Turkey has taken a series of new measures involving companies and public institutions in the wake of the State of Emergency first declared on 21 July 2016. Notable measures include allowing collection of certain receivables at a fixed Turkish Lira currency rate until the end of 2017, as well as introduce incentives for the private sector to employ unemployed people. Actions regarding loans which qualify as embezzlement have also been loosened.
Notable recent developments include:
– Until 31 December 2017, the following institutions can collect Turkish receivables in foreign currency, at the purchase rate declared by the Central Bank on 2 January 2017:
– Public administrations and circulating capital establishments within the scope of the Public Finance Management and Control Law number 5018, dated 10 December 2003.
– Government business enterprises and subsidiaries within the scope of Decree No 233 on Government Business Enterprises dated 8 June 1984.
– Business establishments with capital at least half publically owned and within the privatization programme, as per Law on Privatization number 4046 dated 24 November 1994.
– Joint stock companies established under private laws, which have public share directly or indirectly within their capital and Saving Deposit Insurance Fund.
– Transfer and assignment transactions which are made by shareholders of companies under guardianship will be deemed invalid, from the date of investigation until 7 February 2017 (Article 133 of the Criminal Court Law No. 5271, added by Decree No. 686).
– Employers can receive incentives for each person employed before 31 December 2017, who was previously registered as unemployed by the Turkish Employment Agency.
– Insurance premium – TRY 22.22 per day will be granted to employers and deducted from social security premiums.
– Income tax – Employers will no longer pay income tax except from the employee’s minimum living allowance.
– The crime of embezzlement no longer includes transactions concerning loans which are used according to banking principles and procedures, nor extension of such loans, use of supplementary loans, instalment loans, implementation of loan guarantees, or loan restructures.
Please see the following links for the full text of the relevant Decrees (only available in Turkish):
Turkey’s Deputy Prime Ministry has announced procedures and principles for management, sale, termination and liquidation of companies which are under the trusteeship of the Savings Deposit Insurance Fund (“Fund”). The provisions apply until the end of the investigation and prosecution processes initiated against such companies due to their alleged connection with terrorist organisations.
The Communiqué (“Communiqué”) was published in Official Gazette number 29951 on 17 January 2017, entering into effect on the same date. The duties and authorizations of such trustees were adopted by Law no. 6758 within the scope of State of Emergency (more).
The latest Communiqué empowers the minister affiliated with the Fund to:
– Appoint the board of directors/managers, general manager, executive directors, executive managers and other representatives with equivalent authorities.
– Dismiss and replace company managers, including those appointed by the Fund.
– Decide on sale, termination and liquidation of the company or company assets, if the company status is not sustainable due to its financial status, shareholding structure, market conditions or other reasons.
If the company or its assets are sold or liquidated, the income and post-liquidation balance will be blocked in a public bank on behalf of the company’s shareholders until the end of the investigation and prosecution processes.
As the statutory intervenor, the Fund will carry on claims initiated against controlling shareholders and managers of a liquidated company, as well as third parties. If any award is received, such amounts will be distributed among the company creditors in accordance with the creditors’ ranking.
Please see this link for the full text of the Regulation (only available in Turkish).
Certain public companies owned and partially owned by the Turkish Treasury have been transferred to the recently established Sovereign Wealth Fund (more). In addition, 3 billion Turkish Lira which was previously owned or used by the Defence Industry Support Fund has been transferred to the Wealth Fund for three months.
The Turkey Wealth Fund Management Incorporation (“Wealth Fund”) was incorporated on 26 August 2016 and registered with the Istanbul Commercial Registry on 7 November 2016. All shares are held by the Directorate of Privatization Administration.
The Treasury’s shares in the following publically listed companies have been transferred the Wealth Fund:
– T.C. Ziraat Bankası A.Ş. – A state owned bank.
– Boru Hatları ile Petrol Taşıma A.Ş. (BOTAŞ) – Petroleum pipeline company.
– Türkiye Petrolleri Anonim Ortaklığı (TPAO) – Hydrocarbon exploration and refining.
– Posta ve Telgraf Teşkilatı A.Ş. – National post office.
– BORSA İstanbul A.Ş. (BIST) – Istanbul stock exchange.
– Türksat Uydu Haberleşme Kablo TV ve İşletme A.Ş. (TÜRKSAT) – Satellite telecommunications.
– Türk Telekom A.Ş. – Telecommunications.
– Çay İşletmeleri Genel Müdürlüğü’nün (ÇAYKUR) – Tea manufacturer.
3 billion Turkish Lira which was previously owned or used by the Defence Industry Support Fund has been transferred to the Wealth Fund, to be repaid within three months.
Please see the links below for full text of the relevant legislations, effective on 5 February 2017 (only available in Turkish):
– Decree by Council of Ministers numbered 2017/9756 (Duplicate Official Gazette numbered 29970, published on 5 February 2017)
– Decree by Council of Ministers numbered 2017/9758 (Duplicate Official Gazette numbered 29970, published on 5 February 2017)
Turkey has introduced procedures and principles for authorization, activities and abolishment of the institutions which appraise banks within the scope of the Banking Law. Detailed obligations are introduced for banks receiving appraisal services, as well as new obligations for banks’ boards of directors.
