Category: Turkiye

A condition precedent, for the purposes of this article, shall be defined as a condition, only upon whose fulfillment closing of a transaction will be made by the parties. In a share deal, the parties may agree upon certain matters to be designated as conditions precedent for the closing, these may arise from the laws, agreement between the parties, specifics of the transaction and/or activities of the target. In this article, we will only touch upon certain conditions precedent which may become mandatory under Turkish laws.

i. The Approval of the General Assembly

Among the cases where the affirmative votes of a certain majority of shareholders are sought (the percentage of which would change in accordance with the type of action to be taken) and which cannot be assigned to any other organ of a company, are cases where articles of association are to be amended, board members to be appointed and removed, termination of the company, for example. Our focus in this paragraph is on a certain type of a general assembly approval, which is triggered under Article 408(2)(f) of the Turkish Commercial Code. The relevant article stipulates that the general assembly shall decide on the sale of a significant amount of company assets. While especially what constitutes a “significant amount” and other aspects of the drafting of the said article stir debate in legal writing, it becomes relevant in share deals regarding sale of a parent company’s shares in a subsidiary. In such case, it would become mandatory that the parent company’s general assembly resolves upon sale of its shares in a subsidiary.   

ii. Ministry Consent for Changes in the Articles of Association

As stated above, while the percentage of affirmative votes of a general assembly may differ (in accordance with the type of change to be realized), companies, in principle, would be able to amend their articles of association through a general assembly resolution on the matter, without requiring consent from the Ministry of Customs and Trade (“Ministry”). That said, the communiqué regarding determination of joint-stock companies whose amendment of articles of association is subject to ministry consent, published on the Official Gazette numbered 28468 and dated November 15, 2012, lists certain companies, whose amendment of articles of association is subject to consent. Accordingly, banks, companies engaged in financial leasing, factoring, wealth management, insurance, independent auditing and companies that are subject to capital markets laws are among those whose amendment of articles of association would trigger the need to obtain Ministry’s consent. Accordingly, if the target is subject to the abovementioned communiqué, the buyer would expect the seller to obtain the relevant consent, resulting in the seller causing the target to apply for such consent and such matter to be stipulated as a condition precedent for the closing within the transaction document.

iii. Regulatory Approvals

Depending on the sector the target is active in and whether it is publicly-traded or not, almost all independent administrative bodies (a definition which would cover the Capital Markets Board (“CMB”), the Banking Regulatory and Supervision Authority (“BRSA”), Energy Markets Regulatory Authority (“EMRA”) and the Tobacco and Alcohol Market Regulatory Authority (“TAPDK”) do seek that a share deal is brought before them for clearance before closing, thus rendering their consent a condition precedent for the closing.

The CMB seeks that its consent is obtained in deals regarding transfer of shares of intermediary institutions [Article 44(3) of the Capital Markets Law numbered 6362], investment funds (under certain conditions) [Article 14(1) of the Communique on the Principles regarding Investment Funds; Article 50(2) of the Capital Markets Law numbered 6362] and stock exchanges [Article 65(7) of the Capital Markets Law numbered 6362]. 

As for BRSA, the Banking Law numbered 5411 (“Banking Law”) stipulates that share transfers with the minimum magnitude of 10% shall be subject to BRSA’s approval (Article 18 of the Banking Law). 

EMRA also stipulates a 10% threshold, with a decreased 5% for publicly-traded companies that are also subject to EMRA’s rules and regulations [Article 8(1)(b) of the Law numbered 4628 on the Organization and Duties of EMRA]. Lastly, TAPDK also seeks that its consent is sought with respect to share transfers to third parties by companies that have production permit for alcohol or alcoholic beverages (Article 20 of Regulation on Principles and Procedures as to Technical Specifications, Establishment, Operation and Auditing of Production Plants of Alcohol and Alcoholic Beverages). 

(First published in Mondaq on October 26, 2017)

By Gonenc Gurkaynak, Managing Partner, Nazlı Nil Yukaruc, Partner, Damla Dogancalı, Counsel, and Gozde Kitapcı, Associate, ELIG, Attorneys-at-Law

The Turkish Medicines and Medical Devices Agency (the “TİTCK”) recently announced updates to the Guidelines on the Regulation on Package Information, Manuals and Tracking of Medicinal Products for Human Use (the “Guidelines”). The updates concern the requirement to include animal sources in product manuals.

Background

In April of 2017, the TİTCK published the Regulation on Package Information, Manuals and Tracking of Medicinal Products for Human Use (the “Regulation”) based on the corresponding EU directives. The Regulation tightens the obligations regarding the packaging and labeling of medicinal products for human use and requires that all medicinal products for human use include manuals with certain mandatory information.

