Category: Turkiye

Turunc has advised intercity bus operator Kamil Koc on its alliance with Istanbul-based bus companies Ses Turizm and Gulen Turizm.

According to Turunc, Kamil Koc “is one of the largest intercity bus operators in Turkey and a subsidiary of FlixBus, a Germany-based multinational intercity bus operator that also owns, among other brands, Greyhound Lines, the largest intercity bus service in North America. FlixBus is backed by numerous funds, including Baillie Gifford, Blackrock, Canyon Partners, General Atlantic, HV Capital, Permira, SilverLake, and TCV.”

Turunc’s team included Managing Partner Kerem Turunc, Partner Esin Camlibel, and Associates Beste Yildizili Ergul and Naz Esen.

Turunc has announced the launch of the firm’s UP Tel Aviv acceleration program together with Bogazici Ventures, GN-Z11, and Reichman University, in collaboration with Amazon Web Services.

“This groundbreaking initiative is the first and only acceleration program focused on opening up Turkish start-ups to global markets through the Israeli and US ecosystems,” Turunc announced. “The program includes a wide range of topics including legal issues, fundraising, expansion strategies, product management, and human resources, and also offers network opportunities through in-person and online sessions.”

As investors continue to seek a safe haven after the collapse of crypto exchanges, cryptocurrency companies have begun to resort to new ways to restore confidence. The most important issue in the market is whether cryptocurrency companies have enough assets to cover their customers’ funds.

Nine leading Crypto Exchanges said they will publish proofs of their reserve amounts. Crypto exchanges are trying to take their minds off fears of a collapse in the wake of the liquidity problems at FTX. For this, they announced that they will publicly publish their fund reserves. It is expected that the problem of lack of trust affecting investors can be solved to a large extent in this way.

Two different methods will be used to inform investors. The first method is to issue a Merkle tree reserve certificate, the second method is to prepare a transparency report.

So what is the Merkle Tree?

The Merkle tree is a data structure used in computer science applications., Merkle trees allow for more efficient and secure encoding of blockchain data in Bitcoin (BTC) and other cryptocurrencies. Crypto assets are recorded in a separate ledger, regardless of who owns them with this method, called Merkle reserve testing. This allows blockchain data to continue to be encoded more efficiently and securely, while also allowing it to be audited for quantity on a third party.

Will the transparency report be transparent?

The second method was to have a third-party auditing firm prepare a report for investors containing evidence of reserves. This so-called transparency report will continue to protect privacy but will also allow users to verify the stability of their assets on exchanges. The first question is how much confidence can be placed in the accuracy of the information that cryptocurrency companies will declare during the preparation of the report. another question is Which audit firms are ready to work on this report.

First Statement from SEC

Following this move by the companies, the US Securities and Exchange Commission (SEC) informed the public that it would increase its audits. In fact, the biggest reason for increasing these audits is to protect investors and create resources to access accurate information.

“Investors should not rely too heavily on a company saying it has received evidence of reserves from an audit firm,” Paul Munter, the SEC’s acting chief accountant, said in a Wall Street Journal report. “Having such a report is not enough information for an investor to assess whether the company has sufficient assets to meet its obligations,” he added.

While these developments were taking place, Binance, the largest crypto exchange by trading volume, commissioned a report on evidence of reserves. Shortly after the report was published, the report was withdrawn after the audit firm it hired announced that it no longer works with crypto firms.

The fact that the SEC will tighten and expand its current audits is the most reliable source for making confusing reports understandable. It seems that the lack of trust in crypto exchanges will continue to exist for a while.

By Onur Kucuk, Managing Partner and Berk Recber, Trainee, KP Law

McKinsey & Company has appointed Burcu Karaaslan Altan to Assistant General Counsel in Turkey.

Altan has been with McKinsey & Company since 2015 when she joined as a Contracts Manager. In 2018 she was appointed to Senior Contract Manager and in 2019 to Assistant General Counsel. Before joining her current team she worked with PwC, first as an Attorney between 2012 and 2014 and as a Senior Attorney between 2014 and 2015.

