Edition 44: 10 May 2017
Editorial Team:
Orçun Çetinkaya, LL.M., Ezgi Baklacı, LL.M., and Pelin Oğuzer, LL.M.
Rules Tightened in Turkey for Identifying and Storing Information about Internet Users, Plus Filtering Criminal Content

Turkey has tightened rules for collective internet use providers, introducing more detailed requirements for filtering and monitoring internet users. Collective internet use providers are defined as real persons or legal entities which provide internet for a certain amount of time, or for a certain area. For example, hotels, convention centers, or schools. Under the changes, these providers must now introduce more detailed systems to filter online criminal content, as well as identify internet users. They must also now store users’ access details for two years.

The Regulation on Collective Internet Use Providers (“Regulation”) was published in Official Gazette numbered 30035 on 11 April 2017, entering into effect on the same date.

The Regulation introduces new obligations for collective internet use providers, which must now:

– Apply a more detailed filter system to identify criminal content.

– Develop systems to identify internet users in public places (for example, internet cafes), such as via short message services (SMS) to identify users.

– Record users’ access details and store the data for two years. There were previously no recording and storage requirements.

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

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Turkey Expands Scope of Government Investment Support Scheme, Introduces VAT Exemption for Software and Intangible Rights

Turkey has expanded the scope of its government investment support scheme. The changes exempt software and intangible rights from VAT, as well as outline the benefits which a relocating facility can receive within the scheme. Notably, it also outlines significant tax exemptions for investments made during 2017.

Council of Ministers’ decision numbered 2017/9917 dated 13 December 2017 (“Decision”), was published in Official Gazette number 29987 on 22 February 2017, entering into effect on the same date. The Decision amends the “Decision on State Aids in Investments”.

Notable changes include:

– Sale and lease of software and intangible rights to investors holding an incentive certificate are now exempt from VAT.

– Financial incentives available for organized industrial zones investments have been expanded. The incentives for the sixth region are now also available to cities noted in the fourth and fifth regions, as well as to Kilis.

– Investments supported by the Development Bank of Turkey (Kalkınma Bankası) can now benefit from aid provided under the Decision.

– Facilities relocating to a location included in the government support scheme can receive benefits related to employer insurance, insurance premiums, as well as withholding tax if:

– No additional investments are made to a relocated facility, or

– Additional investments are made to a relocated facility, but the minimum fix investment amount and minimum capacity conditions are not exceeded for the new region.

– If a facility relocates into a city within the government support scheme and meets the conditions, the relocated facility can receive additional support in the form of:

– Customs Duty Exemption.

– VAT Exemption.

– Tax Reduction.

– Investment incentive documents related to manufacturing investments (US-97 Code: 15-37) between 1 January 2017 and 31 December 2017 can receive:

– VAT refund for building-construction expenses.

– For regional, large-scale and strategic incentive applications:

– 100% waiver of corporate tax.

– 100% waiver of and income tax.

– 100% investment contribution for the investor’s earnings.

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

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Turkey Updates Procedural Rules for Pre-Trial Settlement Negotiation Mechanism

The Turkish Bar Association has updated the rules for reconciliation negotiations. These are an alternative dispute resolution mechanism, available to parties before filing lawsuits (except those involving public order). The mechanism allows dispute parties an opportunity to voluntarily settle their conflict, relatively quickly and cheaply compared to formal court processes. Notable changes apply to lawyers’ obligations during the process, as well as procedural steps for arranging, recording and concluding reconciliation meetings.

The Reconciliation Regulation (“Regulation”) was published in Official Gazette number 30038 on 14 April 2017, entering into effect on the same date.

Reconciliation negotiations are generally used in commercial disputes and there are no specific monetary thresholds or limits for parties to take advantage of the mechanism.

Notable changes to the process include:

– Lawyers are no longer required to be impartial during reconciliation negotiations. Previously, lawyers were required to act in an impartial manner between the parties and try to reach a settlement without being impressed by either party. Lawyers must now:

– Explain the reconciliation process to their own client, including outcomes.

– Prepare a document outlining the information about the reconciliation process provided to their client and have the client sign this.

– Act in an equitable manner during reconciliation negotiations and completely implement legal rules.

– The inviting lawyer is now entitled to bring personnel to reconciliation negotiations, in order to draft meeting minutes. Previously, all parties’ consent was required for any other party or person to attend, besides the parties and their lawyers.

