners can hold only up to 25 per cent of the shares in a Turkish TV channel or radio station.

Amendment to the Administrative and Financial Conditions Regulation was amended on 12 January 2008. Although the amendment to the Regulation was promulgated on 12 January 2008, it has been stated that this amendment would be effective from 1 January 2008. With this new amendment, the minimum paid-up capital of national broadcasting companies has been increased from YTL 7.761.600 to YTL 8.320.435 (approximately USD 7,000,000) for the year 2008. This amount will be higher if the same company also owns a radio station.

Telecoms

The Council of Ministers’ Resolution on the Privatisation of the Shares of Turkish Telecommunication Joint-Stock Companies that are Owned By the Treasury published in the Official Gazette on 26 December 2007. It has been stated that Turkish Telekom shares of 15 per cent will be privatised and the sale will be done by initial public offering. It is proposed that the initial public offering shall be completed by 31 December 2008.

Mining and Environment

Regulation on the Rehabilitation of the Land Damaged due to Mining Activities published in the Official Gazette numbered 26730, dated 14 December 2007. This regulation deals with any mining activities that are conducted in forests and any damage to land which may be caused by excavation activities or dumping waste on the land. The regulation sets out how to minimise the damage of these activities and how to rehabilitate the land afterwards. The regulation provides that a "Rehabilitation Plan" should be prepared and submitted to the relevant authorities before initiating such activities. All establishments that are within the scope of this regulation should prepare a Rehabilitation Plan within one year from the publication of this regulation and should, amongst other things, submit this plan to the relevant authorities. Additionally, those that hold Operation Permits in accordance with the Mining Law, numbered 3213, should, amongst other things, prepare and submit a Rehabilitation Plan within one year to the Provincial Directorate of Ministry of Environment and Forestry.

IP/Technology

The Law on the Regulation of Broadcasts via the Internet and the Prevention of Crimes Committed by way of such Broadcasts entered into force on 23 May 2007. Two regulations in relation to this law have recently been promulgated:

  1. Regulation on the Principles and Procedures for the Issuance of Operation Permits to Access Providers and Hosting Service Providers by the Telecommunication Authority published in the Official Gazette numbered 26680, dated 24 October 2007. Provides that capital stock companies that will provide access to the Internet from Turkey and real or legal persons that will provide hosting services in Turkey must obtain an operation certificate from the Telecommunication Authority before initiating their activities.
  2. Regulation on the Principles and Procedures Regulating the Broadcasts made via the Internet published in the Official Gazette numbered 26716, dated 30 November 2007. Addresses the liability of Internet actors depending on the type of services they offer (e.g. content providers; service providers). It sets out the minimum information that each Internet site must contain and establishes means to prevent certain crimes being committed via the Internet (such as a procedure to block access to offensive Internet sites).

The International Private and Procedural Law numbered 5718 repeals the previous conflict of law rule set forth in the Law on Intellectual and Artistic Works numbered 5846 and introduces new conflict of laws rules to determine the law applicable to intellectual property rights disputes and to contracts in relation to intellectual property rights. The law applicable to intellectual property rights disputes is generally the law of the country where the protection is sought. The law applicable to contracts in relation to intellectual property rights is in principle the one chosen by the parties, although the new law sets forth principles to determine the applicable law in case no such choice is expressly made.

Insurance

Council of Ministers decided on 24 December 2007 that lines of liability insurance which will be determined by the Undersecretariat of Treasury (General Directorate of Insurance) can be effected abroad. This decision was published in the Official Gazette on 3 January 2008.

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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