Edition 67: 27 June 2018
Editorial Team:
Orçun Çetinkaya, LL.M., Ezgi Baklacı, LL.M., and Pelin Oğuzer, LL.M.
Turkey Amends and Clarifies Movable Pledge Regime

Turkey has amended various rules and related processes for pledged movables. Notably, it has been clarified that if a pledge is placed on a business, immovables assigned to the business’ commercial activities will not be considered within the scope of such pledge. Other amendments relate to criteria for when a third-party is deemed to be “in good faith”, as well as an increased scope for assets which can be pledged.

Notable amendments to the pledged movables regime and related processes include:

– It has been clarified that if a pledge is placed on a business or a craftsman business, immovables assigned to the business’ commercial activities will not be considered within the scope of such pledge.

– A third-party who does not know (or is not expected to know) that a movable is pledged will be considered to be “in good faith” if:

– The third-party is not required by law to check the pledged movables registry, or

– The third-party does not have legal capacity to be a party to the pledge contract.

– The list of assets that can be pledged has increased. It is now possible to pledge “all movable assets and rights similar to the list of assets which can be pledged”.

– If a movable has no distinctive quality, the movable’s general qualities which enable its specification must now be included in the pledge contract.

– The provision which stated that lapse of time does not apply to receivables once the pledge contract is registered to the pledged movables registry has been revoked.

– The deadline for requesting a pledge contract be released once receivables expire has increased from three business days to:

– 30 business days for pledgors subject to foreign laws.

– 15 business days for local pledgors.

– The requirement to include an annotation that “the pledgor is able to exercise its right to transfer ownership in case of default” has been removed for pledge contracts.

– Processing, merging or mixing pledged movables no longer qualify as circumstances where valuation may be requested.

– Pledges on construction vehicles are no longer required to be reported to the pledged movables registry center.

 The full text of the regulations published in Official Gazette number 30428 on 22 May 2018 can be found below (only available in Turkish):

Regulation Amending Pledged Movables Registry Regulation

Regulation Amending Regulation on Establishment of Pledges in Commercial Transactions and the Use of Rights After Default

Regulation Amending Regulation on the Valuation of Pledged Movables in Commercial Transactions

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Turkey Launches Electronic Notification System for Foreign Direct Investments

In Turkey, foreign-oriented or included companies must notify the authorities about their capital structures, share transfers and other activities. The Ministry of the Economy has announced an electronic system for such notifications, called the Electronic Information System on Incentive Implementation and Foreign Capital (“System”).

The Regulation Amending the Regulation for Implementation of Foreign Direct Investment Law (“Amendment Regulation”) was published in Official Gazette number 30348 on 1 June 2018.

Qualifying companies must apply to the General Directorate of Incentive Implementation and Foreign Capital (“General Directorate”) to authorize users who will use the System on the company’s behalf.

Individual users will log in and operate the System via an eligible electronic certificate, which should be obtained from an electronic certificate service provider.

Qualifying companies must use the System to:

– Update the following information within one month after authorisation:

– “Investor”

– “Shareholder List”

– “Subsidiaries”

– Annually complete the Foreign Direct Investment Activity Form, by the end of May each year.

– Update the Shareholder List within one month if a capital increase or decrease occurs.

– Update the Shareholder List within one month of payment if a share transfer occurs.

– Update the Foreign Investment Capital Form within one month of payment if a capital increase or share transfer occurs.

Companies with only Turkish contributions must also use the System to update the “Investor”, “Shareholder List” and “Subsidiaries” sections if a foreign investor joins the company via a capital increase or a share transfer.

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

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Turkey Announces Rules for Merging Mining Licences

Turkey has published rules for merging separate mining licenses into Mining Zones, addressing issues such as taxation, cancellation, tender, re-licensing and determining investment costs to establish Mining Zones.

The Regulation on the Mining Area and Merging Licences was published in Official Gazette number 30429 on 23 May 2018.

A Mining Zone will be declared if one of the following exists:

– Separate mining operations pose a danger because the licenced areas are adjacent and/or close to each other.

– Separate mining operations pose a risk to operational security and the projects cannot be efficiently operated separately due to reaching license limits.

– If there is more than one business license, the annual average particle emission values (dust, etc.) during operation, transport, explosion, crushing and other activities, exceeds environmental limits.

– A joint venture is needed in the settlement area due to its proximity to the zoning areas and environmental effects.