– Parties must now compromise in order to include technical personnel in reconciliation negotiations, such as an independent accountant and, financial advisor and/, or engineer to reconciliation negotiations.. Such technical personnel can only make statements regarding questions asked to them.

– Changes have been made to how reconciliation meeting are arranged:

– Reconciliation offers must now be made in writing

– The inviting party must now include a meeting place and date in their proposal.

– Parties receiving a reconciliation offer must now respond within two weeks, or else the offer will be automatically deemed as rejected.

– If parties cannot agree on a meeting place, one will now be allocated by the Turkish Bar Association.

– Written minutes must be recorded for each meeting, with documents signed by the parties’ lawyers.

– If both parties agree, audio or video recordings can be made of meetings.

– The meeting outcome must be recorded in writing, regardless of whether parties reach an agreement.

– The parties and their lawyers must retain all documents drafted or submitted during the reconciliation process for at least three years from signing the reconciliation report.

– If the parties resolve their dispute during the reconciliation process:

– If the client and lawyer have agreed on a fee, such agreement would apply.

– If there is no fee agreement, the lawyer is only entitled to receive fees in accordance with the Legal Practitioners Act No. 1136.

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

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Turkey Tightens Regulations for Firms Supervising and Approving Electricity Generation Facilities

Turkey’s Ministry of Energy and Natural Resources (“Ministry”) has updated the regulatory regime for firms which supervise and approve electricity generation facilities (“Authorized Firms”). The changes generally tighten the regime, by restricting the Ministry’s delegation powers, as well as adding new authorization requirements for Authorized Firms, additional responsibilities during operations, and restrictions on activities.

The Regulation Amending the Regulation on Acceptance of Electricity Generation Facilities (“Amendment Regulation”) was published in Official Gazette number 30038 on 14 April 2017, entering into force on the same date.

The Ministry’s Approval of Authorized Firms 

Procedures and principles for how the Ministry can delegate its responsibilities have been restructured. Accordingly:

– The Ministry can now only delegate responsibilities for the following tasks where this is necessary to establish and operate electricity generation facilities in compliance with modern technology and national interests:

– Review

– Detection

– Reporting

– Project approval

– Project acceptance.

– The Ministry’s ability to wholly transfer its duties as to acceptance has been limited. Previously, the Ministry could wholly transfer its duties for acceptance procedures to authorized entities. However, it can now only delegate acceptance procedures to third parties via authorization, commissioning or purchasing services.

– The Amendment Regulation clearly specifies the entities and institutions which the Ministry can authorize as Authorized Firms:

– Expert public institutions and organizations.

– Legal entities with electricity distribution license under the Electricity Market Law No. 6446.

– Private legal entities.

Accrediting an Authorized Firm 

Amendments have been made to the approval processes for becoming an Authorized Firm:

– Applicants to the Ministry for approval as an Authorized Firm must now be accredited by the Turkish Accreditation Agency. An exception applies for expert public institutions and Authorized Firms appointed by the Ministry,

– Applicants must now submit an experience certificate, showing the Authorized Firm, its shareholders, or its employees have experience as controller of acceptance procedures in at least one of the following:

– Electricity generation, transmission, distribution facilities.

– Petrochemical, refinery, petrol or natural gas transmission lines.

– Shipping and shipyards.

Terminating an Authorized Firm’s Approval

Amendments have been made for terminating an Authorized Firm’s approval:

– An authorization protocol is executed between the Ministry and the Authorized Firm (“Protocol”). The Ministry can now terminate the Authorized Firm’s approval if:

– The Ministry determines an Authorized Firm has breached its obligations under:

– The Protocol, or

– Legislative provisions, and

– The Authorized Firm receives three notifications concerning different three breaches, within three years.

– An Authorized Firm’s authority under the Protocol can now be terminated or suspended if the Turkish Accreditation Agency restricts, suspends, or revokes the Authorized Firm’s accreditation.

– An Authorized Firm which has its authorization terminated is now prevented from applying for re-authorization for at least three years (from the termination decision).

Authorized Firm’s Responsibilities

Additional responsibilities have been introduced for Authorized Firms, which must now also:

– Hire sufficient personnel with adequate technical knowledge, expertise, technical and occupational training;

– Ensure personnel receive training to keep their occupational knowledge and capabilities up-to-date.

– Obtain professional liability insurance to cover the risks of its activities.

