Edition 11: 2 December 2015
Editorial Team:
Dr. E. Seyfi Moroğlu, LL.M., Işık Özdoğan, LL.M. and Bora İkiler, LL.M.
Regional Second Instance Courts Will Hear Cases in Turkey from 20 July 2016

Regional second instance courts will hear cases in Turkey from 20 July 2016. These courts will hear certain cases before they can be brought before the Court of Appeal. Preparations for a two tiered legal remedy system have been ongoing for several years in Turkey. Changes have also been made to the Code of Civil Procedure (“CCP”) and Code of Administrative Procedure (“CAP”).

Resolutions by the Ministry of Justice (“MoJ”) and the Supreme Board of Judges and Prosecutors (“SBoJP”) radically change legal remedies available in the Turkish legal system.

In the civil jurisdiction, the CCP outlines all necessary provisions for a two tiered legal remedy system. However, the system is not functioning yet because facilities for regional second courts of instance are not operating. Hence, only the CCP’s appellate provisions will be in force until 20 July 2016.

In the administrative jurisdiction, regional second instance courts are already operating, but they do not currently hear cases as a mandatory step in the chain of legal remedies. Rather, they act as Court of Appeal for some decisions by Administrative Courts and Tax Courts. From 20 July 2015, regional second instance courts in the administrative jurisdiction will exclusively hear cases as a step of a two tiered legal remedy system.

According to the Resolutions published in the Official Gazette, there will be 15 regional second instance courts in the civil jurisdiction and eight in the administrative jurisdiction.

Below you can find links for the Resolutions (Only available in Turkish):

– SBoJP’s Resolution numbered 187, 7 June 2011

– MoJ’s Resolution establishing six new regional second instance courts in the civil jurisdiction

– MoJ’s Resolution establishing regional second instance courts in administrative jurisdiction and setting judicial locality

– MoJ’s Resolution setting the operation date for all regional second instance courts

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Capital Markets Listing Directive Enters Into Effect in Turkey as Part of BISTECH Changes

On 14 July 2015, the Capital Markets Board approved the Listing Directive, prepared under the Regulation of Principles Regarding the Stock Activities in Borsa İstanbul A.Ş. (“Directive”). The Directive established the legal framework for capital markets instruments to be listed, maintain listing and be delisted, as well as be traded without becoming listed. The Directive entered into effect as part of BISTECH transition on 30 November 2015.

Borsa İstanbul A.Ş. and NASDAQ signed a Strategic Alliance Agreement on 20 January 2014, in which the parties aimed to have all markets within the Borsa İstanbul on through one common trading platform. The first step involves transferring the Stock Market onto a new trading platform. Accordingly, a new Share Trading System is launched with the Directive coming into effective on 30 November 2015.

Significant changes introduced by the Directive include:

– Market forms and names in the Stock Market have been changed. The National Market and Second National Market contained in the Stock Market have been revoked and two new markets established: BIST Star and BIST Main. The Free Trade Platform, which is contained outside of the Stock Market, is renamed the Pre-Market Trading Platform.

– The terms “Listed/Delisted Market” are revoked. Under the Directive, all capital markets instruments traded in Equity and/or Debt Securities Markets will be listed.

– A new regulation exists for companies with shares currently being traded in the National Market and/or the Second National Market. Companies which have traded shares valued at more than 100 Million Turkish Liras, or companies listed in the BIST 100, will be traded in the BIST Star. Companies which have traded shares valued at less than 100 Million Turkish Liras will be traded in the BIST Main, subject to the same listing terms as the BIST Star.

– Shares currently being traded in the Free Trade Platform will continue to be traded in the Pre-Market Trading Platform without being listed.

Provisions of the Directive will be conducted by the General Director of Borsa İstanbul A.Ş.

Please see this link for full text of the Directive (only available in Turkish).

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Stock Market Directive Enters Into Effect in Turkey as Part of BISTECH Changes

The Stock Market Directive (“Directive”) outlines the basis and procedures for the Stock Market, incorporated within Borsa İstanbul Anonim Şirketi. The Directive updates the Stock Market’s legal framework. It was approved by the Board of Directors of Borsa İstanbul Anonim Şirketi and the Capital Markets Board, entering into effect on 30 November 2015 as part of BISTECH transition. The Directive was prepared based on the Regulation of Principles Regarding the Stock Activities in İstanbul Stock Exchange Inc..