Originally reported by CEE In-House Matters.

Turunc has advised Bogazici Ventures on its investment in Dojo Talent. Polat & Partners advised Dojo Talent Founder Alp Sezginsoy.

Dojo Talent is a decentralized platform focused on the Web3 and gaming industries.

Bogazici Ventures is a Turkish Capital Markets Board-regulated venture capital fund focused primarily on financial technology, health technology, retail technology, and gaming.

The Turunc team included Managing Partner Kerem Turunc and Associates Beste Yildizili Ergul and Selay Berfin Turgut.

The Polat & Partners team included Partners Baris Can Polat and Yigit Kula and Of Counsel Nihan Seda Kisi.

Mergers and acquisitions transactions, which has reached a global record level of 5.9 trillion dollars in 2021, are considered as one of the legal transactions with the highest potential for disputes, even though its grounds for disputes are striven to be reduced or at least brought to a foreseeable level by detailed agreements. Agreements and afterwards transactions that comply with the intentions of the parties may result in unintended consequences later. Due to geopolitical tensions, soaring inflation, turmoil in finance and energy sectors, more disputes have been arisen after the closing of M&A transactions comparing to last year. That is with respect to Berkeley Research Group’s third-annual M&A Disputes Report (“Report”), which is prepared with contributions from some of the world’s top lawyers, private equity professionals and leading experts. Report brings forth a broad perspective, on how the current market environment has changed the essence of disputes.

Key Findings of the Report

According to the key takeaways of the Report,

• Macroeconomic concerns as rising interest rates, heightened energy costs and global recession are increasing dispute likelihood, especially in the crucial areas of the agreements, such as valuations.
  COVID-19 pandemic’s lasting effects, geopolitical tensions like Ukraine – Russia war and related international sanctions, and urgency around energy security are expected to drive growth in dispute numbers in coming years.
• Whilst it is expected that the disputes that concentrated in APAC (Asia – Pacific) countries last year will shift to EMEA (Europe, Middle East, and Africa) region (which includes our country) due to the deepening economic and political volatility, EMEA is shown as the key region to be monitored.
• The pressures to digitize industries are causing many traditionally non-tech companies to acquire or collaborate with technology companies, hence that is increasing M&A transactions. It is estimated that this digitalization through acquisition will result in administrative and cultural conflicts after the transaction.
• The temporary and volatile nature of the prices due to economic recession and inflation makes possible the disputes likely to increase, according to the report. The time elapsed between the commencement of the deal and its completion may increase the likelihood of complete change of the valuations and assumptions that the parties agreed upon at the beginning of the process. This results in construction of more robust price adjustment mechanisms in agreements and even renegotiation of purchase prices, and making the valuations adaptable to drastic market volatility.
• This year, FinTech is considered as top-ranked sector for disputes to spark and escalate, due to the implosion of cryptocurrencies, slowdown in available capital and regulatory challenges. According to the report, this “crypto winter”, when crypto asset prices have been under pressure for an extended period, is expected to last until next year, owing to the increasing conflicts stemming from failed projects.
• It is claimed in the report that, M&A based transactions may catalyse future dispute activities since the energy sector is in turmoil because of the Russia – Ukraine war increasing investments around renewable energy.

Key Steps to Take for Dispute Resolution

The report reveals that in 2022, lawyers are more encouraging their clients to take preventive measures to mitigate the risk of a dispute, such as doing more comprehensive due diligence, pre-litigation counselling, and investing in litigation preparation tools, than has been done so far. According to the report, although these measures do not completely eliminate the disputes, they narrow the scope of it.

Nevertheless, although the M&A disputes had increased in 2022, most of the disputes are settling before trial. This is due to the fact that, the parties do not want to lose their commercial relations with each other. Negotiations with good faith between the parties in order to resolve the disputes within the time stipulated in the agreement, negotiations of disagreements by senior executives such as board members, and efforts of the parties to resolve the dispute with a third party (mediator) can be cited as examples of amicable and effective resolutions.