– Ensure management and personnel:

– Are impartial.

– Keep information obtained during their activities confidential.

– Protect information relating to intellectual property rights.

Activity Restrictions for Authorized Firms

Under the amendments, Authorized Firms, their management and personnel, are now restricted from:

– Holding shares in the facilities or the license holders they will provide controlling activities to.

– Partaking directly in production, sales, marketing, or construction of any aspect of equipment, piping, electrical hardware and control systems for generation facilities, nor be representatives of persons engaged in these activities.

– Being involved in any activity which may jeopardize the independency of the Authorized Firm’s decisions or duties.

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

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Turkey Updates Waste Incineration Regime, Restricting Common Burning Plants to Hazardous Waste Only

Turkey has updated its waste incineration regime, to keep up with technological and sector developments. Notably, only “hazardous wastes” can now be incinerated at common burning plants. Wood waste is now mostly removed from the Regulation on Waste Incineration. Further, energy recovery is now possible at cement plants.

The Regulation Amending the Regulation on Waste Incineration (“Amendment Regulation”) was published in Official Gazette number 30031 on 7 April 2017, entering into effect on the same date. The Amendment Regulation makes changes to the Regulation on Waste Incineration (“Regulation”), published in the Official Gazette number 27721 on 6 October 2010.

Changes introduced by the Amendment Regulation include:

– Only “hazardous wastes” can now be incinerated at common burning plants.

– Energy recovery is now possible for waste at cement plants.

– Wood waste is now excluded from the Regulation, except for:

– Wood preservative and wood waste which includes halogenated organic compounds or heavy metal.

– Wood waste originating from construction or destruction.

– Previously, all medical waste incineration facilities were required to install a laboratory. The Ministry of Environment and Urban Planning now has discretion to waive this requirement.

– Lengthy trial waste incinerations are no longer required for:

– Facilities to incinerate one type of waste.

– Facilities supplementing waste codes.

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

 

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Turkey Introduces Additional Environmental Approval Mechanism for Certain Government Projects

Turkey has introduced an additional environmental assessment mechanism for approving certain types of government projects, which have the most significant environmental effects. The new Strategic Environmental Assessment mechanism integrates further environmental factors into approval of government projects, in the interests of sustainable development and in line with Turkey’s EU harmonization process. The new process will apply for specified project types, on top of existing Environmental Impact Assessment processes.

The Strategic Assessment Regulation (“Regulation”) was published in the Official Gazette number 30032 on 8 April 2017, entering into effect of the same date.

The Strategic Environmental Assessment (“Assessment“) involves assessment of a project’s environmental impact to:

– Ensure environmental issues are considered and integrated prior to approval or acceptance of plans/programs.

– Minimize potential adverse environmental effects of a plan/program.

– Maximize positive impact.

Assessments should involve participatory approach, to support the decision makers, resulting in a written report about the proposed environmental works. Assessment reports must be submitted to the Ministry of Environment and Urbanisation for approval, which will publicly announce its decision within 30 days.

The new Assessment process will apply on top of current Environmental Impact Assessment procedures. The underlying intention is to ensure environmental assessment occurs at the planning stage for certain project types, which are most likely to have significant effects on the environment.

The Regulation identifies 23 types of projects (Annex-1 of the Regulation) in the following sectors, will be subject to the new Assessment process:

– From 8 April 2017 for:

– Coastal management.

– Spatial planning.

– Agriculture.

– Tourism.

– Transport.

– From 1 January 2020 for:

– Fisheries.

– Forestry.

– From 1 January 2023 for:

– Waste management.

– Industry.

– Telecommunications.

– Energy.

The project types addressed in the Regulation are mainly:

– Integrated coastal zone plans.

– Environmental plans.

– Planning studies in the energy sector.

– Waste management, drought and wastewater treatment plans of basins.

– Rural development schemes.

– Agriculture master plans.

– Tourism and industrial strategy plans.

– Transportation master plans.

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

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Turkish Competition Board Publishes 2016 M&A Activity Report

Turkey’s Competition Authority (“Authority“) recently published a report on mergers and acquisitions examined by the Competition Board (“Board“) during 2016 (“Report”). The Report outlines transaction numbers and values, as well as investor countries and industry sectors. The Authority considered 209 transactions in 2016, with 22% involving foreign parties investing approximately TRY 18.9 billion into Turkish companies. The total reported transaction value increased 252% in 2016, relative to 2015. The Report showed electricity as the most active sector for M&A activity in 2016.

