Turkey: Sweeping Currency Restrictions

Last Updated: 5 October 2018
Article by Yeşim Bezen, Murat Soylu, Can Özilhan and Berfu Öztoprak

Presidential Decision No. 85 has effected changes to Decree No. 32 Regarding the Protection of the Value of the Turkish Lira ("Decree No. 32") which governs Turkey's general currency control and capital flows regime.

The changes restrict foreign currency and currency-indexed payments under certain categories of transactions between Turkish residents and require existing payment obligations to be re-negotiated in Turkish Lira.


The Government's latest measure in the self-proclaimed "economic war" has been rolled out in the form of amendments to Decree No. 32 by way of Presidential Decision No. 85 which has entered into force following its publication in the Official Gazette dated 13 September 2018 and numbered 30534.

Presidential Decision No. 85 attempts to address the increasing currency pressures facing the private sector by restricting the use of foreign currency and currency-indexed payments under certain categories of transactions between Turkish residents and requiring existing payment obligations to be re-negotiated in Turkish Lira.

The Government had been expressing intentions to limit the use of foreign currency and currency indexing in commercial real estate, in particular in the context of shopping malls – which had mushroomed under the Government's relaxed zoning policies – for a number of years and the commercial real estate market was long-expecting they would have to operate with a lesser degree of freedom relatively soon.

However, Presidential Decision No. 85 has gone aggressively beyond commercial real estate, covering financial leasing, sale and purchase of assets, construction and service agreements, sending shockwaves through affected markets.

Scope of the new restrictions

According to Presidential Decision No. 85, Turkish residents may no longer provide foreign currency or currency-indexed "contract considerations" or other related payment obligations in the following categories of transactions entered into with another Turkish resident:

  • sale and purchase of movable and immovable assets;
  • all types of rental agreements including vehicle rentals, leasing, financial leasing and the rental of immovable properties;
  • employment agreements;
  • service agreements; and
  • construction agreements.

Note that Decree No. 32 describes Turkish residents as "natural and legal persons who have their legal residence in Turkey, including Turkish citizens who are employed or have businesses abroad".

Presidential Decision No. 85 suffers from the misuse (not to say a complete abandonment) of technical drafting - note for example the repetitive and sometimes interchangeable use of the terms "leasing, financial leasing, rental". This adds further uncertainty to an already sensitive market around the extent to which technical distinctions can be relied upon to flesh out a negative scope to the new restrictions. Some examples, which are by no means meant to be exhaustive, include discussions around the extent to which parts of the consideration on hybrid contracts (where some elements fall within the restricted categories but others do not) can be foreign currency based or currency-indexed and whether the "sale and purchase of movables" is intended to capture the sale and purchase of shares in companies if they have been formalised by way of share certificates.

There is silent hope in the market that the Ministry of Treasury and Finance, which has been authorised to produce a list of exceptions to these new restrictions, will provide more reasonable and comprehensive answers to these pressing questions soon.

Transition issues

Presidential Decision No. 85 provides a 30-day transition period for Turkish residents to convert any foreign currency or currency-indexed payment obligations under affected transactions to Turkish Lira.

This may very well be possible for a limited number of entities with a small number of relatively straightforward arrangements. However, it is a gross underestimation of the scale of the transition being requested, given the commercial steps required to unwind many years of established business practices, sophisticated contract terms where a transition may not be as simple as a notional conversion to Turkish Lira and the administrative burden of having to amend potentially hundreds of contracts.

Presidential Decision No. 85 does not provide any built-in option for time extension whereby the Ministry of Treasury and Finance or a regulatory body can push the timing out as necessary, although there is always the possibility that another Presidential Decision may be adopted to grant more time.

Consequences of non-compliance

Law No. 1567 on the Protection of the Value of the Turkish Currency sets out administrative fines of TL3,000 to TL25,000 for breaches of Decree No. 32 and any associated secondary legislation, including Presidential Decision No. 85. These fines will be doubled on repeat offences.

From a technical perspective, it would be difficult to say that a breach of Decree No. 32 could render contracts unenforceable. It would be similarly difficult to say that Presidential Decision No. 85 could result in a mandatory conversion of foreign currency and currency-indexed payments in contracts after the expiry of the 30-day transition period. This would mean accepting that freedom of contract, which is a constitutionally protected right, can be limited or restricted by administrative action.

However, constitutional protections do not necessarily exclude all substantive effects. For example, parties who fail to reach an agreement on conversion negotiations could find themselves subject to court intervention under article 138 of the Turkish Code of Obligations to re-adjust the commercial balance in light of exceptional and unforeseen circumstances.

The Court of Appeals' position on whether the exceptional remedy under article 138 of the Turkish Code of Obligations can more easily be utilised in furtherance of the new regulations remains ambiguous.

Alternative structures

Notwithstanding the sweeping approach taken by Presidential Decision No. 85, the commercial need to provide hard-currency payment obligations continues to be ever pressing amidst current currency trends, in particular in contracts with mid-to-long payment terms or where input or supply costs have foreign currency exposure.

While the primary hope is that the Ministry of Treasury and Finance will provide a wholesome list of exceptions that will bring the new restrictions back into the realm of reasonableness, parties should prepare for the possibility that all of their transactions may not be afforded protection and consider alternative structures, possibly by referencing other appropriate indices that are not currency-based or moving contracts offshore, where possible.


Presidential Decision No. 85 has been an unpleasant surprise to markets that were already under heavy strain from currency and rate pressures. All eyes are now on the Ministry of Treasury and Finance and its approved list of exceptions to provide much needed balance and commercial reasonableness to the unhelpfully broad set of new currency restrictions.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Murat Soylu
Can Özilhan
Berfu Öztoprak
Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
Eryürekli Attorney Partnership
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
Eryürekli Attorney Partnership
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions