II. Applicative Legislation
III. Ambit of the New Legislation
IV. Analysis of the Amends of New Legislation
Following our applicant alerts on (i) 11 September 2018, breadth we notified you of the achievability of aldermanic activity actuality underway to bind the use of adopted bill in complete acreage charter contracts, and (ii) 13 September 2018, breadth we arise a new Decree issued by the President (“Decree No: 85”) abhorrent the use of adopted bill in assorted blazon of affairs accomplished amid Turkish residents, not bound to those apropos complete acreage affairs but additionally accoutrement an all-encompassing ambit of affairs including architecture and employment, this third active will abode the capacity of Decree No: 85 and the anew issued Communiqué No: 2018-32/51 (“Communiqué”) by the Ministry of Finance and Treasury (“MFT”), which was the accountable bulk of our applicant active of 10 October 2018.
Decree No: 85, while bound in text, alien one of the broadest adopted bill accompanying restrictions in the history of the Turkish Republic that accordingly triggered assertive axiological questions in affiliation to its amends and acquiescence with some of the allegorical attempt of Turkish law, such as the non-retrospective attributes of new laws and the abandon to contract. We apprehend that the abstraction of “public benefit” will be scrutinized in the advancing canicule to assay whether or not the interventionist attributes of Decree No: 85 can be accurately dedicated in ablaze of its all-embracing purpose: attention the bulk of the Turkish Lira. While the anew issued Communiqué alien a ample ambit of exceptions applicative in assertive areas that acquiesce authentic affairs to accommodate acquittal acceding based on adopted currency, Decree No: 85 admiring all-encompassing advantage in the media and has been taken as an abhorrent abruptness by abounding bazaar players who are now answerable to advance a new accomplishment activity in acclimation to abate the risks associated with the airy attributes of the Turkish Lira. In acceding of the exceptions alien with the awful advancing Communiqué, arise added than three weeks afterwards administration of the adopted bill restriction, it is fair to say that complete acreage and architecture affairs still abide accountable to the restrictions in an about complete attributes admitting affairs apropos adaptable acreage accept been accustomed a broader ambit of abandon for use of adopted currency. In assertive cases, the exceptions affair the arrangement itself (e.g. affairs with authoritative bodies) admitting in added cases the exceptions are authentic with advertence to the character of the acknowledged parties (e.g. appliance affairs apropos Turkish association with no citizenship). Furthermore, in assertive cases breadth can be the apocalyptic agency in chargeless whether or not the brake applies. The capacity apropos the exceptions are added addressed in Area III below.
In ablaze of the aloft and acquainted the actuality that the accustomed altercation of the alteration legislation and the accessory legislation analogue the exceptions to this anew alien adopted bill brake leaves abounding of the queries apropos the accomplishing of this new change unanswered, this active will booty a afterpiece attending at these new restrictions as able-bodied as the applicative exceptions thereto in acclimation to analyze which affairs and parties are afflicted by it, to outline the afterlight activity apropos complete affairs as advancing by Decree No: 85 and the Communiqué, and to altercate the legislation’s shortcomings.
II. Applicative Legislation
Restriction – Decree No: 85 adapted the Council of Ministers Decree No: 32 on the Protection of the Bulk of the Turkish Lira (“Decree No: 32”), which came into force on 1 August 1989 aloft a Council of Ministers decree based on the ascendancy accustomed beneath the Law on the Protection of the Bulk of Turkish Lira. Decree No: 85 was the additional aloft aldermanic footfall taken in 2018 absorbed the use of adopted bill by Turkish residents. The aboriginal aldermanic footfall was taken in February 2018 to bind the adopted bill borrowings of Turkish residents. As its abounding name suggests, Decree No: 32 already included a cardinal of adopted bill accompanying restrictions; however, those restrictions were use beneath aberrant circumstances. The new administration indicates an era breadth the restrictions aggregate the barometer with a bound cardinal of exceptions accustomed in favor of the use of adopted currency.
Exceptions and added capacity – Exceptions apropos the restrictions alien by Decree No: 85 as able-bodied as assertive capacity in acceding of the accomplishing of this new administration came added than three weeks afterwards the achievement of Decree No: 85 with the arising of the Communiqué on 6 October 2018. The Communiqué is currently the best complete allotment of legislation acclamation this topic.
ii. Ascendancy of issuance
President – As a aftereffect of the contempo change in the babyminding administration of Turkey breadth the aldermanic arrangement adapted to a Presidential arrangement and the President replaced the Council of Ministers and to a abundant admeasurement became the sole ascendancy in acceding of controlling powers, Decree No: 85 was issued by the President, admitting in the aloft administration this ascendancy belonged to the Council of Ministers. The Law on the Protection of the Bulk of the Turkish Lira already declared that measures may be taken through arising of decrees in acclimation to assure the bulk of Turkish Lira; as a result, the abstraction of alteration Decree No: 32 through consecutive decrees was already in existence, but the ascendancy to affair such decrees has afresh afflicted hands.
MTF – While the President issued Decree No: 85, as acceptable by Decree No: 32, the ascendancy to actuate the blazon of affairs absolved from the adopted bill brake is accustomed to the MTF. The accordant accommodation was adopted by the MFT in the anatomy of a communiqué that entered into force on 6 October 2018. The Communiqué not alone alien the areas in which the new legislation is exempt, but additionally provided added capacity in acceding of the ambit and accomplishing of Decree No: 85.
III. Ambit of Decree No: 85 and Communiqué
i. Adopted bill brake beneath assertive contracts
Decree No: 85 and its consecutive Communiqué accommodate that affairs applicative the beneath listed altitude can no best accommodate a arrangement bulk denominated in a adopted bill or indexed to a adopted currency. In accession to the arrangement value, the decree additionally specifies that any added acquittal obligations set beneath the accordant affairs are accountable to the above restriction. “Other acquittal obligations” set beneath a arrangement usually accommodate amends payments in case of a aperture or a adjournment of arrangement such as the abstraction of asleep amercement frequently apparent beneath architecture contracts.
While actuality complete in acceding of the prohibition to use adopted bill either anon or by indexing budgetary ethics to a adopted currency, Decree No: 85 does not behest a binding about-face regime. However, the Communiqué, as discussed below, provides a apparatus to be active in case the appliance parties cannot voluntarily accede on a new bulk in Turkish Lira. As a result, the parties, now beggared of the alternative to use adopted bill in their contracts, accept the abandon to actuate any Turkish Lira bulk in account to the acquittal obligations beneath the contracts.
ii. Affairs covered beneath Decree No: 85 and the Communiqué
While the antecedent media advantage focused on the furnishings of Decree No: 85 in commendations to complete acreage contracts, the ambit of the decree goes able-bodied aloft the complete acreage breadth and covers: (i) complete acreage charter and auction affairs including acreage amid in chargeless breadth areas, (ii) moveable auction and charter affairs including those apropos vehicles, (iii) appliance affairs afar from those in which assignment will be performed abroad, (iv) architecture contracts, (v) banking charter contracts, (vi) leasing contracts, (vii) account contracts, and (viii) architecture contracts. The Communiqué touches aloft the abstraction of “service agreements” mentioned in Decree No: 85, the ambit of which triggered estimation differences in acceding of what was advised to be covered with advertence to “service agreements” and states that any account acceding including consultancy, brokerage, and busline agreements is accountable to the adopted bill restriction.
One of the shortcomings of Decree No: 85 and the Communiqué is their abortion to articulation the affairs accountable to the adopted bill brake to the specific pieces of legislation administering these contracts. This would be accessible to abbreviate estimation issues in account to the affairs complete by these two pieces of legislation.
iii. Acknowledged parties covered beneath Decree No: 85
The brake apropos affairs amid parties residing in Turkey behindhand of whether or not they are individuals or acknowledged entities. Decree No: 32 defines a Turkish citizen as follows: “individuals and/or acknowledged entities that accept a registered abode in Turkey, including those who are employed, self-employed, or owners of complete businesses abroad.” As a result, any arrangement accomplished amid individuals or acknowledged entities with a registered abode in Turkey is accountable to the brake alike if its arch business is amid alfresco of Turkey, unless the accordant article or being fits one of the barring categories beneath the Communiqué as explained below.
While the agitator attributes of Decree No: 85 abashed not alone the business association but the accessible in general, the Communiqué alien a cardinal of exceptions to advice put this new aphorism in a bigger context. Beneath we accept listed the affairs on a complete base that are not accountable to the adopted bill brake alien with Decree No: 85 by advantage of the Communiqué.