In July of 2017, the TİTCK published the Guidelines setting out the main principles regarding certain mandatory information on the packages and manuals, as well as the explanations about the content and use of the relevant product. The TİTCK regularly updates the Guidelines to ensure harmonization with the applicable Turkish and EU legislations, as well as the current standards. For more information on the Regulation and the Guidelines, please see our previous alerts dated July 27, 2017 and October 4, 2017.

Conclusion

The TİTCK continues to demonstrate its commitment to providing comprehensive guidelines for companies engaged in medicinal products for human use. Companies should take note of the new updates and take the necessary steps to ensure compliance.

By Can Sozer, Senior Associate, Baker McKenzie

In April 2016, the Turkish Competition Board (the “Board”) launched an investigation against Mey İçki, a subsidiary of Diageo plc. The investigation aimed at exploring the validity of allegations of abuse of dominance in the Turkish markets for vodka and gin.

After eighteen months of investigation, the Board found that (i) Mey İçki holds dominant position in vodka and gin markets with unanimous vote, (ii) Mey İçki has violated Article 6 of Law No. 4054 in the vodka and gin markets with unanimous vote, and (iii) Mey İçki has been subjected to an administrative monetary fine for the consequences of the same strategy in the raki (traditional Turkish spirit) market and that there is no room for further administrative monetary fine imposition with majority vote, through its decision of October 25, 2017.

The case handlers alleged that Mey İçki enjoyed dominance in the Turkish markets for vodka and gin. Mey İçki allegedly engaged in exclusionary practices against competitors through rebate schemes, cash payment supports and visual arrangements at sales points.

All these alleged practices of Mey İçki had already been examined and fined by the Competition Board in its raki decision of earlier this year (February 16, 2017, 17-07/84-34). The alleged practices belong to the exact same period of time in both decisions and the only significant difference between the two investigations is the products concerned.

The defendant, Mey İçki, demonstrated the lack of both procedural and substantial grounds, emphasizing the “non bis in idem” principle in particular, and utilized economic arguments to fortify its oral and written defenses. Mey İçki argued that the investigation was crippled for double-jeopardy as (i) the Turkish Competition Authority carried out a second investigation on the same allegations which belong to the same period of time and (ii) it created the risk of repetitive fine. Eventually, the Board found a violation through abuse of dominance but accepted “non bis in idem” Mey İçki’s defense, and concluded that Mey İçki should not be subject to an administrative monetary fine under Article 16 of Law No. 4054.

While the reasoned decision is not yet available, the Board acknowledged that “non bis in idem” principle should be taken into account while rendering a second decision on the same allegations against the same firm about the same time period, though the relevant product market concerning the second decision is different than the product market examined in the first one. Therefore, the decision is candidate to set a landmark precedent in terms of the interpretation of the “non bis in idem” principle under Turkish competition law regime. The reasoned decision, which is expected to be published in the following months, is likely to provide insight on the direction the Turkish competition enforcement will be heading to in the coming years concerning the approach on the “non bis in idem” principle.

Gönenç Gürkaynak, managing partner of ELIG, Attorneys-at-Law, who commented on the decision, praised the approach adopted by the Board and commented that “We are proud to see the objectivity with which the Turkish Competition Authority has looked into this investigation in light of the explanations and defenses of the client, and the thorough compliance program followed internally. Depending on the reasoned decision to be issued in the future, this case might well be a monument of the ‘non bis in idem’ principle in Turkish competition law.”

(First published in Mondaq on October 25, 2017)

By Gonenc Gurkaynak, Managing Partner, ELIG, Attorneys-at-Law

Following the enforcement of the new Communiqué on Pricing of Human Medicinal Products last September, the Ministry of Health (“Ministry”) rolled up its sleeves for a new regulation concerning human medicinal products: The Regulation on Manufacturing Plants of Human Medicinal Products (“Regulation”). 

With an eye to regulate human medicinal product manufacturing and importing in line with internationally acknowledged standards, the Ministry has published the Regulation on the Official Gazette of October 21st, 2017. 

Upon the publication of the Regulation, the predecessor Regulation on Human Medicinal Products Manufactories (published in 2013 – “Abolished Regulation”) has been abrogated. 

