The Decision 85 of President (''Decision'') is published by Presidency of Republic of Turkey on the date of 13.09.2018 for the purpose of protection of the Turkish currency's value. As a result, setting the contract value in foreign currency or indexed to foreign currency has been rendered against the law. The Decision is applicable for some specific type of of contracts and it only applies where both parties are residents in Turkey.
According to the Decision, the Ministry of Treasury and Finance has the authority to make exceptions to this rule. With regard to the current contracts that contain prices in foreign currency or indexed to foreign currency, the contracting parties have to amend the price and agree on a new value set with the Turkish Lira.
The Decision comprises:
- Contracts of bargain or sale for chattels or real estates,
- Leases of chattels or real estates without any exception for car rental and financial leasing,
- Contracts of leasing,
- Labor contracts,
- Service contracts and
- Contracts ofconstruction
In the decision, there is only one criteria related to the contracting parties; the Decision is applicable only if the parties are residents in Turkey.
According to the Turkish Civil Code, a real person's residenceis the place in which he/she is settled in with the intention to stay permanently. A legal person's (entities)residence is the place from where the business is managed (e.g. head office), if there is no other provision in the company's certificate of incorporation.
Concerning the price, there is no mention of a specific currency (USD, Euro, etc.) and the ban is applicable for all types of foreign currency and all values that are indexed to any foreign currency. Besides, contract values (e.g. service prices, leasing prices, commitment prices) and the other payment obligations arising from the contracts (e.g. conventional penalties, security prices, deposits) are under the scope of this ban.
As a result of this decision, the future contracts that are under the scope of the decision and the relevant contracts which are signed before the effective date of the Decision have to be determined or revalued in Turkish Lira within 30 days from the effective date of the Decision.
On the other hand, regarding the due debts -set in foreign currencies- which arise from the abovementioned type of contracts; it is generally accepted that the value can not be changed to Turkish Lira if such due debt has become a matter of dispute. In cases where the due debt is not disputed, such amendment shall be made in accordance with the Decision.
In the Decision, there is not any criteria related to the revaluation of prices for the previously signed or any specified exchange rate for denomination to Turkish liras. The parties are required to determine a new price in Turkish Lira with their free wills, as a conclusion of the negotiations.
Furthermore, there is no regulation regarding the consequence of a fruitless negotiation. (i.e. the case where the parties fail to come to an understanding with regard to revaluation) However, it is common opinion that in such cases, the Parties can request the determination of a new price by filing an "adaptation case" under the scope of Turkish Code of Obligations Article 138.
According to the Code of Protection of Turkish Currency Value Article 3, an administrative fine ranging from 3.000 Turkish Liras to 25.000 Turkish Liras shall be applied to the persons who fail to comply with this Decision.
As stated above, the Ministry of Treasury and Finance is authorized to make exceptions to the ban foreseen in this Decision; and under the scope of that authority, the Ministry has made a press announcement on its official website on the date of 17.09.2018, which reads as follows: "While the scope of exceptional situations is determined by our Ministry, the input costs and obligations in foreign currency will be the primary criteria that will be considered. For example; According to the Decision 32 Article 17 and 17/A concerning the use of credits in foreign currency,the contracts between parties who are residing in Turkey; who are able to use credits in foreign currency without any limitation and, for that reason, who have obligations in foreign currency, is evaluated under the scope of this exception."
In accordance with this statement, the Ministry indicates that the contracts related to the products and services which have input costs and obligations in foreign currency are exempt from the related Decision, however, there is no official regulation on this subject yet.
September 23, 2018
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.