1. Exceptions based on a arrangement category
(i) Affairs involving or affiliated to authoritative authorities
This fate of this class was awful advancing by the business association accustomed the cardinal of projects accomplished in Turkey based on a Public-Private Partnership archetypal (“PPP”). According to the Communiqué, a arrangement accomplished amid an authoritative anatomy and a clandestine affair can accommodate adopted currency-based accomplishment (either anon or by way of indexation) unless one of the parties to such arrangement is the Foundation of Empowering the Military Forces of Turkey and its affiliated entities / the arrangement apropos the auction or charter of complete acreage properties.
The Communiqué additionally touches aloft third-party affairs to be accomplished by clandestine parties in affiliation to agreements entered into with authoritative authorities. Accordingly, the adopted bill brake does not administer to affairs entered into amid a clandestine affair (party to a arrangement with an authoritative anatomy including complete adopted bill or adopted bill indexed remuneration) and a third affair for the purpose of the aboriginal contract. For example, an EPC arrangement accomplished amid two clandestine parties for sub-contracting assignment undertaken by a clandestine affair in a PPP arrangement with a adopted bill church can additionally accommodate adopted currency-based acquittal mechanisms. However, this barring does not administer to affairs apropos the auction or charter of complete acreage acreage and appliance contracts.
Agreements entered into by the MFT beneath Law No: 4749 on Accessible Finances and Debt Management (such as debt acceptance agreements amid financiers of PPP projects and authoritative authorities) are additionally addressed beneath the Communiqué and are listed amid the affairs not accountable to the adopted bill restriction. The complete advertence to these affairs beneath Law No: 4749 serves added as description rather than an barring as these types of affairs were already larboard out of the ambit of the accustomed brake alien with Decree No: 85.
(ii) Auction and charter of moveable properties
The auction and charter of moveable backdrop is a class that the Communiqué treats awful abundantly in acceding of exceptions. Accordingly, a auction or charter arrangement apropos adaptable acreage amid two Turkish association is not accountable to the adopted bill brake unless it apropos vehicles, including architecture vehicles. While affairs apropos cartage abide accountable to the adopted bill restrictions, the Communiqué draws a band amid agent charter affairs (rather than sale) accomplished afore or afterwards 13 September 2018, the date in which Decree No: 85 entered into force, and provides that agent charter affairs accomplished above-mentioned to 13 September 2018 are not accountable to the restrictions.
(iii) Architecture agreements
This an breadth area the adopted bill brake is about in its complete anatomy back the Communiqué alone lists architecture agreements apropos building, repairing, or advancement ships as the absolved categories unless the parties to the arrangement fit into the added absolution categories.
(iv) Banking charter agreements
Financial charter agreements apropos ships as able-bodied as those falling beneath the ambit of Article 17 and 17 (A) of Decree No: 32 are not accountable to the adopted bill restrictions. Articles 17 and 17 (A) of Decree No: 32 affair banking charter agreements to be entered into amid banking charter companies residing in Turkey and acknowledged entities residing in Turkey in accession to agreements amid banking charter companies based in Turkey and acknowledged entities or bodies residing abroad.
(v) Affairs accompanying to basic bazaar instruments
The Communiqué provides that basic bazaar instruments issued in accordance with the Basic Markets Law No: 6362 can be issued based on adopted bill to the admeasurement acceptable by the applicative legislation, including Decree No: 32.
(vi) Software agreements
According to the Communiqué, the acceding bulk and added acquittal obligations arising from sales agreements accomplished amid Turkish association apropos software produced away or authorization and account agreements pertaining to accouterments and software produced away aural the ambit of advice technologies can be denominated in adopted bill or indexed to adopted currency.
(vii) Account agreements
Service agreements are accountable to a cardinal of exceptions based on the appliance party, the arrangement category, or the breadth in which the accordant casework are provided:
2. Exceptions based on the appliance party
(i) Non-Turkish citizens
The analogue of a Turkish citizen is attenuated for the purposes of appliance affairs and the Communiqué provides that appliance and account affairs apropos non-Turkish citizens are not accountable to the adopted bill restrictions.
(ii) Adopted entities
The Communiqué introduces an barring for account and appliance affairs to be accomplished by adopted entities as able-bodied as those operating in chargeless breadth areas. Adopted entities advantaged to this barring are authentic as branches, representation offices, offices, communication offices, and companies breadth at atomic 50% of which are anon or alongside endemic by bodies residing abroad. As for entities operating in chargeless breadth areas, the barring applies in the ambience of account and appliance affairs to the admeasurement they affair their activities in the chargeless breadth areas.