The Role of Arbitration

In addition to above, if the provisions stipulating alternative dispute resolution before the trial causes the proceedings to be prolonged and the costs of the proceedings to increase, a direct application is made to the court or arbitration. In this regard, arbitration has been considered as a frequently preferred method for M&A disputes in recent years, since its advantages such as; the selection of arbitrations can be made among the experts from related area, the language in which the proceedings will be held can be same with the language of the agreements and negotiations, the chance of the foreign litigants to avoid unfamiliar legislation in domestic courts, the ability to conduct detailed examinations on technical issues and getting faster resolution than court proceedings. In particular, the fact that the transaction takes place between different variety of companies from different industries corroborates the necessity of sectoral expertise, along with the M&A knowledge. According to the early statistical report released by the International Chamber of Commerce, with each passing years, arbitration continues progressively to be a trusted and preferred method for dispute resolution for commercial disputes, including high-demanded, comprehensive, and complex disputes.

As the foreign investment has been increasing in our country, the application range of arbitration has been expanding. Distinctive features of arbitration proceedings such as, possibility for the parties to pick the arbitrator, the arbitrator’s wide discretion to take effective injunction reliefs depending on the case, and the arbitrator’s expertise on the dispute and its ability to get a solid knowledge on the case quicker than the expert examinations practicing in the judiciary, make the arbitration preferable as the primary solution for M&A disputes, especially when it comes to share purchase agreements and shareholder agreements finalized as a result of protracted negotiations.

Over the next year, the report predicts that the adverse economic conditions and increasing energy costs will produce an upswing in M&A disputes, and a further slowdown in new M&A deals will be seen, if sellers do not adapt to more unfavourable valuations. On the other hand, it is also among the predictions that those who avoid risks and seek the way of practicing economy, will chose to resolve their disputes internally in 2023, instead of bearing the costs of litigation or arbitration.

By Onur Kucuk, Managing Partner, Cemile Demir Gokyayla, Partner, and Beste Unsoy, Junior Associate, KP Law

With the recent amendments to the Notary Public Law No. 1512 (“Law”), the immovable property sales agreements, which could only be executed before the land registries previously, can now be executed before the Turkish notaries as of January 1, 2023. In other words, immovable property sales agreements can now be concluded both before the land registries and the notaries as of such date.

The procedures and principles applicable to the immovable property sales agreements to be executed before the notaries are set forth in the Regulation on the Procedures and Principles to be Applied to Immovable Property Sales Agreements to Be Executed Before the Notaries (“Regulation”), published in the Official Gazette dated January 11, 2023 and numbered 32070.

A. Electronic Application Process
In order for immovable property sales agreements to be executed before a notary, an electronic application must first be submitted through the e-appointment application of the Turkish Notaries Association using the e-Government portal. During this application, information and documents regarding (i) the parties of the sales agreement, (ii) the immovable property to be sold and (iii) the value of the agreement must be uploaded to the Turkish Notaries Association Information System (“TNBBS”). The information and documents regarding the application are transmitted to the selected notary public via TNBBS. The originals of the documents uploaded to the TNBBS must be submitted to the notary on the appointment date.

B. Drafting and Registration of the Agreements
Notaries are obliged to inquire the land registry records and other related details of the immovable property to be sold through the Land Registry and Cadastre Sharing System (“TAKPAS“) and to determine whether there are any legal obstacles regarding the sale of such immovable property. If there are any rights and obligations on the immovable property (such as; mortgages in favour of third parties or whether the property has been leased etc.), the notary must inform the parties accordingly. If the parties prefer to proceed with the transaction in the existence of such rights and obligations, these rights and obligations musty fully and accurately be included in the agreement as well as the declaration of the parties regarding their acceptance.
If it is identified that there are no legal obstacles for the sale of the immovable property, the notaries prepare the sales agreement by using the agreement template available on the Land Registry and Cadastre Information System (“TAKBIS”). Following signing of the agreement by the parties and completion of the registration procedures electronically through TAKBIS, the title deed of the property is delivered to the new owner by the notary.

