A range of legislative changes have been made in Turkey following the attempted coup on 15 July 2016, as well as changes to the structures and compositions of government, military and judicial bodies. Notable aspects for companies include bankruptcy suspension requests being deemed invalid during the national three month State of Emergency, as well as increased powers for guardians appointed to companies under investigation.
Bankruptcy postponement requests suspended
According to the Bankruptcy and Enforcement Law No 2004, companies with share capital, as well as cooperative associations, can request bankruptcy if their liabilities exceed their assets. If the company or cooperative’s financial status can improve, it can request bankruptcy be suspended by submitting an improvement plan. However, the Law states that postponement applications cannot be made and will be declined by the Courts in any case during the State of Emergency.
There have recent also been drastic changes to the Turkish bankruptcy postponement regime, outlined in detail here. These changes will come into effect once the State of Emergency is lifted.
Council of State memberships terminated
Turkey’s Council of State is the Superior Court for administrative justice and, as such, is the Court of last instance. It reviews all rulings rendered by Administrative Courts, unless laws specifically refer them to other judicial authorities.
Legislative amendments terminated the memberships of all members of the Council of State, except the President, Deputy President, Chief Prosecutor and Department Head of Council of State. New members of the Council of the State were elected on 25 July 2016.
Powers of guardians assigned to companies are increased
Under the Law of Criminal Procedure, companies can be appointed a guardian if there is a strong suspicion that the crime under investigation was committed by the company. According to the changes, these guardians also now receive powers over:
– Managing bodies.
– Partnership interests.
Compensation claims against guardians will be able to be made from the State. The State will have one year to recoup such compensation from malicious guardians.
Please see these links for the full text of relevant legislation (only available in Turkish).
– Decree Law No 669 on Measures to be taken regarding the State of Emergency and Establishment of the University of National Defence and Amending Some Laws (published in Official Gazette number 29787 on 31 July 2016).
– Amending Law on Council of State Law and other Laws (published in Official Gazette number 29779 on 23 July 2016).
Turkey has tightened up its postponement of bankruptcy regime. Bad faith debtors would regularly exploit the prior legislative arrangements and court processes, using them to threaten or bargain with their creditors by depriving them of enforcement and execution avenues for a significant and uncertain amount of time. However, legislative amendments go a significant way towards evening up the balance between creditors and debtors in this area. The amendments entered into force on 9 August 2016, but will not apply until after the three month State of Emergency has been lifted (more information).
The Law Regarding Amendment of Certain Laws for Improvement of Investment Environment numbered 6728 (“Amendment Law”) was published in Official Gazette number 29796 on 9 August 2016.
Changes introduced by the Amendment Law include:
– Legislation now specifies the exact documents and data which companies must submit when applying to postpone bankruptcy. If the applicant fails to submit the required information within a two week grace period, the applicant will be immediately declared bankrupt.
– Recovery project reports must now demonstrate how the management expenses and working capital will be met during the postponement period.
– Creditors now have legislative basis for objecting to bankruptcy postponement, within two weeks of its announcement in commercial registry. Creditors can object (request the court reject the postponement application) on the ground that the applicant does not meet the criteria for postponement of bankruptcy.
– Applicants can now only submit a revised recovery project only once during postponement of bankruptcy proceedings.
– Extensions to the postponement period are reduced from four years to one year.
– Applicants which have already benefited from postponement of bankruptcy cannot apply for a further postponement within one year of previous postponement periods expiring (including extension periods).
– The court can now appoint multiple trustees if it believe a single trustee will not be capable of handling all necessary duties.
– A single trustee can now be appointed to a maximum of three companies.
– Courts can now terminate a trustee and appoint new trustees, if necessary.
– Trustees must now submit a quarterly evaluation report to the court about whether the applicant shows improvements in line with the recovery project.
Please see this link for full text of the Amendment Law (only available in Turkish).
EMRA (Energy Market Regulatory Authority), Turkey’s energy market regulator has amended electricity legislation, particularly focusing on consumer-facing aspects. The definition of “eligible consumer” has now changed to focus on the location, rather than individual. Changes also apply to billing and meter reading timeframes, as well as the steps distribution companies must take before initiating legal processes and enforcement proceedings against consumers.