Borsa İstanbul A.Ş. and NASDAQ signed a Strategic Alliance Agreement on 20 January 2014, in which the parties aimed to have all markets within the Borsa İstanbul on through one common trading platform. The first step involves transferring the Stock Market onto a new trading platform. Accordingly, a new Share Trading System is launched with the Directive coming into effective on 30 November 2015.

The Circular Regarding Operational Principles of Derivative Exchange dated 19 July 2013 and numbered 433, which complements with the Directive, also enters into force on 30 November 2015. Accordingly, it amends maximum order size, stock share option agreements, stock share futures agreements, BIST 30 Index option agreements, Mini BIST 30 Index option agreements, as well as BIST 30 Index futures agreements.

On the other hand, the Directive regulates in particular:

– Orders sent to the Stock Market and transactions made in this Market, as well as reports written by the Stock Exchange regarding these order and transactions.

– Price and transaction quantity recorded by the Stock Exchange, as well as announcement of related information.

– Trade methods applied in the Stock Market

– Market making and liquidity providing exercises.

– Suspension of capital markets instruments transactions in the Stock Market.

– Special transactions, such as mass trading, official auction and primary market rights.

– Methods to perform clearing obligations after a transaction.

Provisions of the Directive will be conducted by the General Director of Borsa İstanbul A.Ş..

Please see this link for full text of the Directive (only available in Turkish).

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Turkish Ministry of Finance Announces 2015 Reevaluation Rate Under Tax Procedure Law as 5.58%

The Ministry of Finance published the General Communiqué on Tax Procedure Law number 457 (the “Communiqué”) in Official Gazette number 29528 on 10 November 2015. The Communiqué determines the revaluation rate for 2015 as 5.58% and this rate will also apply to the last provisional taxation period of 2015. The revaluation rate is used to update various taxes, administrative penalties and other monetary amounts on an annual basis.

Article 298(B) (duplicated) of the Tax Procedure Law number 213, defines the revaluation rate as the increase rate for the Domestic Producer Price Index.

The Turkish Statistical Institute announces the rate during October each year (including October), as a comparison with the same period in the previous year. The Ministry announces the rate in the Official Gazette.

Please see this link for the full text of the Communiqué (only available in Turkish).

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Clarifications Issued Regarding Procedures for Commercial Books in Turkey

The Union of Turkish Public Notaries issued an information letter (“Information Letter”) on 11 November 2015 regarding implementation of the Communiqué on Commercial Books, which has been published in the Official Gazette on 19 December 2012 by the Ministry of Customs and Commerce as well as the Ministry of Finance (“Communiqué”). The Communiqué outlines procedures for merchants and cooperatives regarding commercial books, including registration periods and form, as well as procedures for notarial attestations related to opening, renewing and closing commercial books. The Information Letter clarifies issues which have caused practical problems.

Clarifications outlined in the Information Letter include:

– In limited companies, resolutions regarding company management which are adopted by the board of directors can be recorded in the shareholders’ meeting and negotiation book, as well as in a separate book kept for board of directors’ resolutions. If a separate board of directors’ resolution book is kept:

– It will be subject to provisions applicable to board of directors’ resolution books for joint stock companies, including the matters related to notarial attestations for opening and closing.

– Board of directors’ resolutions cannot also be recorded in the shareholders’ meeting and negotiation book.

– If share ledgers and shareholders’ meeting and negotiation books contain a sufficient number of sheets, they can be used in the following accounting period, without a notarial attestation for opening.

– If board of directors’ resolution books, general journals, stock books and general ledgers have a sufficient number of sheets, they may be used in the following accounting period, provided a notarial attestation for their renewal is made during the first month of the new accounting period.

– Various clarifications are made regarding commercial registry certificates (“Certificate”):

– A Certificate is required during the incorporation process for notarial attestation for opening commercial books kept by companies. Notarial attestation to open commercial books kept by real person and legal entity merchants (other than companies) does not require a Certificate.