C. Fees and Taxes
The immovable property sales agreements to be executed before the notaries are subject to a notary fee, a title deed fee and a revolving funds service fee. However, the immovable property sale agreements executed before the notaries are exempted from the stamp duty.

D. Enforcement
The Regulation will not be implemented until the date of the announcement of the Ministry of Justice regarding the establishment of the title deed information system stipulated by the Law, on the official website of the ministry.

By Cerensu Cetin Yenigun, Senior Associate, and Selin Ivit, Associate, Moral, Kinikoglu, Pamukkale, Kokenek

Paksoy, working with Willkie Farr & Gallagher, has advised Groupe Cahors on its acquisition of Schneider Electric companies that operate transformer plants in Turkey and Poland. Baker McKenzie Turkish affiliate Esin Attorney Partnership reportedly advised the sellers. Volt Associes and Kinstellar Turkish affiliate Gen Temizer Ozer reportedly advised the lenders.

Groupe Cahors is a France-based international group specializing in the development of energy distribution and telecommunication networks.

Schneider Electric is a French multinational company specializing in digital automation and energy management.

Paksoy’s team included Partners Stephanie Beghe Sonmez and Sera Somay and Associates Tugcan Akalin, Deniz Benli, Goksu Cetin, and Muhammed Tosun.

How to prove that an on-site inspection is obstructed: Board’s Kınık and A101 decisions

• How to prove that an on-site inspection is obstructed: Board’s Kınık and A101 decisions

• End of the indefinite exemption: Unmaş decision

• The Board accepts Baymak’s commitments and terminates the preliminary investigation

• Chain markets not fined for hub-and-spoke: The Board’s Sunny decision

• Turkish Competition Board clears Adidas of RPM and discrimination allegations

• Non-poaching agreements in labor markets: The Competition Board’s private hospitals decision

• Does Johnson&Johnson Have Exemption or Not?: The regional administrative court strikes in J&J’s exemption case

How to prove that an on-site inspection is obstructed: Board’s Kınık and A101 decisions

Through the administrative fines imposed by the Turkish Competition Board (“Board”), it has again sent a clear signal that it will show zero tolerance regarding any noncompliance in its on-site inspections and particularly the deletion of emails or instant messages. Within the case law of the Board, the Kınık Maden Suları A.Ş. (“Kınık”) and Yeni Mağazacılık A.Ş. (“A101”) decisions are of great importance as they clearly reflect the emphasis of the Board and highlight the importance of timing of data deletion during on-site inspections.

Board’s assessment

Log records constitute the most critical evidence for the suspicion of obstruction of an on-site inspection in these decisions spesifically.

During Kınık’s inspection, the Turkish Competition Authority’s (“Authority”) case handlers found that certain email and WhatsApp conversations of the investigated employees were deleted during the inspection, as detected by the log history. They later confirmed this fact with a test in the Authority’s IT laboratory. The searched terms in the records of the employees’ search histories increased the suspicion regarding the deletion. Indeed, it was found that the terms in the search history were related to rival undertakings. In that regard, all investigated undertakings must ensure that their employees comply with this enforcement trend and show a high sensitivity regarding deletion of emails and instant messages on their mobile phones. The Board’s A101 decision, as adopted in the Kınık decision and other past Board decisions, makes the evaluation based on log records within the scope of the obstruction of on-site inspection, but it also raises some controversies. Within the A101 decision, during the on-site inspection, certain employees whose phones were to be examined deleted the WhatsApp application from their mobile phones. When the correspondence was restored through backup in the reinstalled applications, there was almost no correspondence. The Board considered that even if there was a suspicion of data deletion, it concluded that the on-site inspection was not hindered as the log records could not determine whether (i) the deletion had occurred on the phones of all three employees and, if so, (ii) when the deletion had occurred.

Dissenting opinion: Should evidence of the deletion, other than log records, be considered? In a dissenting opinion of A101, two Board members stated that the absence or inability to obtain a log record could not be claimed as evidence that the deletion had not occurred. Accordingly, the following points were discussed as concrete evidence that should be considered as an alternative to the log records:

▪ Delaying the examination by 15 minutes (during which time the case handlers were kept in a room by themselves).