EMRA published the Amending Regulation on Electricity Market Regulation on Consumer Services (“Amendment Regulation”) in Official Gazette number 29791 on 4 August 2016, entering into effect on the same date.
Key changes introduced by the Amendment Regulation include:
Change to definition of “eligible consumers”
The definition of “eligible consumers” changes to focus on the location, rather than the particular consumer. These consumers are eligible to choose their electricity suppliers.
Accordingly, “eligible consumers” are now defined as consumers who own (or obtain) usage rights for an electricity connection location which consumed more than the eligible consumer limit in the preceding calendar year.
Adjustments to billing processes
– Monthly (or longer) billing periods must now be determined under the retail sales agreements or bilateral consumer agreements. The billing period cannot exceed one year.
– Electricity distribution companies cannot bill more than once in the same calendar month under the retail sales agreement. Certain exceptions exist, such as billings for electricity disconnections due to unpaid bills, termination, expiration of the agreement, or changes in energy suppliers.
– Consumers can now request to make payments in installments if the billing period is initially determined as three months or less, but a particular billing period exceeds three months.
– Electricity distribution companies must now read electricity meters every 25-35 days and only once each calendar month. Exceptions apply for force majeure, heavy weather conditions, inability to make readings due to periodic usage, as well as other reasons and situations deemed acceptable by the Authority.
Information requirements under bilateral agreements
Invoices and payment notices sent to consumers who purchase electricity under a bilateral agreement and have agreed to purchase electricity for a specific period of time must include:
– Term of the undertaking.
– Remaining period of the undertaking.
– Date which the undertaking terminates
– Rules for forfeit penalties in case of early termination.
Initiating proceedings against consumers
To initiate legal processes and enforcement proceedings against residential consumers who are subject to regulated tariffs, electricity distribution companies must first:
– Disconnect the consumer’s electricity.
– Terminate the consumer’s agreement.
– Deduct the consumer’s security deposit from unpaid amounts.
Any proceedings initiated contrary to this process will be stopped and the costs of the proceedings will not be claimed from the consumer.
Please see this link for the full text of the Amendment Regulation (only available in Turkish).
Turkey’s Ministry of Finance (“Ministry”) has introduced new principles and procedures for suspending and prohibiting suspicious transactions. These aim to prevent laundering of criminal proceeds and terrorism financing. The rules apply to a wide range of entities, involved in both completed and attempted transactions. Such entities must report suspicious transactions and suspend their execution pending a decision from the Ministry.
The Regulation on Suspension of Transaction Within the Scope of Laundering Proceeds of Crime and Financing of Terrorism (“Regulation”) was published in Official Gazette number 29785 on 29 July 2016, entering into force on the same day.
The following are included in the Regulation as “obliged parties”, along with branches, agencies, representatives, commercial agents and similarly dependent units:
– Non-bank institutions which are authorized to issue bank cards or credit cards.
– Authorized exchange offices, specified in foreign exchange legislation.
– Financing and factoring companies.
– Capital Markets Brokerage Houses and portfolio management companies.
– Payment service providers and electronic money institutions.
– Investment partnerships.
– Insurance, reinsurance and pension companies.
– Insurance and reinsurance brokers.
– Financial leasing companies.
– Institutions providing settlement and custody services within capital markets legislation.
– Borsa Istanbul A.Ş. (Incorporation), limited only to its custody service for the Precious Metals and Precious Stones Market.
– PTT Corporate (Company of Post and Telegraph Organisation) and cargo companies.
– Assets management companies.
– Dealers of precious metals, stones and jewellery.
– Directorate General of the Turkish Mint, limited only to its gold coin minting activities.
– Precious metal intermediaries.
– Those who buy and sell immovable objects for trading purposes, and intermediaries for these transactions.
– Dealers of any kind of sea, air and land transportation vehicles, including construction machines.
– Dealers and auctioneers of historical artefacts, antiques and art works.
– Those who operate in the field of lotteries and betting, including the Turkish National Lottery Administration, Turkish Jockey Club and Football Pools Organization Directorate.
