Category: Turkiye

Istanbul, as one of the most populated cities in the world with a population of almost 15 million people, uses various modes of public transportation which are metro, light rail, funicular, tram, suburban train, bus rapid transit, highway bus, sea bus, and ferryboat. Apart from these modes of public transportation, people in Istanbul often use private transportation which might be listed as private car, private highway bus, taxi, and sea taxi. 

According to Turkish Statistical Institute database, there are 21.454.288 registered motor vehicles in Turkey. Only 7,5% of these vehicles are used for commercial purposes and almost 90% of it consist of private vehicles.

As an alternative to the traditional transportation methods, innovative application-based taxi and car services are getting more popular. Considering that the quantity and quality of traditional taxis fail to satisfy passengers’, especially tourists, demands on the expected-quality of transportation, such enterprises offer the opportunity to reserve vehicles for future travels and provides a road-map for desired destination. These transportation methods are based on a freelance model where the registered drivers to the company are free to determine when and where they can drive. Application-based transportation services simplifies ordering and payment processes thanks to the wire-transfer systems installed in the vehicles. Even for an instant order, synchronized location detection services make it easier to calculate the arrival time of the vehicle and reduce the uncertainty whether a cab will appear or not. Besides all these pros, there are several cons to be considered when it comes to the vague legal transportation regulations in Turkey.

Background

As soon as application-based transportation services entered into the market in Turkey in 2014, Istanbul Taxi Drivers Chamber of Artisans and Association of Turkish Travel Agencies immediately started to protest similar to their fellows/associates in other countries such as France and other countries. Taxi drivers alleged that application-based travel service activities are out of the scope of laws and regulations since the vehicles used in such activities are not licensed and vehicles’ drivers are not tax-payers.

Although it was not based on any provision of law, Istanbul Metropolitan Municipality Transportation Department published a decision dated 27.08.2014 which allows passenger transportation with luxury cars. The decision aims to regulate and resolve the problems and establish a standardization for the passenger transportation by luxury automobiles in İstanbul. However Association of Turkish Travel Agencies has filed a lawsuit for the cancellation of this decision due to the ground that luxury travel services may lead unfair competition and tax evasion and the court suspended execution of the said Istanbul Metropolitan Municipality Transportation Department decision.

Current Status

Nowadays, application-based transportation companies provide two types of services. First one connects passengers with drivers of luxury vehicles for hire via Smartphone app and pay based on company tariff. They make an agreement with passenger by virtue of D2 licenses they possess. In the second one, passengers call standard yellow taxis via Smartphone app and pay based on taximeter which is regulated by Metropolitan Municipality Transportation Department. Both cars are reserved by using the mobile app, and customers can track their reserved car’s location. 

According to transportation regulations, there are totally 37 different types of licence for passengers and cargo transportation however with draft regulation it is expected only 13 different types of Licenses. Drivers who transport passengers without a license and owners of such vehicles are deemed as “pirates” and are exposed to certain risks under Turkish law. Generally, application-based transportation drivers are alleged to be “pirates” however most of the drivers and cars fined by the police are actually license holders. Furthermore, apart from the driver, also passengers are obliged to pay fines from time to time. These fines are usually brought to courts by the drivers and the companies and most of the court decisions are nowadays tend to decide in favour of the drivers that use such technology. 

While these legal controversies on alternative transportation services became a hot topic on the agenda, Istanbul Metropolitan Municipality took a revolutionary step by launching the “I-taksi” application which actually functions as same as the new actors of transportation services. I-taksi application provides different models of taxis and payment method via İstanbul Kart which is the public transportation card used in İstanbul and it is recently criticised due to the ground that municipalities should not act like a entrepreneurs and not compete with them within such a new-born market but instead show efforts to regulate it. 

Conclusion or a New Beginning

New actors of transportation sector are enhancing public welfare by offering affordable and safe rides. Presence of these companies are also regarded as essential and inevitable part of the free market economy and competition which also serves as a comfortable method of transportation for tourists etc. that enhances satisfaction of foreigners starting from İstanbul. We firmly believe that, for the benefit of the public, legislative authorities will adopt a consumer-oriented approach which provides legislative infrastructure, harmonizes and transforms applications according to needs, and facilitates the use of new-technologies in accordance with the free-economy principle. Therefore, we indeed should not “park” here but quite in the contrary, we should “hit the road” and observe how this sector and legislation will evolve in time.