– For notarial attestation to open accounting periods following the company’s initial incorporation, a Certificate is required for companies, real persons and legal entity merchants.

– A back-dated Certificate can be used if there is no change to the Certificate’s information.

– A Certificate must be presented to renew commercial books.

– If commercial books kept by merchants are lost during the legislatively required retention period (due to disasters such as fire, flood, earthquake or theft), merchants can request a certificate of loss. The request must be made to the competent court located at the company headquarters, within 15 days of discovering the loss.

– Commercial books subject to notarial attestation for closing which do not receive the attestation by the legal deadline can receive the necessary attestation until the end of the same year. Notaries performing the attestation in this manner bear no liability. The same principle also applies to notarial attestations for renewals and openings which could not be performed within the legal period.

– In principle, it is not possible to notarize commercial books for previous years. However, notarization can be performed for the preceding year where less than one month has elapsed after the start of operations in the previous year, or the notarization deadline for additional books.

– Without prejudice to administrative penalties indicated in the Turkish Commercial Code, a board of directors’ resolution book which was not notarized for renewal in the preceding year, but has been used by the company since then, can be notarized in the current year.

– If a share ledger has never been kept before, a new share ledger can be formed by obtaining the written statement and a notarial attestation for opening.

– Information on the amount of subscribed and paid in share capital which will be written in the book for its opening will be written according to the statement of the concerned, without requiring relevant documentation.

Please see this link for the full text of the Information Letter (only available in Turkish).

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Regulation for Approval of Electricity Generation Facilities Enters into Effect in Turkey

The Electricity Generation Facilities Approval Regulation (“Regulation”) was published in Official Gazette number 29524 on 6 November, entering into force on the same date. It was prepared within the context of studies to ensure electricity generation facilities are built and run in accordance with modern technology. It outlines the legal entities authorized for testing, controlling, and approval processes, as well as principles and procedures for grating approvals and ensuring facilities are harmoniously connected to transmission and distribution networks.

The regulation applies to all electricity generation facilities subject to the Electric Facilities Project Regulation (Official Gazette number 29221, 30 December 2014), except for facilities connected to interconnected electric networks with a voltage level less than 1 Kv. The Energy and Natural Resources Ministry will carry out provisions of the Regulation. If uncertainty occurs regarding whether an electricity generation facility is subject to the Regulation, the Energy and Natural Resources Ministry will decide.

Significant matters covered by the Regulation include:

– Authorization of the Controlling Institution.

– Facility building process.

– Applying voltage to facilities.

– Controlling and commissioning processes.

– Evaluation of pre-approvals and temporary approvals.

– Facility operations.

– Qualification and education of the personnel working in facilities.

– Facility repair and maintenance.

– Technical and administrative liability.

The Regulation states the Energy and Natural Resources Ministry will determine the organization, institution or legal entity which will be authorized for approval processes related to ensuring electricity generation facilities built and run in accordance with the modern technology. Legal entities which wish to be authorized as the controller company must apply to the Ministry (except for state institutions and organizations which are expert in the field). The Ministry will evaluate all applications to ensure they are in accordance with the Regulation, then authorize suitable candidates by inviting them to sign a protocol.

License or facility owners should complete all processes required for the approval of the facility within three years following the temporary approval date. This includes agreements with state organizations or institutions, permission and approval processes, as well as gathering and submitting other documents.

Please see this link for full text of the new Regulation (only available in Turkish).

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New Regulation Regarding Detection and Recall of Defective Medical Products in Turkey

The Recall Regulation was published in Official Gazette number 29537 on 19 November 2015 (“Regulation”), entering into effect on the same date. The Regulation outlines an updated framework for investigating medicinal products which are defective or suspected of being defective in terms of consumers’ health and safety, as well as related recall and withdrawal procedures.

The Regulation’s scope includes human medicinal products, medical gases, traditional herbal medicinal products, special-purpose dietary food, homeopathic products, advance treatment products, human tissue and cell products, as well as all raw materials which fall under the responsibility of the Pharmaceuticals and Medical Devices Agency (“Agency”). The scope includes those who produce, import, store, distribute and sell these products, along with end-users.