– Sports Clubs.
– Public notaries.
– Freelance lawyers, limited only to functions within the scope of Article 35(2) of Law No. 1136 on Lawyers. This includes trading of immovable objects, as well as establishing, managing and transferring companies, foundations and associations.
– Certified general accountants, certified public accountants and sworn-in certified public accountants operating without being attached to an employer.
Obliged parties must notify the Turkish Financial Crimes Investigation Board (“Board”) if a supportive document or a serious indication exists showing that a suspicious transaction has been performed or attempted.
The Board must provide a decision to the obliged party within seven working days of receiving the notification. The obliged party must refrain from performing the relevant transaction until receiving the Board’s decision.
Under the Regulation, the following are indications of suspicious transactions:
– Extraordinary nature.
– Checks in various database or other sources indicate the person(s) carrying out the transaction is or might be connected with crimes.
– Risky situations, giving the impression that it would be difficult or impossible for Turkish authorities to seize proceeds of crime, or funds related to terrorism.
The Board will also advise obliged parties (on the Ministry’s behalf) about suspicious transactions which have been detected ex officio, or due to notification received from foreign institutions. In these circumstances, the obliged party must not perform the respective transaction for seven working days from the date of service.
Decisions will be served electronically to obliged parties which have an electronic notification account. However, for parties who do not have such an account, notification will be made through technical communication devices like fax, e-mail or web service.
Please see this link for the Regulation (only available in Turkish).
Turkey has introduced new principles and procedures regarding work permits for foreigners, as well as exemptions. Existing uncertainties about work permit requirements for company directors have been clarified and a new “Turquoise Card” system is introduced, The Turquoise Card grants holders the same benefits as an indefinite term work permit.
The Law on International Labor Force (“Law”) was published in Official Gazette numbered 6735 on 28 July 2016, entering into force on the same day. It supersedes The Law on Work Permits for Foreigners numbered 4817.
Uncertainties about work permits for company directors have now been clarified. Accordingly, the following people must now obtain work permits:
– Directors who are shareholders of limited liability companies.
– Directors who are shareholders of joint stock companies.
– Directors who are also active partners of partnerships in commendam, where the capital is divided into shares.
The following people are exempt from requiring a work permit:
– Directors of joint stock companies who are not resident in Turkey.
– Shareholders who are not acting as directors.
Other notable changes to the work permit regime include:
– The “Turquoise Card” system is introduced:
– Same benefits as indefinite term work permit holders.
– Granted initially for a three year term.
– Granted based on education, experience, contribution in science and technology, impact of the applicant’s activity or investment in Turkey on national economy, as well as employment.
– Spouses and dependent children of Turquoise Card holders receive documents indicating their relationship, which can be used as a residence permit.
– Foreigners must now enter Turkey within six months of the date their work permit was issued, or the permit will be cancelled.
– Work permit applications can now be made via authorized intermediary institutions.
– The Ministry of Labor and Social Security (“Ministry”) will establish a Foreigner Application, Evaluation and Monitoring System, to receive and evaluate work permit requests and monitor the impacts of Turkey’s foreign labor force.
– Work permit extension applications must now be made sixty days before an existing permit expires, or the Ministry will reject the extension application.
– Foreigners applying for or undertaking internships, as well as temporary workers (cross border service providers), are now included in the scope of the work permit regime.
– Applicants for indefinite term work permits must now have been previously granted at least eight years’ worth of work permits (previously six years).
The Ministry will publish further details as secondary regulations, such as application terms and procedures.
Definite term work permits granted before 28 July 2016 will be valid until their expiry date. Indefinite term work permits will continue to be valid, unless the Ministry cancels them.
The Law continues the existing categories of work permits: Indefinite term; Definite term; Independent. Work permit applications continue to be possible from both inside and outside Turkey.
Please see this link for the full text of the Regulation (only available in Turkish).
The domain names “.istanbul” and “.ist” are now available for public use on a first-come-first-served basis. The Istanbul Metropolitan Municipality provides the domain names via a range of accredited local and international registry operators, for one year minimum registration periods. Istanbul joins cities with similar geographic domains such as Amsterdam, Berlin, Madrid, Moscow, Paris, Rome, and Tokyo.