II – New Definitions

Somewhere down the list of definitions under Article 4 of the Regulation are definitions of “primarily packaging” and “secondary packaging” which have been introduced. With this division made on the packaging definition, procedure on interior packaging (i.e. packaging which directly interacts with the human medicinal product) of human medicinal products will be deemed as “primary packaging”, whereas procedures such as replacement of the interior packaging into exterior packaging, packaging changing, printing, barcoding/patterning, inserting banderole/label, adding or changing prospectus/operating instructions will be considered as “secondary packaging”. Both primary and secondary packaging will be accepted as part of the “manufacturing” process.

III –-License Holder’s Responsibilities

The responsibilities of the holders of the license for manufacturing plants are governed under Article 8 of the Regulation. The Ministry has added certain provisions to the responsibility list which seem to bring a strict monitoring liability to license holders. 

For instance, license holders will be responsible to assign a manager within 30 days after the resignation of the current manager and notify the Ministry accordingly. Also, license holders will have to hold the documentation proving that their manufacturers, importers or distributors of active agents are duly registered in their countries. License holders, in this respect, will have to confirm safety and quality of active agents and inactive ingredients that they use and ensure necessary control over human medicinal products as well as active agents during all stages of manufacturing.

Article 8 also brings a notification responsibility to license holders if they come to the conclusion or even suspect that the products are counterfeit. 

IV – Audit

Article 10 contains detailed arrangements on audit of human medicinal product manufacturing sites. As per the Article, these sites, as well as laboratories and importers that provide contractual analysis services for human medicinal products, are subject to routine inspections within the program which is the result of the Turkish Drug and Medical Device Institution’s (“Institution”) risk-based evaluation. These audits can be done without notice when necessary. 

If following the audits, the sites are determined to be incompatible with the applicable legislation; the Institution can grant the relevant site a period of time sufficient to repair the deficiencies. As of the expiration of this period, if it is deemed necessary, new on-site audits can be carried out to determine whether the deficiencies are repaired. 

V – Imports

Article 13 of the Regulation sets forth principles on the imports of human medicinal products. According to thearticle, importers should be able to submit their Good Manufacturing Practices Certificate and/or production permit to the Institution. If they do not possess a Good Manufacturing Practices Certificate they should apply to the Institution in line with the guidelines of the Institution. 

Article 13 also brings certain responsibilities to importers. As per the Article importers will have to:

(i) Supply human medicinal products from the plants approved by the competent authority of the country of manufacture. If they import clinical research products, they will have to supply these products from manufacturers that are approved and the products of which have been notified to competent authority.  

(ii) Ensure that all batches of imported human medicinal products are released into the Turkish market after being tested and controlled within the frame of product license file/specifications. 

Apart from the foregoing, license holders will be obliged to (i) provide the manufacturer with samples at the sufficient amount to conduct at least 2 analytical controls or at the amount  approved by the Institution and (ii) preserve expired products for at least 1 year after their expiration date. 

VI – Active Agents and Inactive Ingredients

Principles on active agents and inactive ingredients are regulated under Article 14 of the Regulation. According to Article 14 (2), permit/license holders should confirm that their manufacturers and distributors of active agents are in compliance with the principles of Good Manufacturing Practices and Good Delivery Practices, by way of auditing the manufacturing and distribution sites of these manufacturers and distributors. 

On a side note, as per Article 32 of the Regulation, Article 14 (2) will be effective one year after the date of publication of the Regulation (i.e. October 21st, 2018).

VII – Internal Audit

Article 24 of the Regulation brings an internal audit obligation to manufacturers. Internal audit is deemed necessary for the purposes of taking required corrective actions within scope of Good Manufacturing Practices. Manufacturers will also have to take records of these internal audits..

VIII – Administrative Sanctions

Article 27 of the Regulation provides a more detailed regulation on sanctions to be imposed on license/permit holders as well as managers. While the Ministry maintains its suspension and withdrawal authorization, certain changes made in the Article sheds light to aftermath of suspension/withdrawal. 

As per Article 27 (4), the Institution will determine how to proceed with products distributed before the suspension or withdrawal by manufacturers whose licenses are suspended or withdrawn.  

If breaches which require suspension of production permit are not remedied within a year, production permit as to related operations, if all operations are suspended production permit for the manufactory, will be withdrawn. 

As to sanctions against the managers, Article 27 (7) regulates that the following audits at the manufactory, in case it is determined that the manager was absent without duly excuse three times during its duty, his/her management permit will be withdrawn and the manufactory will be obliged to appoint a new manager and notify the Institution in line with the Regulation. 

IV – Transition Period

Importers wishing to conduct only batch release operations are obliged to apply to the Ministry and obtain a permit within one year as of publication of the Regulation. 