▪ […] taking the mobile phone taken into custody for inspection and performing operations on it without the knowledge of the case handlers.

▪ Deleting the WhatsApp on the grounds that it contained private/confidential correspondence.

▪ The seniority of the employees alleged to have deleted the WhatsApp application, as they were the direct focus of the on-site inspection.

▪ The fact that the action in question was carried out separately by three high-level individuals

▪ The fact that all three employees had uninstalled the application from their phones and during the on-site inspection, either the application was not installed at all, or it was installed but the login procedure required for use was not performed.

▪ After the reinstalment of WhatsApp application, no correspondence was retrieved

In light of the aforementioned arguments, it was declared in the dissenting opinion that the maxim in dubio pro reo principle — “when in doubt, rule for the accused”— was inapplicable as there had been no question but a substantial amount of concrete evidence regarding the obstruction of the on-site inspection.

Conclusion Although log records are important evidence in cases of obstruction of the on-site inspection, the diversity of the evidence to be used in these cases will be among the issues of discussion, as set out in the dissenting opinion of the A101 decision. In addition, this decision is an example of the application of the maxim in dubio pro reo principle within the decisions of the Board.

It appears that the Authority will continue to maintain its tough approach in order to ensure that the on-site inspection can be carried out properly. The undertakings should keep their guard up and be prepared for an unexpected visit from the Authority.

Unmas: You cannot benefit from the exemption indefinitely

The Board concluded its preliminary investigation against Unmaş Unlu Mamuller Gıda Sanayi ve Ticaret A.Ş. (“Unmaş”) without finding necessary to launch a full-fledged investigation based on the assessments that Unmaş is not dominant in the market for “packed bread” and its de facto exclusivity practices benefit from the Block Exemption Communiqué No. 2002/2 for Vertical Agreements (“Communiqué No. 2002/2”). 

However, the Board enforced Art. 6/1 of the Communiqué No. 2002/2 and decided to carry out a separate analysis to determine whether Unmaş’ practices have effects against the individual exemption conditions under Art. 5 of the Law No. 4054 and thereby, to revoke Unmaş’ exemption granted by the Communiqué No. 2002/2 pursuant to Art. 13 of the Law. No. 4054.

After its analysis, the Board withdrew the block exemption for vertical agreements between Unmaş and sales points.

The Board’s decision provides some notable insights as there are only a few decisions for withdrawal of the block exemption.

The Board’s assessment of the relevant markets

Before moving on to assess whether it should withdraw the block exemption, the Board provided a general overview of the bread production sector in in Türkiye. With reference to the Turkish Food Codex Regulation, the Board compared the traditional bread production and the industrial bread production and concluded that these differentiate mainly in terms of the products’ nature (ingredients, shelf life, freshness, hygiene) and pricing.

Also, the Board noted that bread produced through the traditional production method is generally sold in geographical areas that are close to the place of production, whereas packed bread can be sold all over Türkiye. The Board, first, evaluated the arguments of Unmaş regarding the definition of the relevant product market, and then analyzed the opinion of the Economic Analysis and Research Department (“EARD”)

i. Position of Unmaş regarding the definition of the relevant market

Unmaş argued that the relevant market should be defined as the “bread market,” covering unpacked bread as well, with reference to some of the Board’s decisions on the relevant sector. Unmaş’ argument is on the grounds that (i) packed and unpacked bread can be sold through the same sales channels and as substitutes for each other; (ii) there is no significant price gap between these bread types and the potential price gap might arise due to the ingredients of breads, (iii) the demand for packed bread remains low specifically due to the packaging obligations on breads brough with the COVID-19 pandemic; and (iv) there is no difference between unpacked and packed bread in the eyes of the consumer, and the demand can shift between them. Unmaş suggested that the Board does not accept its argument on a broader market definition, the relevant product market should be defined as “the bread sales in organized and traditional fast moving consumer goods points” in the narrowest sense. Unmaş also submitted an economic analysis report to support its arguments on the definition of the relevant product market. This report mainly provided that unpacked bread and packed bread are substitutes for each other in terms of demand and supply and further argued that the volume-based sales data would reflect market conditions better than the valuebased data and the should be considered in terms of the assessments of the market power.