The Agency is authorized to perform several actions regarding evaluation and recall of defective products. Products can be determined to be defective via an ex-officio inspection or in response to notifications made to the Agency. The Regulation outlines in detail the actions and inspections which can be carried out by the Agency.

The Regulation outlines duties and responsibilities of responsible companies and other institutions with regard to evaluation and recall of defective products. Among other obligations, responsible companies must inform the Agency about defective products, establish a recall procedure in compliance with the Regulation, as well as ensure effective and immediate recall procedures in line with the recall plan. The Regulations also imposes obligations on institutions and organizations which store, distribute and sell defective products.

The Regulation outlines reasons for recalls, initiation and finalization of recall procedures, as well as classification and limits for recalls. It also includes provisions regarding recall announcements, ceasing distribution and sale of defective products, as well as destruction or improvement of defective products.

The Regulation repeals the Regulation on Recall and Withdrawal of Pharmaceutical and Medical Drugs, Substances, Materials, Compounds and Herbal Preparations, published in Official Gazette number 19196 on 15 August 1986.

Please see this link for the full text of the Regulation (only available in Turkish).

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Amendments to Principles and Procedures for Tax Audits Enter Into Effect in Turkey

The Regulation Amending the Procedures and Principles regarding to Tax Audit (“Amendment Regulation”) was published in Official Gazette number 29524 on 6 November 2015, entering into effect on the same date. The Amendment Regulation amends equity thresholds, as well as conditions for forming groups of first rank traders. It also introduces principles regarding tax audits conducted for international exchange of information.

Significant changes introduced by the Amendment Regulation include:

– The definition for equity size is changed to be the total equity calculated under the balance sheet, as of the end of the accounting period, according to the Tax Procedure Law number 213.

– Rulings presented by tax payers about controversial issues within the context of tax regulations during the audit will be incorporated into the audit report and the audit officer will include it in the audit analysis.

– Auditing assignment is subject to approval by the designating authority.

– Tax payers will be informed that the provisions in the audit report will be considered proof in possible procedures, within the terms of the Tax Law. Tax payers will also have possible procedures explained to them.

– Tax audits intended for international information exchange are prioritized and related time periods are introduced.

– The conditions to qualify as a first rank trader are changed so that the first group of first rank traders include either:

– Companies with average total assets and net sales (indicated in balance sheet); greater than TL 50,000,000, or

– Companies with more than TL 15,000,000 equity.

Please see this link for full text of the Amendment Regulation (only available in Turkish).

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New Principles For Public Procurement of Research and Development Services Enter Into Effect in Turkey

The Ministry of Development (“Ministry”) has issued Principles Regarding Procurement Made Within the Scope Of Article 3(f) of the Public Procurement Law (“Public Procurement Law”), published in Official Gazette number 29523 on 5 November 2015, entering into effect on the same date (“Principles”). The Principles outline processes for the Ministry to obtain research and development services from local or foreign real and legal entities, within the scope of the exclusion under Article 3(f) of the Public Procurement Law.

Article 3(f) of the Public Procurement Law outlines exclusions which are not subject to other provisions under this piece of legislation. Accordingly, the Public Procurement Law does not apply to procurement of goods and services for research and development projects executed and supported by national research and development institutions. However, the Public Procurement Law will apply to research and development services if the authorities involved fully finance the services or use the outputs exclusively for their own activities.

Significant provisions of the Principles with regard to procuring research and development services include:

– Procurement procedures can direct, restricted, or negotiated. Restricted and negotiated procedures are deemed to be tenders (Article 10 of the Principles).

– Goods and services can be directly procured in some circumstances without any announcements, through negotiating about technical terms and price (Article 11 of the Principles).

– Information and documents may be requested during the qualification evaluation, according to the circumstances (Article 40 of the Principles).

– The contracting authority is entitled to reject all tenders and cancel tender proceedings without liability (Article 48 of the Principles). The contracting authority must provide reasons for the cancellation if tenderers request.

– The tender guarantee amount is at the administrative authority’s discretion for negotiated or restricted procedures. The guarantee must be indicated in the relevant document and be no less than 1% of the first tender price.