(First published in Mondaq on October 24, 2017)

By Gonenc Gurkaynak, Managing Partner, Ceren Yıldız, Associate, and Ecem Elver, Associate, ELIG, Attorneys-at-Law

Early this year, on February 6th, 2017, the Ministerial Cabinet has published its decision on Pricing of Human Medicinal Products (“Decision”) and announced that the requirements of the Communiqué on Pricing of Human Medicinal Products (published in 2015) that do not conflict with the Decision, shall remain applicable. 

This transition process has come to an end at the end of last week when, on September 29th, 2017, the Ministry of Health (“Ministry”) has published the new Communiqué on Pricing of Human Medicinal Products (“Communiqué”) on the Official Gazette. 

Upon publication of the Communiqué, the predecessor Communiqué on Pricing of Human Medicinal Products (published in 2015 – “Abolished Communiqué”) has been abrogated. 

I – What’s New?

The Communiqué adopts a simpler and reader-friendly language regarding the technicalities of pricing principles, while governing Turkish drug pricing system and encouragement of domestic drug manufacturing. The most striking amendment introduced with the Communiqué is that the prices will be amended once a year, rather that the “twice a year” arrangement that was governed with the Abolished Communiqué.  

Some of the other major amendments introduced with the Communiqué can be outlined as the following:

– The Communiqué, while preserving the reference countries as is¹, has abandoned the “reference price” wording and introduced the “real source price” term. Although the mechanism behind the reference price calculation is preserved, its definition is now changed. Article 3 of the Abolished Communiqué defined the reference price as “The lowest price of the source product in the reference markets and the market in the countries where the batch is released / imported, respectively, or the lowest price of the product on the market in EU countries, or the ex- factory price of the product on the market in any country in the world”. 

Whereas, under Article 3 of the Communiqué real source price is described as “Wholesale sales price of the product (announced in Euros in the price list) which is licensed and put on the market in the country of origin”. Real source price will be calculated in line with the principles set forth under Article 5 of the Communiqué. 

– As per Article 3 of the Communiqué “Price (specified in Euros on the price list) which is the basis of the wholesale sales price in Turkey and is determined in line with the procedures in this Communiqué” will be accepted as the source price and its calculation will be made in accordance with Article 6.

– Pricing principles are regulated under Article 7 of the Communiqué. In this sense, compared to the Abolished Communiqué, it is clearly seen that the Ministry has developed and detailed the pricing principles. 

– As to price increase requests, as per the Abolished Communiqué, price increase requests due to reference price increases up to 100% of the current ex-factory price, were assessed by the Turkish Medicine and Medical Devices Institution (“Institution”) and  price increase requests of more than 100% were assessed by the Commission . The Communiqué has amended this rule and regulated that, 

(i) In the event of a change in the source country, an increase request of up to 20% of the current  selling price to wholesalers, shall assessed by the Institution. 

(ii) If there is no source country change, increase requests up to 50% of the current sales price to the wholesalers, shall be assessed by the Institution.

(iii) The increase requests more than the rates specified in subparagraphs (i) and (ii) shall be assessed by the Commission, if the application is made during the Commission evaluation period.

In this respect, the upper limit for an increase in the sales prices to wholesalers has been amended to 20 % where there is a change in the source country; and to 50 % in cases where this request does not result from a change in the source country prices. This will enable to control the effect of a change/increase in the source country prices on the prices in Turkey. 

II – Transition Period

The Ministry has announced its transition schedule under Provisional Article 1. In this respect, the sales prices to the wholesalers for the products falling within the scope of the provision of “The changes in the selling price to the wholesalers approved in Turkey due to the reference price or reference country change shall not be reflected in the price unless it exceeds 3%. Only reference and reference country information shall be updated.” abolished by the Decision will be updated during real source price amendment period of 2017, in line with their source prices. Changes which lead to an increase in the prices will be made upon the request of the license-holders, while changes which lead to a decrease will be made by the Institution ex officio.  These updated prices will be effective as of the effective date of the final interim list issued at the end of the actual source price amendment period.

Finally, amendments introduced with the Communiqué on real source price amendment period shall not be applied to real source price amendment period of 2017, except for paragraphs 1, 4, 5 and 7 of Article 10 . Provisions under the Abolished Communiqué will be taken into account for real source price amendment period of 2017.

(First published in Mondaq on October 2, 2017)

1. As per Article 4 of the Communiqué, reference EU countries countries are France, Spain, İtaly, Portugal and Greece. 

By Gonenc Gurkaynak, Managing Partner, Ceren Yıldız, Associate, and Ecem Elver, Associate, ELIG, Attorneys-at-Law