Mergers or acquisitions can reduce or restrict competition in a market by creating a dominant position or strengthening an existing dominant position. These transactions are prohibited by Article 7 of the Law on the Protection of Competition No. 4054 (“Law“). Transactions which meet certain criteria and thresholds must be notified to the Board to be legally valid.

Notable points in the Report include:

– 209 mergers and acquisitions were reported to the Authority in 2016.

– The total transaction value in 2016 was TRY 1,595,572,480,940. This is a 252% increase from 2015 (TRY 452,560,160,618).

– In 91 transactions, the target companies (including company subject to transfer and joint venture companies) or joint ventures are incorporated in Turkey.

– 47 of the 2016 transactions (22%) involved foreign parties investing in Turkish companies. Most notably, these investments were from:

– The Netherlands (nine).

– Germany (six).

– England (four).

– Japan (four).

– Foreign parties invested approximately TRY 18.9 billion in takeover transactions of Turkish companies, equating to a 200% increase on 2015 (TRY 6.3 billion).

– Electricity was the largest industry sector for 2016 transactions (except privatizations).

– The highest valued transactions were in the field of monetary intermediary activities (except privatizations).

– Nine privatization processes were evaluated in 2016. Privatizations mostly occurred in the electricity sector.

– It took an average of 15 days after the final notification for the Authority to finalize its consideration of transactions during 2016.

Please see this link for the full text of the Report, published on the Authority’s website on 12 April 2017 (only available in Turkish).

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Turkey Announces Secondary Legislation with Rules and Exceptions for Substances Which Deplete the Ozone Layer

Turkey ratified the Montreal Protocol on Substances that Deplete the Ozone Layer in 1991 (“Protocol”) and has now introduced secondary legislation in line with the Protocol. Under the recent developments, controlled substances can now be imported to Turkey in refillable pressure cases, although disposable cases continue to be prohibited. Also, exceptions have been introduced for halon gas in airline fire extinguishers and Chlorodifluoromethane imports for refrigeration and air conditioning equipment.

The Protocol was designed to reduce the production and consumption of ozone depleting substances in order to reduce their abundance in the atmosphere, and thereby protect the earth’s fragile ozone Layer.                    

The Regulation on the Substances Depleting The Ozone Layer (“Regulation”), was published in Official Gazette number 30031 on 7 April 2017.

The Regulation introduces a range of exemptions for:

– Halon gas can now be used as an extinguisher on airplanes. Previously, Halon gas was completely prohibited.

– Chlorodifluoromethane imports are now permitted for after-sale services of refrigeration and air conditioning equipment. Imports had been prohibited since 2015.

– Import of the controlled substances in refillable pressure cases are now permitted. Imports in disposable cases continue to be banned.

– All controlled substances (except hydrochlorofluorocarbons) are now permitted in Turkey for laboratory and analytical use.

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

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Turkish Constitutional Court: Right to Fair Trial Violated by Failure to Consider Request to Use Oath Evidence

Turkey’s Constitutional Court recently considered whether a first instance court had breached the principle of equality of arms by failing to consider a party’s request to use an oath as evidence. The court held the party’s right to a fair trial had been violated, sending the matter back to the lower court for a re-trial.

During the first instance court’s trial (about unjust enrichment), the applicant sought to use oath evidence to refute a legislative presumption which weighed against her (as the defendant). However, the court decided the case without considering her right to use the oath as evidence.

At the Constitutional Court, the applicant claimed her right to a fair trial had been violated, seeking a re-trial and compensation. She argued that the firstinstance court had misjudged the evidence by failing to recognize her jurisdiction plea and consider her right to use an oath as evidence. As a result, she argued the lower court’s decision had been contrary to law.

The Constitutional Court considered the matter on the basis that the principle of equality of arms is a sub-element to the right to fairness.

The Constitutional Court ruled that by preferring the evidence of one party, the applicant was put in an unequal position, impacting the whole trial’s fairness.

It held that the lower court has a duty to assess whether an oath would be beneficial to settling the dispute and whether the oath would affect the outcome. Therefore, it held the lower court’s decision was contrary to the principle of equality.

Please see this link for full text of the Constitutional Court’s decision, made on 1 February 2017, with application number 2014/12324 (only available in Turkish).

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