The Istanbul Metropolitan Municipality applied to The Internet Corporation for Assigned Names and Numbers (“ICANN”) in 2012 to establish specific domains for Istanbul and an agreement was ultimately signed in September 2014. Accordingly, “.istanbul” became a Top Level Domain (TLD) and “.ist” became a Generic Top Level Domain (gTLD) on the domain name server from July 2015. The domains are expected to be used by parties seeking to emphasise their project or trademark’s link to Istanbul.
The domains were first available in January 2016 as part of a pre-application period, open to global trademarks certified within the scope of ICANN’s Trademark Creating House Program.
The pre-application period expired in March 2016 and a restricted application period began. During the restricted application stage, applications were accepted from public institutes, companies, non-governmental organizations, associations and individuals operating in Turkey. The restricted application period expired on 10 May 2016 and the domain names are now open for individual applications.
For more information and access to the authorised registry operators, please visit nic.istanbul.
Turkey has published detailed principles and rules for operating retail businesses. These are introduced as secondary legislation, outlining further details for legislation enacted in January 2015. The recent regulation include detailed procedures and principles for retail trade operations, inspection of retail businesses, shopping festivals, sales campaigns, as well as related sanctions.
The Law on Retail Trade Regulation numbered 6585 was published in Official Gazette number 29251 on 29 January 2015 (“Law”). The Regulation on Principles and Rules on Retail Trade was published in Official Gazette number 29793 on 6 August 2016 (“Regulation”).
Notable provisions introduced by the Regulation include:
– If a product is subject to premium request, or other means of contribution, and is being sold on exhibition units, this service will be considered to be shelf allocation service.
– The Law states that where the producer or supplier is a small-scale business and the retailer is a large-scale business, the payment period cannot exceed 30 days from the date of delivery for FMCG goods (food, beverage, cleaning and personal care) whose shelf life is limited to 30 days. The Regulation allows exceptions to the rule where changes occur to the parties’ operational size.
– A supplier’s name, trade name, or brand must be mentioned on the labels of store-branded goods. Such specifications must be easy to read, as well as written in full and distinguishable.
– Discounted or promotional sales campaigns include practices such as sale of products for a limited period for the purpose of promoting the product, brand or operation and increasing sales volumes.
– Retail trade businesses are prohibited from making discounts without time limitation.
– The start and finish dates of shopping festivals, as well as agenda, must be notified in writing at least one month before commencement to:
– The provincial directorate (if the festival is organized based on state or province).
– The Ministry of Customs and Trade (“Ministry”) (if the festival is organized based on region or country).
– Shopping festivals cannot last more than sixty days.
– Detailed criteria are introduced for products subject to continuous discount sales.
– Conditions are introduced for when the governor or Ministry will determine working hours.
Please see this link for the full text of the Regulation (only available in Turkish).
Turkey has amended regulations related to electricity system connection and usage. Changes apply to setting and reducing power levels stated in system connection and usage agreements, as well as investment repayment conditions, and notification of power outages.
The Regulation Amending the Electric Market System Connection and Usage Regulation (“Amendment Regulation”) was published in Official Gazette number 29786 on 30 July 2016, entering into effect on the same date.
Significant changes introduced by the Amendment Regulation include:
– Power levels for system connection and usage agreements between consumers and the Turkish Electricity Transmission Corporation (“TEİAŞ”) must be the same as the levels set by TEİAŞ during issuance of its opinion regarding connection to the transmission line.
– TEİAŞ will invite consumers by 31 October 2016 whether to increase power levels where the power levels in the system usage agreements is below the power levels from the connection agreements. Revised agreements must be signed within three months of this invitation. If consumers do not answer TEİAŞ’ invitation and make an application with the revised agreements to the TEİAŞ, the connection of the consumption facilities will be disengaged from the transmission line five days after the three months period expires.
– Consumers cannot request a decrease in power if the requested power level is lower than the power levels set on the signed system connection and usage agreements.