Previously issued Principles on this topic issued under Council of the Minister’s Decision number 2010/850 on 18 August 2010 are no longer valid. Please see this link for the full text of the Council of Ministers’ Decision, including the Principles (only available in Turkish).

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Regulation For Air Carrier Obligations Regarding Migration and Unaccepted Passengers Enters Into Effect in Turkey

The Regulation on Procedures and Principles Regarding Obligations of Air Carriers was published in Official Gazette number 29525 on 7 November 2015 (“Regulation”), entering into effect on the same date. The Regulation outlines principles and procedures to encourage systematic migration, deal with unaccepted passengers, as well as prevent irregular migration.

The Regulation requires air carriers to take relative precautions to prevent transporting unaccepted passengers (Article 5). Unaccepted passengers are deemed to be people who are not allowed to enter the destination country or pass transit due to not meeting relevant legislative conditions.

The Regulation imposes obligations on carriers which transport passengers who pass through Turkish airports, destined for a third country, but are turned away (back to Turkey) by their destination country (Article 5). In these circumstances:

– Operations regarding the passenger’s arrival into the third country must be completed within three days.

– The carrier must cover nutrition, housing and health expenses until the passenger arrives at the third country

– If the passenger is not accepted by the destination country and being sent back to Turkey, the carrier must cover expenses related to deporting the passenger from Turkey.

– The airport’s local authority must assist the passenger’s transfer if the carrier proves that it (or any other carrier) does not have any flight to the destination country, or there is a delay, weather condition, cancellation, or the destination country’s airports are closed for any reason.

The Regulation outlines obligations for maintaining safety of unaccepted passengers (Article 6):

– The airport local authority must maintain safety of unaccepted passengers.

– The airport operator must maintain proper housing for unaccepted passengers.

– Housing facilities must be designed according to passengers’ humane and basic needs.

– The carrier must protect passengers’ luggage and allow access to their belongings.

The Migration Administration General Directorate (“Directorate”) can request API and PNR information from carriers in order to prevent irregular migration. The Directorate determines the scope of information which can be requested. Use of information collected outside this scope is prohibited unless it relates to a situation regarding public order or homeland security. The Directorate decides which foreign countries information will be shared with, taking into account opinions of other relevant institutions (Article 9).

Please see this link for the full text of the Regulation (only available in Turkish).

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Regulations Amended For Private Higher Education Institutions in Turkey

The Regulation to Amend the Regulation on Private Higher Education Institutions (“Amendment Regulation”) was published in Official Gazette number 29537 on 19 November 2015, entering into effect the same date. The Amendment Regulation expands the scope of measures that can be applied for non-compliance and removes certain financial benefits provided to private higher education institutions.

Article 3 of the Amendment Regulation changes Article 24 of the Regulation on Private Higher Education Institutions (“Former Regulation”). Private higher education institutions are subject to supervision and inspection of the Council of Higher Education with regard to educational, administrative, financial and economic matters. Under the Amendment Regulation, this role is now undertaken pursuant to the laws on higher education and the related legislation. The Council is entitled to inspect accounts, operations and activities, as well as properties of private higher education institutions. However, although private higher education institutions were previously also subject to supervision and inspection by the Council, the old article regulated that inspection and evaluations were subject to procedures and principles determined by the Council. Under the amendment, private higher education institutions must present an activity report to the Council at the end of each academic year and these institutions will be subject to general inspection and evaluation of the Higher Education Auditing Board. Private higher education institutions must now also send their budgets to the Council.

Articles 4, 5 and 6 of the Amendment Regulation respectively amend Articles 25, 26 and 27 of the Regulation, regarding sanctions for non-compliance. Accordingly, if non-compliance occurs, measures of instructive, reparative, restrictive and revoking nature can be applied. These measures include warnings, correction demands, suspension of new academic units or opening new programs, quota limits and suspension of student admissions. The Amendment Regulation also introduces suspension or revocation of activity licenses as possible sanctions for non-compliance, along with outlining the effects of such a revocation.