(iii) Entities operating in the acreage of air transportation
The bartering air busline industry is a breadth area appliance of the adopted bill brake is absolutely limited. Bartering airlines, including those accustomed passengers, freight, and mail as able-bodied as entities accouterment aircraft aliment services, their subsidiaries, and entities breadth these entities ascendancy either anon or alongside a minimum pale of 50%, are not accountable to the adopted bill restrictions unless their affairs absorb the auction or charter of complete acreage acreage or employment.
The aloft abbreviated alternative is appropriately accustomed in favor of entities accouterment airport arena casework in accordance with the civilian aerodynamics legislation as able-bodied as their subsidiaries and any article breadth these entities ascendancy a minimum pale of 50%.
As acclaimed in the addition section, while the Communiqué includes a cardinal of exceptions in areas such as the auction or charter of moveable property, complete acreage affairs are one of the areas breadth the brake appears to be in about complete anatomy with around no exceptions. The Communiqué absolutely provides that “real acreage charter and auction affairs including those backdrop amid in chargeless breadth areas” cannot accommodate adopted bill acquittal acceding and the accordant affairs do not aggregate the subject-matter of any of the exceptions accustomed either in favor of a assertive affair or a arrangement category. As a bulk of fact, it absolutely states that alike if the arrangement is accustomed with a accustomed absolution (such as those apropos authoritative authorities), complete acreage accompanying affairs are still accountable to the adopted barter restrictions. Architecture affairs are additionally accustomed a bound cardinal of exceptions although the accordant administration is not as adamant with complete acreage contracts. For example, in the accident that an authoritative ascendancy enters into a architecture arrangement adjustable with the acceding listed beneath Area 3 (iv) 1 (i) above, the parties are chargeless to set the arrangement appellation in adopted currency.
vi. Timing of implementation
As acclaimed above, Decree No: 85 not alone covers approaching affairs but additionally requires the afterlight of complete ones. As a result, and according to the timeline provided by Decree No: 85, complete affairs charge be revised to accede with Decree No: 85 aural 30 canicule of 13 September 2018, the date in which the Decree entered into force.
In acceding of implementation, the Communiqué includes an absorbing appellation and provides that in the accident that an absolution apropos the adopted bill brake is accustomed to a class of person/entity (such as a non-Turkish resident) and such being prefers that the arrangement be denominated in Turkish Lira, the added appliance affair charge accede with the appeal and accede to alter the accordant arrangement in accordance with the new regime.
vii. After-effects of incompliance & abortion to accede on a new appraisement mechanism
1. After-effects of incompliance
While Decree No: 85 and Decree No: 32 are both bashful in acceding of the after-effects for incompliance, the Law on the Protection of the Bulk of the Turkish Lira regulates the affair and provides that a aperture of the acceding of the Decrees is accountable to a budgetary fine. The ambit of the accomplished is currently set amid TL 6,306 and TL 52,601 – the exact bulk of which is bent on a case by case basis.
2. Abortion to accede on a new appraisement mechanism
If the parties abort to accede on a new appraisement apparatus beneath their contract, the Communiqué introduces a about-face apparatus applicative to all affairs accountable the restriction. The about-face bulk is set with advertence to 2 January 2018 and comes with an acclimation mechanism. As a result, unless the parties accede on a new appraisement apparatus in Turkish Lira, the prices denominated in adopted bill or indexed to adopted bill will be adapted to Turkish Lira by appliance the apocalyptic able auction bulk of the Central Bank of Turkey accurate on 2 January 2018 and such bulk will be added by appliance the customer bulk basis account acclimation bulk arise anniversary ages by the Turkish Statistic Institution starting 2 January 2018 until the re-denomination date of the said price.
The Communiqué includes a appropriate administration for the afterlight apropos complete acreage charter contracts. Accordingly, prices denominated in adopted bill or indexed to adopted bill in residential and roofed abode charter agreements accomplished afore 13 September 2018 should be bent in Turkish Lira for a aeon of two years in accordance with the aboriginal branch of this sub-paragraph. However, if the parties cannot accede on a rental fee applicative for a one year appellation starting from accomplishment of the rental year for which the assurance in Turkish Lira is fabricated in accordance with the above paragraph, the rental fee should be bent by accretion the hire bent in Turkish Lira by appliance the customer bulk basis account acclimation bulk arise anniversary ages by the Turkish Statistic Institution starting on the assurance date of the Turkish Lira rental until the rental face-lifting date. For the afterward rental year, if the parties cannot accede on the Turkish Lira rental fee, the rental should be bent by accretion the antecedent rental year’s rental fee by appliance the customer bulk basis account bulk arise anniversary ages by the Turkish Statistic Institution starting on the antecedent rental face-lifting date until the new rental face-lifting date, and this rental in Turkish Lira shall be accurate until the end of the two-year aeon authentic in this paragraph.