By Efe Kınıkoglu, Partner, and Ipek Asikoglu, Associate, Moral Law Firm

The Turkish Medicines and Medical Devices Agency (“TİTCK”) recently announced the Q2 results of its market surveillance and inspection of the cosmetics sector between April and June 2017.

What the Results Say? 

The TİTCK’s Cosmetics Supervision Department published the list of unsafe and non-compliant cosmetics products detected during the second quarter of 2017. Of the 238 cosmetic products inspected, 165 were detected as non-compliant and six were detected as unsafe. A total fine of TRY 495,597 fine (approximately USD 140,785) was levied against the responsible companies. The complete Q2 list of unsafe and non-compliant cosmetics products is available here (in Turkish).

The cosmetic products safety results reveal that the number of unsafe products has remarkably decreased compared to the 2017 Q1 results, thus leading to a significant decrease in the administrative fines. The TİTCK’s strict inspection of the healthcare sector seems to have yielded positive results regarding the compliance of cosmetic products with the technical legislation.

Conclusion

The TİTCK continues to demonstrate its commitment to periodical market surveillance and inspection in the cosmetics sector. All cosmetic products in circulation must fully comply with the applicable Turkish laws and regulations, and manufacturing companies must ensure that they do not sell or distribute unsafe or non-compliant products.

By Can Sozer, Senior Associate, Baker McKenzie

The Turkish Law on Industrial Property (the “Law”) was published and entered into force on January 10, 2017.

The Law aims to strengthen the protection of intellectual property rights and adopts a similar method and terminology as those used in European Union legislation. Before the adoption of the Law, intellectual property rights were largely regulated by separate statutory decrees on trademarks, patents, industrial designs, and geographical designs, in addition to a predecessor law on intellectual property rights. Even though the decrees and that previous law were designed to be compatible with and fulfill obligations arising from the EU-Turkey Customs Union, certain aspects contradicted the Turkish Constitution on issues related to the limitation of fundamental rights. 

In 2016, the Turkish Constitutional Court (the “Court”) – having already annulled other provisions of the decrees as unconstitutional in 2008, 2014, and 2015 on the ground that property rights cannot be limited by statutory decrees – annulled the provision of Decree No. 556 on Protection of Trademarks providing for the cancellation of trademarks due to non-use. The Law was enacted to fill the gap on industrial property rights created by the Court’s rulings and was drafted in accordance with the Court decisions, as well as Turkey’s need for wider protection in the form of intellectual property rights consistent with EU law and practice – specifically on trademarks, geographical indications, designs, patents, and utility models. 

The fundamental change in the Law on all trademark, designs, patents, and utility model rights is that it expands the exhaustion principle to international scope, rather than applying this principle only within Turkey. 

Key Changes on Trademark

Decree No. 556 prohibited the co-existence of trademarks and considered them as absolute grounds for rejection. The Law has altered this provision and allows notarized co-existence agreements where they contain the explicit consent of the initial trademark owner, which can overcome the presumption of rejection. 

Second, in addition to registered well-known trademarks, the Law regulates the protection of unregistered well-known trademarks in Turkey, pursuant to the Paris Convention. Thus, the owner of the unregistered well-known trademark may oppose applications submitted for identical trademarks on the same or similar products and services. The same article of the Law provides protection for registered well-known trademarks; if there is a risk that a subsequent application may dilute the distinctive character or take unfair advantage of the well-known trademark’s reputation, the subsequent application will be rejected.

Finally, the Law provides a new defense mechanism regarding the non-use of trademark for opposed trademark applicants who apply for a resembling registered trademark. Similar to Decree No. 556, the Law provides that a trademark that is not used or suspended for five continuous years will be cancelled. However, due to Decree No. 556, subsequent applicants are not able to challenge the initial trademark owner over an unused trademark but must instead file a claim for nullity of the trademark. The Law provides that, in relatively simple proceedings, if a trademark owner claims to be an initial owner, the subsequent applicant may challenge the initial trademark owner to submit evidence of genuine use of the trademark. Unless the initial owner proves the genuine use, the opposition of the initial owner shall be rejected.

Key Changes on Geographical Indications

The Law requires the usage of emblems on product packages protected by geographical indications in order to raise awareness of consumers.

Key Changes on Designs

The Scope of Decree No. 554 on Protection of Industrial Designs was limited to industrial designs. The Law aims to protect all sorts of designs, regardless of their industrial character.