Licenses will be merged if at least two licensees, representing at least half of the licenses’ total equivalent reserves, sign a license merger undertaking, then submit this to the General Directorate of Mining Affairs.

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

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Turkey Allows Human Pharmaceuticals and Food Supplements to be Produced on Same Sites as Veterinary Pharmaceuticals

Turkey has loosened manufacturing rules to now allow pharmaceutical products for human use and food product supplements to be produced on the same sites as veterinary pharmaceutical products, under certain conditions.

The Regulation Amending the Regulation on the Veterinary Pharmaceutical Products (“Amendment Regulation”) was published in Official Gazette number 30424 on 17 May 2018.

Under the Amendment Regulation, pharmaceutical products for human use and food product supplements can be now manufactured in an appropriate form and category on the same sites which are authorised to manufacture veterinary pharmaceutical products. Manufacturers must take appropriate measures to prevent the risk of cross-contamination and obtain approval from the General Directorate of Food and Control.

However, manufacturing sites operating with living active substances cannot be used as a common area for human and veterinary pharmaceutical products.

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

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Turkish Constitutional Court Considers Title Deed Registry Notations and their Consequences for Property Ownership

The Turkish Constitutional Court recently considered sale of a property to pay public debts, in circumstances where the property was allegedly owned by another party (“Applicant”). The court ruled that if a restriction is registered on the title deed registry and observable, later transactions for the property should carry the restriction’s consequences. Therefore, the court ruled that the Applicant’s property right was not violated and a fair balance existed between property rights and public interest.

The Applicant signed a preliminary sale contract to purchase a property in 1998. At this time, the property had two attachment annotations in favour of a Tax Office. The preliminary sale contract was registered on the title deed in 1999.

The purchase transaction failed and in 2001 the Applicant filed a declaratory lawsuit, seeking to assert his ownership of the property. The First Instance Court ruled that the property belonged to the Applicant.

In 2009, the Tax Office notified the Applicant that the property had been put up for sale. The Applicant filed a lawsuit before Tax Court alleging that the Tax Office’s notice was incorrect and illegal, pointing to the 2001 declaratory judgment which established that the Applicant owned the property.

The Tax Court cancelled the sales transaction, but the Council of State later reversed the cancellation. The higher court stated that immovable property can be sold to collect public debts because seizure of the property had not been removed and nor was the attachment cancelled by judicial decision.

The Applicant applied to the Constitutional Court, claiming that selling the property despite the 2001 declaratory judgment breached his property rights.

The Constitutional Court noted that given the 2001 declaratory judgment, the Applicant held a reasonable expectation of ownership.

The Constitutional Court also noted that property rights are not unlimited though. Rather, these can be restricted by law and for purposes of public good.

The Constitutional Court ruled that if a restriction is registered with the title deed registry and could be observed:

– Any transaction by a third-party regarding the property should carry the restriction’s consequences.

– The third-party cannot be deemed as acting with goodwill.

In the case at hand, the Constitutional Court found that a fair balance existed between property rights and the public good had not deteriorated. Therefore, the court ruled that the Applicant’s property right was not violated.

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

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Turkey Introduces New Rules for Meal Card Schemes

Turkey recently announced a new scheme for regulating meal cards, which are a common benefit scheme offered to employees. The new rules address a variety of issues, including payment terms and compulsory clauses for contracts between meal card entities and retail businesses. The new rules also apply to applications and online systems which fulfil the same task as meal cards.

The Regulation Amending the Regulation on Principles and Rules for Retail Business (“Amendment Regulation”) was published in Official Gazette number 30428 on 22 May 2018.

Notable aspects of the new rules include:

– Meal card entities cannot make any discounts to the employers which they deal with.

– Meal card entities cannot charge more than 6% commission to retail businesses.

– Meal card entities must not receive any payment from retailers besides the agreed commission.

– Payments by employers to meal card entities, or by meal card entities to retailers must be made within 30 days.

– Remaining meal card balances at the end of each month or year will be transferred to the next month or year’s balance.

– The Amendment Regulation does not apply to:

– Fuel cards.

– Gift cards.

– Incentive cards.

– Accommodation cards.

– A card can include other schemes (besides meals) if the payments can be separated.

– Meal card entities must notify the Ministry of Customs and Trade before they start operations.

– Entities currently providing meal card services must notify the Ministry of Customs and Trade by 22 August 2018.

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

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