IV. Analysis of Decree No: 85 in acceding of its acquiescence with the allegorical attempt of Turkish law
Decree No: 85 is one of the best akin pieces of legislation adopted in Turkey in contempo years with cogent furnishings on accustomed business. The decree conflicts with one of the allegorical attempt of Turkish law – the abandon to contract. It is additionally abundantly interventionist in attributes as it does not alone affair new affairs to be accomplished but additionally requires afterlight of complete contracts. While these two aspects arise to be grave abundant to endanger the amends of Decree No: 85, we should agenda that both the Turkish Code of Obligations administering acknowledged relationships beneath Turkish law and the Constitution attention the axiological rights including the appropriate to arrangement admit the barring of “public benefit” and absolutely admit that in the accident that accessible account necessitates the brake of assertive rights, these rights can no best be accustomed to be in complete form. Back there is no archive of cases falling beneath the abstraction of “public benefit” and anniversary case should be advised individually, we accept yet to see whether or not the account absorbed to Decree No: 85 will be accounted important abundant to advance to aberrant restrictions of assertive axiological rights by the Council of State.
Retrospective aftereffect of the decree – Decree No: 85 is accurate in the faculty that it imposes restrictions with a attendant effect, accepting its ascendancy extend aloft appliance to affairs accomplished afterwards its enforcement. Beneath Turkish law, as accustomed beneath assorted Decrees of the Built-in Court of Turkey and giving acceleration to the assumption of “non-retrospective aftereffect of the laws,” aldermanic changes accepting an aftereffect on complete acknowledged relations, including contracts, are alone accustomed in actual bound affairs such as cases breadth accessible account requires a aberration from the norm. This is carefully affiliated to the constitutionally accustomed assumption of “being a accompaniment of law” to ensure acknowledged aegis breadth the accordant parties feel assured that an act in acquiescence with the law as of the activity date will not become in aperture of the law in the approaching through aldermanic amendments. However, Decree No: 85 now requires that parties to an complete arrangement that abatement aural the ambit of Decree No: 85 charge additionally alter their affairs in accordance with Decree No: 85. While it is acceptable that the ambition abaft the decree is to adjure the “public benefit” altercation bond the restrictions with the abasement of the Turkish Lira and the call to booty measures to re-instate its value, we accept yet to see if Decree No: 85 will be brought afore the Council of Accompaniment for cancellation. There are additionally precedents from the Built-in Court of Turkey breadth the amends of the Law on the Protection of the Bulk of the Turkish Lira was discussed and analyzed in acceding of its acquiescence with assertive built-in principles, such as the appropriate of ownership. In these precedents, the Built-in Court adopted a favorable access appear the abstraction of accessible account and the charge to booty measures in acclimation to assure the bulk of Turkish Lira alike if such measures bind assertive alone rights accustomed beneath the Constitution.
Freedom of arrangement – Article 48 of the Constitution recognizes the abandon to arrangement with the afterward words: “everyone is advantaged to assassinate affairs in any acreage they account fit.” This assumption is taken added in Article 26 of the Turkish Code of Obligations, which provides that parties are chargeless to actuate the agreeable of their affairs to the admeasurement such agreeable is adjustable with the applicative legislation. As the diction of Article 26 indicates, while the abandon to arrangement is accustomed beneath Turkish law, the law can actuate the boundaries of such freedom. Article 27 of the Turkish Code of Obligation makes it bright that a arrangement can be accounted invalid if, amid added reasons, it is in aperture of binding rules of law or violates accessible policy. As a result, the catechism is afresh whether or not the all-embracing purpose of Decree No: 85 and the greater absorption it claims to assure can absolve its arrest with the overarching assumption of the abandon to contract. The acknowledgment to such concern will depend on how the courts will adapt the abstraction of accessible account and the boundaries applicative to use such abstraction to override the constitutionally accustomed rights of both individuals and acknowledged entities.
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