The Regulation on Appraisal Services for Banks and the Authorization and Operations of Appraisal Institutions (“Regulation”) was published in Official Gazette number 29946 on 12 January 2017, entering into effect on the same date.
An appraisal institution will be deemed dependent on the bank if its operations were established by the bank receiving the appraisal service. Such a circumstance mean the services will be deemed to contradict the Banking Law.
Detailed obligations are introduced for banks receiving appraisal services. The bank’s board of directors are now responsible and liable for:
– Developing written domestic policies and procedures in accordance with the bank’s scale and needs regarding procedures and principles for working with appraisal institutions.
– Considering appraisal operations as an activity that is independent of credit marketing and allocation activities.
– Preventing any operation and behaviour which could influence and create pressure on appraisal institutions, as well as harm the bank’s reputation.
– Ensuring the appraisal institutions is given at least two workdays (excluding the day the appraisal institution is appointed) to prepare and delivery each appraisal report and to set internal bank regulations in order to ensure the time period is met.
– Ensuring the bank and authorized appraisal institutions act in accordance with the tariff and implementation principles determined by the Capital Markets Board during the appraisal services.
– Introducing the appraisal process into the bank’s internal control and risk management system. The procedures and principles which apply to the banking system and compliance with the legislation should be included in the bank’s internal control and audit activities. Possible risks should be defined, measured, monitored and controlled.
– Establishing an objective system to ensure contracts are made with a sufficient number of appraisal institutions required by the bank. Consideration should be given to the business size, fair distribution of work to institutions in order to maintain the quality of appraisal services, as well as ensuring the system operates effectively.
Please see this link for the full text of the Regulation (only available in Turkish).
Turkey’s Energy Market Regulatory Authority has amended procedures and principles for determining electricity distribution system revenues. Changes apply to categorization of certain factors when calculating revenues, determining distribution system fees, as well as target loss rates.
The Communiqué on Amendment of the Communiqué on Distribution System Revenues (“Amendment Communiqué”) was published in Official Gazette number 29939 on 5 January 2017, entering into effect on the same date.
Notable changes introduced by the Amendment Communiqué include:
– The cost components used as basis for calculating distribution system fees have been expanded and are outlined in detail. The following items are now included as cost components for using electricity distribution systems:
– Investments to carry out distribution activities.
– System operation costs.
– Technical and non-technical loss costs.
– Power-off and power on costs.
– Meter reading costs.
– Reactive energy costs.
– The definition of “loss energy” has been expanded to include both technical and non-technical losses. Both technical and non-technical losses are clearly stated as being included for the purpose of determining target loss rates.
– The costs of technical and non-technical losses which do not exceed target loss rates determined by the Energy Markets Regulatory Board will be added onto distribution tariffs and reflected to electricity consumers.
– Asset sales revenues which are considered when calculating net investment expenditures have been amended. For sales of scrap asset to be considered sales revenue, these must be scrap assets which resulted from distribution activities and/or sub-activities.
Please see this link for the full text of the Communiqué (only available in Turkish).
Turkey has amended procedures and principles for calculating electricity retail prices. The nature of costs taken into account when calculating the retail sale price have changed, as well as the uncontrolled operating costs which occur during retail sale activities.
The Amendment Communiqué on Regulatory Communiqué Regarding Retail Energy Sale Price (“Amendment Communiqué”) was published in Official Gazette number 29939 on 5 January 2017, entering into effect on the same date.
Electricity retail prices are determined based on the costs which supply companies incur in carrying out energy sale activities for consumers, subject to regulation. The following costs will now also be considered when determining electricity retail prices:
– Operating costs for invoicing and customer services, as well as retail sale services.
– All costs incurred in order to continue activity and active energy expenditures.
Operating costs subject to regulation refers to operating costs taken as the basis for determining the maximum limit for retail sale revenues. These are classified into three groups: Fixed, Variable and Uncontrolled.
The following are deemed to be uncontrolled operating costs. However, the Amendment Communiqué makes changes to these categories:
– Depreciation expenses which occurred due to financial regulations with respect for investments made since 1 January 2016. From 5 January 2017, a condition has been added that these must not exceed 10% of fixed operating costs.
– Amounts calculated by multiplying the cost of sold commercial goods of commissioned supply company by the average of the respective company’s collection risk and the country’s collection risk, with respect to provisions for doubtful commercial receivables. From 5 January 2017, a condition has been added that the country’s collection risk average in this context cannot exceed 1%. Any part exceeding 1% will not be considered during the calculation.
The “net sales revenue” has been defined as the amount re-calculated “after deduction of Electricity and Gas Consumption Tax, energy sales made in organized wholesale market, intragroup sales for balance and subvention amounts received from the total sale revenue.
The term “collection risk” has been defined as the ratio of the amount of the relevant supplier’s doubtful commercial receivables (minus receivables which are not related to the commercial receivables) to net sales ratio.