Article 7 of the Amendment Regulation amends Article 28 of the Regulation. Accordingly, foundations cannot establish private higher education institutions for the purpose of profit. All types of revenue earned must be used for the private higher education institution. The Regulation previously allowed private higher education institutions received financial benefits, exemptions and exceptions outlined under Article 56 of Law number 2547 and they were also exempt from property tax. However, the Amended Regulation prohibits private higher education institutions from transferring funds, specifically outlining prohibited transactions.

Please see this link for the full text of the Amendment Regulation (only available in Turkish).

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Production of Certain Equipment in Renewable Energy Sector Included as Privileged Investment Area in Turkey

A recent decision by the Council of Ministers adds production of turbines and generators for use in renewable energy and production of wings to be used in wind energy as privileged investment areas. The change was introduced by Council of Ministers Decision Regarding the Change of State-Aid for Investments number 2015/8216 (“Change Decision”), published in Official Gazette number 29537 on 19 November 2015.

Privileged investment areas are outlined in the Council of Ministers Decision Regarding the State-Aid for Investments number 2012/3305 (“Decision”), published in Official Gazette number 28328 on 19 January 2012.

Turkey is divided to six regions with respect to investment aid, with each region benefiting from a different level of state support. Privileged investment areas are eligible to receive local aid determined for the fifth region. However, if investments are made in the sixth region, they will be subject to the aid for the region they are located (Article 17 of the Decision). 

Please see this link for full text of the Change Decision (only available in Turkish).

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Turkey’s 18th European Union Accession Progress Report published by European Commission

The European Commission has published Progress Reports on all European Union candidate countries, including Turkey. The reports were published on 10 October 2015 in connection with the 2015 Enlargement Package. The latest report is Turkey’s 18th Progress Report and reflects the retrospective approach embraced by the new European Commission President, Jean-Claude Juncker. Accordingly, the Progress Reports evaluate overall compliance with European Union norms through the lenses of the harmonization process.

Progress Reports consider three main areas: Political Criteria, Economic Criteria and the Ability to Assume Membership Obligations. A candidate country’s progress is generally assessed by comparing local legislation with European Union norms.

The Political Criteria primarily consider judicial systems, freedom of speech and freedom of press.

Within the Economic Criteria, Turkey’s Progress Report endorses the country’s functioning market economy, as well as the high level of commercial and economic integration.

Significant points in Turkey’s Progress Report regarding its Ability to Assume Membership Obligations include:

– Turkey was already evaluated as having a high level of alignment regarding company law. Turkey’s adoption of new corporate accounting and financial reporting standards, as well as amendments to existing standards based on International Financial Reporting Standards is seen as a positive development. However, Turkey must finalize technical alignment of its legislation with European Union norms, including legislation related to mergers and divisions.

– Turkey is evaluated as having a good level of alignment regarding intellectual property law. The Progress Report recommends Turkey adopt pending intellectual property and copyright legislation, as well as improve anti-counterfeiting and piracy enforcement measures.

– Turkey is evaluated as having a good level of preparation regarding financial services. The Progress Report recommends that Turkey take measures to re-establish trust in the independence of supervisory agencies. In particular, the Banking Regulatory and Supervisory Agency.

– Turkey is evaluated as being moderately prepared regarding the energy field. The Progress Report notes good progress over the last year regarding security of supply. The Report outlines three main areas of priority for the coming year within this context:

– Establish a functioning competitive market in the natural gas sector in line with the EU acquis.

– Implement a transparent and cost-based pricing mechanism for electricity and gas.

– Make urgent progress on aligning with the EU acquis on nuclear energy, to establish the necessary legal framework for planning and building nuclear plants.

– Turkey is evaluated as being moderately prepared regarding taxation. The Progress Report notes that Turkey should comply with the 2009 action plan for excise duties on alcoholic beverages, as well as align excise legislation on energy products with the EU acquis.

– Turkey was already evaluated as having reached a good level of preparation regarding the Customs Union and no further progress was noted during this reporting period. Duty relief, free zones, surveillance measures and management of tariff quotas are not yet fully in line with the EU acquis or Turkey’s obligations under the Customs Union. The Progress Report recommends that Turkey particularly improve risk-based controls and simplify procedures to facilitate legitimate trade, while ensuring security and safety. It also recommends that import and export restrictions be removed which prevent the effective free movement of goods.