The Law on the Amendment of the Law on Judges and Prosecutors and Certain Laws (“Law“) published in the Official Gazette dated 28 June 2022 and numbered 31880 made significant amendments to Notary Public Law No. 1512 and enabled public notaries to execute real estate sales contracts. 

This regulation authorizing public notaries to execute real estate sales contracts, which has been on the agenda for a long time, was expected to enter into force on 1 January 2023. However, the Presidential Decision (“Decision“) on the Extension of the Period of Provisional Article 21 of the Notary Public Law until 1 July 2023 was published and the Decision postponed the deadline for the completion of the installation of the system required for the sale of real estate by public notaries until 1 July 2023.

In line with these developments, it was expected that the Ministry of Justice would regulate the relevant procedures and principles. In this context, the Regulation on the Procedures and Principles Applicable to Real Estate Sales Contracts Issued by Public Notaries (“Regulation“) was published in the Official Gazette dated 11 January 2023 and numbered 32070 and entered into force on the same date. The provisions of the Regulation will be applied as of the date the establishment of the information system is announced on the official website of the Ministry of Justice.

What does the Regulation introduce?

The main provisions envisaged in the Regulation are as follows:

• Applications regarding the issuance of real estate sales contracts will be made through the Notaries Union of Türkiye’s e-appointment tab available on the e-Government portal.
• The documents requested during the application will be uploaded to the Notaries Union of Türkiye Information System (“TNBBS“), and the originals of the documents will be required to be submitted at the public notary’s office by the parties on the date and time of the appointment.
• The application document will be issued through TNBBS and by a public notary. If the public notary is unable to issue the application document due to a legal or actual obstacle, the application will be rejected by the public notary and the parties will be provided the opportunity to update the public notary information from TNBBS. The parties will be notified of this situation by text message.
• The public notary will use the contract sample prepared by the Notaries Union of Türkiye and registered in TNBBS by considering the form and content of the contract in the Land
• Registry and Cadastre Information System (“TAKBIS“). Taking this into consideration, together with the provisions of the Regulation that we mentioned regarding the conditions subsequent, it is understood that the provisions of the official deed may be specially regulated by the parties, except for the regulations prohibited in the official deed.
• The real estate sales contract shall not contain any terms and conditions that may impair or nullify the registration.
• The public notary will notify the parties via text message of the e-collection serial number and payment method for the service fee and title deed fee for the transaction, along with the date and time of the appointment for signing the contract. Parties who are not present at the public notary on the appointment date and time will be informed via text message on the day that the transaction can be carried out if they apply to the public notary within 10 days; otherwise the application will be canceled.
• The procedures related to the contract will be carried out by the public notary in person. Accordingly, any restrictions on the real estate, the procedures and principles regarding the restrictions in the legislation on the sale of real estate, the identity of the right holder and whether there is a legal obstacle to the sale of the real estate will be evaluated by the respective public notary.
• Following this evaluation, the contract will be signed by the parties and the contract and related documents will be registered in TAKBIS by the public notary with the document number obtained from TAKBIS and the registration of the real estate in the land registry by the directorate of land registry.
• The title deed will be issued by the public notary following the completion of the registration after the contract is signed.

Conclusion

The amendments to the Notary Public Law and the Regulation aim to finalize the sale of real estate property transactions in a faster and easier manner, and the Regulation sets out the procedures and principles applicable to the real estate property sale contracts to be executed by public notaries. Those who wish to carry out real estate sale transactions before public notaries should follow the announcements regarding the installation of the relevant information system on the official website of the Ministry of Justice.

By Ismail Esin, Partner, Berk Bengi and Tugay Hanegelioglu, Associates, Esin Attorney Partnership