The Law protects designs only if they fulfill conditions of innovation, distinctiveness, and visibility. Thus, nonvisible accessories of a composite design cannot be registered separately. 

Key Changes on Patents

The Law requires an innovation to be new, to involve an inventive step, and to have industrial application. Controversially, Decree No. 551 on Protection of Patents did not require any substantial examination of the innovation for registration, which has led to serious legal issues between owners and companies. The Law reverses this rule, establishing an examination system by the Turkish Patent and Trademark Institution. This system also includes a post-grant opposition system for third parties, who have only six months from the date of publication of a patent application to file an opposition. This development is expected to prevent third parties from blocking legitimate patent applications of rightful owners.

Conclusion

Intellectual property rights have a fundamental place in the economic and social development of a country. Hence, legislation on intellectual property must meet both public and market demands. While the previous regime failed to satisfy these demands completely, the Law on Industrial Property offers hope for strengthening the necessary legal framework.

By Noyan Turunc, Founding Partner, and Beste Yildizili, Attorney, Turunc

This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

EU data protection rules and Turkey

I. Keep up with the cyber age and understand what “data protection” is not

As futurists always underline, we should not plan for or dream about the future; we are actually already living and conducting business in the future, which will with each passing day continue to evolve faster than we can recognize and adapt. On this subject, Einstein is quoted thus: “I never think of the future. It comes soon enough.”

However, we should do our best and one should start from somewhere to adapt to the developing cyber business world by learning more about data protection and its effect on our business.

Rather than listing the principles and rules of data protection in a theoretical manner, we believe it would be much more efficient to clearly clarify some of the essential facts. Firstly, organizations should understand that “data” protection is:

• not only related to customer data
• not only related to electronic data
• not only about hacking or cyber-attacks
• not only an IT-related issue. 

In the digital age, “data” is one of the most critical business assets and unfortunately the owner of this valuable asset is not the business. Data belongs to the subject of the data who is an identified or identifiable natural person with processed data. When you take a single picture of your workplace, you may catch a lot of personal data related to your customer, employee or subcontractor’s employee, or their family, all of which deserves to be protected.

II. What is the EU doing about it?

Although it was, of course, late even at the time, since 2012 the EU Parliament has worked hard on drafting a brand-new piece of legislation, namely the General Data Protection Regulation (“GDPR”) to replace the Data Protection Directive (“Data Protection Directive”) of 1995. Not surprisingly, it was decided in 2016 to grant a transition period of two years until 28 May 2018 before this regulation took effect. 

Even EU companies and EU businesses are under-prepared, so it is better to be late than sorry. According to EU-based reports and studies, most EU companies – or at least their technical infrastructure and most cloud applications that possess colossal amounts of personal data around the globe – are still not GDPR-ready. 

However, the current situation in the EU is, of course, much better than in Turkey since they started their preparations years ago and there is only a bunch of exceptions in Turkey thanks to their chief legal counsels with great vision despite the well-known last-minute Turkish business culture. The EU is now even discussing how to expand this culture away from EU territory in order to more efficiently protect EU-origin data outside the EU.

III. The impact of GDPR on Turkish business

Data protection is currently a really hot topic not only in Turkey but all around the world. Turkish entrepreneurs in the business world have already started compliance procedures in accordance with the Law on the Protection of Personal Data No. 6698 but they should also consider the GDPR.

1. What is new?

The GDPR has a greater territorial scope than existing EU laws and so will apply to many more organizations around the world, even those outside the EU. Before the GDPR, the Data Protection Directive set the data protection and privacy frame for EU Member states in addition to each member state having its own data protection act and approach in accordance with the Directive. The goal of the GDPR is to harmonize and standardize data protection laws across the EU. The GDPR is truly exceptional since it is the first and only EU legislation that will have a direct effect even outside the EU territory in cases of EU-related personal data.

The GDPR sets many new concepts, creates long to do lists and issues new obligations for the business world. However, the most important and worldwide change the GDPR brings forward is the “extra territorial effect.” Previously, European data protection legislation only applied to organizations established within the EU or even if they were established outside the EU when they used equipment within the EU to process personal data. However, the GDPR applies to organizations, regardless of the country in which they are based or from where they are operated, unless they can prove they do not collect or process personal data drawn from the European market. 