Please see this link for the full text of the Report.

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Turkish Council of Ministers Approves Grant From International Bank For Reconstruction and Development

A Grant Agreement entered into force between Turkey and the International Bank For Reconstruction and Development (“World Bank”) on 19 June 2015. The grant is intended to support development of Turkey’s administrative and technical capacity, improving alignment with the EU acquis and Europe 2020 Targets. The Grant Agreement becomes legally binding on Turkey on publication in the Official Gazette. Accordingly, the Turkish Council of Ministers approved the Grant Agreement on 12 October 2015, with a decision published in Official Gazette number 29530 on 12 November 2015.

The Grant Agreement is intended to develop Turkey’s administrative and technical capacity of institutions, to support increasing alignment with the EU acquis and Europe 2020 Targets regarding (“Project”):

– Energy efficiency.

– Internal energy market.

– Long-term energy planning and modelling.

In this context, the World Bank is acting as administrator of the European Union Instrument for Pre-Accession Trust Fund, established with funds provided by the European Commission.

Under the Grant Agreement, the World Bank agrees to give Turkey EUR 11,593,021 (“Grant”) to assist financing the Project.

The Grant is allocated to the Project as follows:

– EUR 4,817,097 for Energy Efficiency.

– EUR 1,533,957 for Electricity and Gas Market Development.

– EUR 4,771,047 for Long-term Energy Scenarios, Capacity Building and Establishment of an Energy Data Center.

– EUR 470,920 for Visibility and Public Awareness.

The Project will be implemented by Turkey’s Ministry of Energy and Natural Resources.

The Grant Agreement outlines detailed matters about Project execution, monitoring, reporting and evaluation and procurement, as well as withdrawal of Grant proceeds. It includes mandatory provisions for procurement under bank-financed contracts subject to national competitive bidding.

Please see this link for the full text of the Grant Agreement and the Council of Ministers’ approval decision.

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Turkish Constitutional Court Partially Cancels Article 13(4) of Capital Market Law as Unconstitutional

The Constitutional Court recently cancelled part of Article 13(4) of the Capital Markets Law, deeming aspects of the article to be unconstitutional in decision number 2015/29, dated 22 October 2015. The court’s decision was published in the Official Gazette number 29530 on 12 November 2015. The court held that Article 13(4) indefinitely and absolutely removed peoples’ property rights on capital markets instruments, also removing indemnity for people who wish to invest in capital markets. The court held that Article 13(4) offered no form of compensation if these rights were injured. Accordingly, the Constitutional Court held that Article 13(4) did not provide a reasonable balance between public interests and personal property rights.

Article 13 of the Capital Markets Law outlines dematerialization of capital markets instruments. Article 13(4) states that fund units cannot be redeemed by intermediaries and capital market instruments which are not delivered by the end of the seventh year following the date they began to be monitored on record will be transferred to the Investor Compensation Centre. Limited real rights will be automatically regarded as terminated and the instrument will be sold within three months of the transfer.

The Constitutional Court held that Article 13(4) contradicted key provisions in the Turkish Constitution regarding property rights and restriction of fundamental rights and freedoms.

The Constitutional Court held that Article 13(4) of the Capital Markets Law indefinitely and absolutely removed peoples’ property rights on instruments they own, also removing indemnity for people who wish to invest in capital markets. The court held that Article 13(4) of the Capital Markets Law offered no form of compensation if these rights were injured. Therefore, it cancelled the related parts of Article 13(4).

Please see this link for full text of the Constitutional Court Decision (only available in Turkish).

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Turkish Court of Appeal Rules on Conditions for Calculating Material Damages for Trademark Infringement as if Licensing Agreement Existed

The Court of Appeal recently considered a case involving issues about calculating material damages for trademark infringement. The Court of Appeal held that if a plaintiff chooses to calculate damages as if a licensing contract existed between the parties (under Article 66(c) of Decree Law number 556 Pertaining to Protection of Trademarks; “Decree Law”), the relevant court must consider the plaintiff’s activities, as well as the defendant’s revenue and production capacity.