The formula has also been amended for calculating amount and energy supply cost undertaken.
Please see this link for full text of Amendment Communiqué (only available in Turkish).
The Turkish Competition Authority recently published a decision about a negative clearance/individual exemption application for an agreement between two competing insurance companies. The Competition Board’s (“Board”) decision signals that co-insurance and re-insurance agreements between competitors should be considered competition law sensitive. As a result, related information transfers, which are common in the insurance market, may require a re-evaluation from a competition law perspective.
The agreement in question outlines co-operation between Aksigorta A.Ş. (“Aksigorta”) and Acıbadem Sağlık ve Hayat Sigorta A.Ş. (“Acıbadem”), regarding co-insurance, re-insurance and operational services.
Notably, it involves agreement that Acıbadem would:
– Provide services to Aksigorta in operational matters related to existing health products.
– Develop a new product to be sold and delivered to customers under the Aksigorta brand.
– Provide services to develop a health insurance product, which Aksigorta would sell.
– Co-insure and re-insure Aksigorta’s health insurance products.
The specific agreement provisions are not included in the Board’s decision. However, the decision reveals that the agreement contains restrictive provisions regarding:
– Transfer of confidential and technical information, trade secrets, as well as customer and market information between the parties.
– Determination of price, profit margin and re-insurance commission.
– Making Aksigorta entering similar collaborations with other parties difficult.
The parties have also entered a Confidentiality Agreement, committing to transfer technical information and trade secrets to each other, as well as all kinds of customer and market information.
The Board’s Decision
In principle, it is important for the Board to evaluate competition restriction provisions in agreements concluded between undertakings which compete and operate in the same market. The Board noted that Aksigorta and Acibadem are engaged in competing activities for insurance services and in the relevant product market (the health insurance market).
The Board conducted a negative clearance and individual exemption examination for the agreement. In general terms, a negative clearance application involves parties seeking the Board to make a determination that their agreement does not breach competition laws. If the Board declines a negative clearance application, the parties must obtain an individual exemption, or ensure the agreement falls into one of the group exemptions which apply to certain types of agreements.
The Board declined the negative clearance application due to the confidentiality agreement, which involves sharing technical information between the parties. The Board considers this to be a restrictive practice.
Accordingly, the parties were required to obtain an individual or group exemption in order for the agreement to proceed.
The Board commented that co-insurance relationships fall within the scope of a group exemption. However, re-insurance relationships are not within the group exemption’s scope. Therefore, an individual exemption was required in these circumstances.
The Board ultimately granted an individual exemption for the agreement. In the process, it noted that competitor undertakings should continue to compete after concluding such an agreement.
The Board’s comments during evaluation of the agreements offer insight into how it views the competition law aspects of these arrangements:
“Taking into consideration the following facts;
– ACIBADEM and AKSIGORTA continue to sell their products as two competitors,
– ACIBADEM continue to create its own products independently,
– Parties has no right to interfere each other in relation to operation,
– ACIBADEM is serving Aksigorta only in relation to products,
It has been observed that the agreement does not contain any action disturbing/restricting the competition more than what is necessary.”
Please see this link for the full text of the Board’s decision, based on an application dated 11 May 2016 and numbered 16-16/269-120 (only available in Turkish).
The Turkish Competition Authority announced last week that it has launched an investigation into the economic unity which consists Türk Telekom A.Ş. and TTNET A.Ş. (“TTNET”). The investigation is launched following a preliminary investigation where a complainant alleged that TTNET abused its dominant position by bundling fixed broadband internet and pay TV services, violating Article 6 of Law No. 4054 on Protection of Competition.
Unless extended, the Competition Board has six months to conclude the investigation. Three written defenses can be submitted and an oral hearing can be held if requested. TTNET is expected to submit its first written defense within 30 days.
Turkey’s High Planning Council (“Council”) has accepted a Strategy and Action Plan for the Software Sector (“Action Plan”) for 2017-2019. It aims to improve the national software market, increase sector exports and employment, as well as produce products and provide international quality services in the software and IT fields.
The Council’s Decision Numbered 2016/46 was published in Official Gazette number 29939 on 5 January 2017.
The Action Plan outlines four objectives:
– Improve national consciousness and strengthen infrastructure.
– Establish legal and administrative regulations.
– Improve qualified human resources.
– Improve international competitiveness.
Specific actions to move achieve the Action Plan’s objectives include:
– TUBITAK’s Cyber Security Institution for Informatics and Information Security Advanced Technologies Research Center will be re-structured, to become the Information Security and Cyber Security Institution.
– A documentation/certification system for information technology companies will be established.
– New incentives will be introduced under the Public Procurement Law for local software companies in case of public procurement.
– Changes will be made to the education syllabus to improve experience in computer science and programming culture at early ages.
– Education will be provided in computer and software sciences for the young and unemployed workforce.
– National software development competitions will be held.
Please see these links for the full text of the Decision and Action Plan (only available in Turkish).