– TEİAŞ will repay investors in equal monthly payments over maximum ten years for transmission assets established on behalf of TEİAŞ due to lack of financing, or investments to connect transmission lines to production and consumption facilities. The legal entity will be exempt from transmission tariff system usage costs for these investments (value added tax excluded).
– TEİAŞ and distribution companies must notify users at least two days before planned power cuts conducted by the Energy Market Management Incorporated Company within the scope of the Energy Market Stabilization and Reconciliation Regulation.
Please see this link for full text of the Amendment Regulation (only available in Turkish).
Turkey recently amended insurance provisions of the Highway Traffic Law Number 2918 (“Law”; see here for more information). Parallel changes have now also been made to the General Specifications on Highway Motor Vehicles Compulsory Automobile Liability Insurance. Accordingly, when applying for compensation, the claiming party must first apply to the insurer. Under the recent amendments, if the insurer and injured party fail to agree upon a compensation amount within 15 days of the injured party’s application, the parties can take the dispute to a mediator.
The General Specifications on Making Amendments on the General Specifications on Highway Motor Vehicles Compulsory Automobile Liability Insurance (“Amendment Specifications”) were published in Official Gazette number 29789 on 2 August 2016.
Documents which the insurer can request from the injured party are also determined in detail under the Amendment Specifications’ Annex.
Please see this link for the full text of the Amendment Specifications (only available in Turkish).
The highest body within the Turkish Court of Appeal system recently considered time limits for submitting evidence at the preliminary examination stage. Accordingly, it upheld the Court of First Instance’s decision to reject the defendant’s evidence request because the period to make such a request had expired.
In the case at hand, one party initiated execution proceedings against the other regarding an alleged debt. The alleged debtor (as plaintiff) sought a separate court declaration that no debt existed and also claimed compensation for bad faith.
The defendant sought dismissal of the action and attempted to submit evidence during the preliminary examination stage. However, the First Instance Court rejected the evidence on the basis that the defendant failed to submit it within the permitted time.
The defendant appealed to the Court of Appeal, claiming the First Instance Court’s decision was based on deficient evidence because the lower court had refused the defendant’s witness examination request. The Court of Appeal reversed the First Instance Court’s judgment and sent the matter back to the First Instance Court. However, the First Instance Court insisted that its previous judgment should stand, so the matter was referred to the highest body within the Court of Appeals (the Assembly of Civil Chambers).
The Assembly of Civil Chambers confirmed the First Instance Court’s initial decision to reject the defendant’s evidence, noting that:
– For negative declaratory judgments like this, the burden of proof rests with the defendant.
– Despite receiving notifications, the defendant’s witness examination requests during the preliminary examination stage were made after the period to do so had expired.
– The First Instance Court cannot grant time extensions to submit evidence which has not already been referred to at the preliminary examination hearing.
The Assembly of Civil Chambers based its decision on:
– Article 6 of the European Convention of Human Rights – Right to a fair trial.
– Article 90 of the Turkish Constitution.
– Article 141 of the Civil Procedure Law.
Case reference: Yarg. HGK. 23/01/2014, 2014/13-856 E. 2016/523K)
Turkey’s Tobacco and Alcohol Market Regulatory Authority (“Authority”) has updated the items which are prohibited from being used when manufacturing tobacco products. Manufacturers which are currently using the newly prohibited items must apply to the Authority, stating that non-compliant products will now be produced in line with the new rules. If no application is made by 31 October 2016, the related product’s Market Conformity Certificate will be cancelled.
The substances indicated in the table below are now prohibited during production of tobacco products which will be placed in the Turkish market, as well as production of the raw materials extracted from tobacco plants. The ban includes production of:
– Cigarette papers and additives.
– Edge binding gums.
– Ink on cigarette papers.
– Filtration substances.
– Filter papers and adhesives.
– Adhesives, adhesive inks and gums.
The Board Decision Regarding Changes on the Board Decision on Evaluation of the Data in Input Notifications and Toxicological Data Tables dated 22 June 2016 and numbered 11499 was published in Official Gazette number 29784 on 28 July 2016, entering into force on the same date. Please see this link for full text of The Board Decision (only available in Turkish).