In the dispute at hand, the plaintiff is the registered owner of a trademark and had used it for over ten years. The defendant made a trademark application for the same word and the application was rejected. The defendant continued to use the word in his commercial name, businesses, and signboards. The plaintiff asked the court to determine that the defendant’s actions constitute an infringement and unfair competition against his trademark rights, as well as to prevent further violations. The plaintiff also sought compensation for material and immaterial damages.

The plaintiff based his request for material damages on Article 66(c) of the Decree Law. Under this basis, a trademark’s owner is entitled to choose a range of methods to calculate loss of profit:

– Possible income that the trademark owner would have generated if the infringing competition had not occurred.

– Income generated by the infringing party from use of the trademark.

– According to a license fee that would have been paid if the infringing party had legally used the trademark under a licensing contract.

No license agreement existed between the parties or between the plaintiff and third parties. Regardless, the plaintiff asked for loss of profit to be calculated in these circumstances on the basis of a license fee, as if the parties had signed a license agreement.

The parties both operated in similar commercial fields. Therefore, the court of first instance ruled that the defendant’s actions constitute infringement and should be prevented. The lower court also held that the defendant should pay immaterial compensation (based on Article 62(1)(b) of the Decree Law).

The lower court also held that the defendant should pay material compensation (under Article 62(c) of the Decree Law) based on a hypothetical license fee, determined via examination of the plaintiff’s turnover. Accordingly, the first instance court ruled for material compensation amounting to the lower limit of the estimated license fee for one year, determined by the expert body, taking into account the plaintiff’s turnover, scope of business and profit share.

Both parties appealed the first instance court’s decision. The Court of Appeal partially reversed the judgment in favor of the plaintiff, changing the method for calculating compensation.

The Court of Appeal held that when calculating compensation under Article 66(c) of the Decree Law, it is inaccurate and unjust to only consider the plaintiff’s activities. Rather, the court stated that the license fee must be calculated by also taking into consideration the defendant’s revenue, production and sale capacity, saleable product amounts.

(Case reference: Yarg. 11. HD. 2.12.2013, 2013/6117 E., 2013/21847 K.)

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Turkish Court of Appeal Rules on Loss of Rights Due to Remaining Silent in Context of Trademark Infringement and Compensation Claims

The Court of Appeal and Assembly of the Civil Chamber recently considered a claim where the defendant was alleged to have used the plaintiff’s trade name as a trademark. The First Instance Court dismissed the plaintiff’s claim, holding that the plaintiff had lost its rights by remaining silent. The higher court overturned this decision.

In the dispute at hand, the plaintiff sought a remedy for infringement as well as compensation. It claimed the defendant’s use of its trade name constitutes trademark infringement. After filing the lawsuit, the plaintiff assigned the basis trademarks to a third party and notified the court.

The defendant requested dismissal of the action. The Defendant argued that it had invested in the trade name for many years and its signs are not confusingly similar with the plaintiff’s signs.

The First Instance Court accepted that use of the trade name extends to its use as a trademark. However, The Court refused the plaintiff’s request. The lower court held that the defendant had obtained a legal interest on the basis that the plaintiff did not take any precautions and had lost its rights regarding the trademark infringement by remaining silent. The plaintiff appealed the decision to the Court of Appeal.

The Court of Appeal ruled to reverse the First Instance Court’s decision. However, the First Instance Court insisted on its ruling, causing the matter to be referred to the Assembly of the Civil Chamber.

Since the basis trademark was assigned to a third party, the Assembly of the Civil Chamber firstly noted that the party who was assigned the basis trademark may proceed as the plaintiff (Article 125 of Turkish Code of Civil Procedure).

The Assembly of the Civil Chamber overturned the First Instance Court’s grounds for insistence on the basis that:

– A five year limitation period applies to actions regarding invalidation of registered trademarks. Therefore, it is unacceptable to apply a final period of less than five years for disputes regarding non-registered trade-marks, which have less protection mechanisms than registered trademarks.

– The plaintiff had already filed oppositions against the defendant’s previous trademark applications. Therefore, the plaintiff’s remaining silence period, lasting less than five years, does not constitute loss of right due to remaining silent.

The Case reference: Yarg. HGK.18.02.2015, 2013/11-1358 E. 2015/820 K.

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