2. Who is affected?

The GDPR will impact every entity and quite a wide range of sectors. Organizations will be considered to be in the scope of the GDPR if they process the personal data of EU-based individuals by either: 

• offering goods or services to individuals within the EU; and/or 
• monitoring the behavior of data subjects within the EU. 

This means that when a business has a website in one of the European languages or offers certain products or services to the EU, or offers transactions in euros or another EU-based currency, such a business is considered to be processing and targeting EU-based data subjects.

IV. What should a non-EU entrepreneur do?

As for other EU-based businesses, non-EU entrepreneurs (businesses) shall take their business picture on databases and analyze what personal data they hold and process where it came from and who they share it with. 

Next, they will have to initiate their compliance process immediately considering that the GDPR brings many steps for currently Directive-complied EU companies. 

Non-EU businesses and entrepreneurs shall also appoint representatives within the EU to be a point of contact for EU personal data subjects and regulators for the purposes of GDPR enforcement. However, the designation of the representative shall be without any prejudice to legal actions that could be initiated against the respective controller or processor.     

V. Costs and hefty consequences

The GDPR introduces significant fines, including revenue-based, which enables the Data Protection Authorities to impose fines for some infringements of up to 20 million euros, or in the case of an undertaking, up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher. There is also a lower limit for the fines of other breaches, up to the higher limit of 2% of worldwide turnover or 10 million euros. 

At the same time, data subjects who have suffered material or non-material damage as a result of an infringement has the right to receive compensation from the controller or processor for the damage suffered.

More importantly, any non-compliance may give rise to the loss of a serious number of customers, client portfolio or market share at very short notice, especially when shared even once on social media, which may have a greater effect on the business and reputation of the company.

The GDPR compliance deadline may still be several months away, but time passes quickly. Businesses and entrepreneurs, even those that are non-EU, must analyze their dataflow and plan their compliance strategies in the short term to give themselves enough time to put the right technology in place and iron out any flaws.

By Efe Kınıkoglu, Partner, and Ipek Asikoglu, Associate, Moral Law Firm

On July 31, 2017, Borsa İstanbul A.Ş. (“Borsa Istanbul”) amended its Borsa Istanbul Listing Directive (the “Directive”), relaxing and softening the listing requirements for the Star Market (Yıldız Pazar), which is expected to increase the number and volume of initial public offerings.

What changed?

Companies seeking listing on the Borsa Istanbul’s Star Market were required, among other things, to (i) record profits for the last two financial years and (ii) have equity to capital ratio greater than (a) 0.75 for the Star Market Group 1 and (b) 1.0 for the Star Market Group 2 listings.

The Directive now allows companies that have not generated any profits in the last two financial years and/or meet the equity to capital ratio as set out above can still be listed on Borsa Istanbul’s Star Market if;

the companies (i) have recorded operating profits in the preceding financial year and the relevant interim period and (ii) have equity to capital ratio greater than 0.5;

the public offering also involves the issuance and offering of new shares (i.e., the issuer receives all, or at least, part of the offering proceeds);

the other requirements applicable to listing on the Star Market are satisfied (for Star Market Group 1, a minimum offering size of TRY 250 million and minimum market capitalization of TRY 1 billion; for Star Market Group 2, a minimum offering size of TRY 100 million and minimum market capitalization of TRY 400 million); and

the board of Borsa Istanbul approves the listing application through considering the issuer’s projections on operations, financial structure and use of proceeds generated from the offering.

Borsa Istanbul will examine the application and decide on whether the issuer within the scope of the exemption will be listed on the Star Market.

Further, Borsa Istanbul may decide to include the amortization and redemption costs that do not require any cash outflow when calculating the issuer’s operating profits.

Conclusion

The original listing requirements inhibited the access of larger corporations to capital markets in certain sectors, where companies generate operating profits but are highly leveraged, such as the energy sector and other investment-heavy businesses.

With the Turkish lira’s devaluation in the last years, FX denominated financial debts have become real burdens for larger Turkish companies that have solid operations and operating profits. The Directive aims to release these companies from high financial expenses and assist them in becoming profitable companies. This development will create a new financing option by facilitating equity financing for these companies, likely decreasing their financial indebtedness, especially hard currency debts.

In addition, relaxing the listing requirements would enable Borsa Istanbul to attract larger Turkish companies have been seeking offering opportunities in foreign stock exchanges.

By Muhsin Keskin, Partner, and Sait Baha Erol, Associate, Baker McKenzie