Turkey has updated regulations aiming to combat agricultural nitrate pollution in rivers and soil. The revised rules include procedures and principles for determining, reducing and eliminating nitrate pollution. Turkish water areas will be surveyed over the next two years to determine nitrate levels and vulnerable locations. Tailored action plans will be also be prepared and executed for vulnerable areas.
The Regulation On Protection Of Waters From Agricultural Nitrate Pollution (“Regulation”) was published in Official Gazette number 29779 on 23 July 2016, entering into force on the same date. The Regulation was jointly issued by the Ministry of Food, Agriculture and Livestock, with the Ministry of Forestry and Water Affairs.
Under the Regulation, the Ministries will determine pollution in waters and soil, considering the physical and environmental properties of the related water and soil. Accordingly, the Ministries will:
– Check all ground and surface waters, natural lakes, other freshwater bodies, estuaries, coastal waters and sea waters to determine whether they:
– Contain more than 50 mg/l of nitrate, or may contain more than this level unless precautions are taken.
– Are eutrophic, or may be eutrohic unless precautions are taken.
– Announce nitrate sensitive areas via a Communiqué within two years, then revise this list at least every four years.
– Announce a Good Agricultural Practices Code for farmers within two years, outlining precautions to protect waters from agricultural pollution.
– Prepare a unique action plan for each sensitive area, considering scientific and technical data, as well as the region’s environmental properties.
– Follow up and evaluate application of action plans for each sensitive area.
Please see this link for full text of the Regulation (only available in Turkish).
Turkey has updated rules for the certain sales operations of the local food establishments. These rules apply to retail food establishments selling food products which originated from animals, such as meat, fish and dairy products. The rules primarily relate to record keeping and operational requirements for such establishments.
The rules apply to raw meat, ground meat as part of meat and meat products, milk and dairy products (except raw milk, drinking milk, colostrum, colostrum based products, raw cream and clotted cream), and any fish and fisheries.
The Regulation on the Organization of the Local, Marginal and Limited Operations of Foods Establishments (“Regulation”) was published in Official Gazette number 29782 on 26 June 2016, coming into force on the same date.
Any retailer wishing to operate locally, marginally and limitedly must apply to the provincial directorate or district directorate of the Ministry of Food, Agriculture and Livestock. Applicants must also provide:
– The establishment’s registry number.
– Information about the food of animal origin, which will be sold in the operation.
– A letter of undertaking stating that the establishment will act in accordance with the related regulations.
Retailers must maintain below records and have these available for inspection, regarding:
– Supply and demand for foods originating from animals.
– The amount of food originating from animals which is sold to other retailers.
The latest Regulation abolishes the earlier Communiqué on the Organization of the Local, Marginal and Limited Operations of Foods Establishments (Communique No: 2014/52).
Please see this link for the full text of the Regulation (only available in Turkish).
Turkey has introduced a passport system for forest plants, as well as authorization and supervision requirements for producing and selling seeds. Private sector seed producers which produce, sell and store any of the 179 specified seeds must now register with the plant passport system and carry such passport at all times. The new rules do not apply to seeds produced for personal use, not for commercial profit.
The Ministry of Forestry and Water Affairs (“Ministry”) published the Regulation on Forest Plant Passport and the Authorization, Supervision within the Forest Plant Seeds (“Regulation”) in Official Gazette number 29787 on 31 July 2016. The Regulation enters into effect on 31 January 2017.
Natural persons or legal entities who seek to obtain the following certificates should apply to the relevant directorate located around the production facilities:
– Seedling producer certificate.
– Seed producer certificate.
– Seed processor certificate.
– Seed distributer certificate.
Directorates will inspect (or arrange certified forestry bureaus to inspect) the seedling producers, seed producers, seed processors at least once each year. Deficiencies will be notified to the producers certificates will be annulled if the deficiency are not rectified within 30 days.
Failure to comply with the Regulation and uncertified activities can lead to administrative fines under article 103 of the Forest Law numbered 6831.
Persons which obtained their seed producer certificates prior to 31 January 2017 must meet the Regulation’s requirements within one year.
Please see this link for full text of the Regulation (only available in Turkish).