Category: Turkiye

Former Ipek | Akbal Schwimann Partner Ceyda Akbal Schwimann has joined Akol Law’s dispute resolution practice as a Partner.

Before joining Akol Law, Schwimann spent over two years as a Partner at Ipek | Akin | Schwimann and its successor IAS Partners (as reported by CEE Legal Matters on April 30, 2020). Prior to that, she was an Attorney-at-Law at Wolf Theiss in Vienna for more than three years. Between 2008 and 2015, she was with Specht & Partner Rechtsanwalt, where she established a Turkey practice with a focus on dispute resolution matters. Earlier still, she spent three years as Associate with White & Case.

According to the firm, Schwimann specializes in commercial and corporate disputes, investments and investment protection disputes, and arbitration matters.

“We are happy to have Ceyda join our team,” Akol Law Partner Meltem Akol commented. “Her unrivaled expertise in international and domestic litigation as well as in arbitration and alternative dispute resolution matters will further strengthen our practice and enrich us to continue providing first-rate legal services to our clients.”

“I am delighted to be a part of the Akol team,” Akbal Schwimann added. “I believe this appointment will be a fruitful exchange and lead us to build a new platform for sharing innovations, knowledge, and expertise.”

Erdem & Erdem has advised Yildirim Group’s subsidiary Qazaq Soda in the tender and construction proceedings for the establishment of a sodium carbonate factory in Kazakhstan.

According to the firm, “Kazakhstan’s first sodium carbonate factory will be constructed with a USD 400 million investment and produce 400,000 tons of soda ash and other raw materials annually. The factory is expected to employ 1500 people during the construction phase and approximately 300 people once it is brought into service.”

Founded in 1963, the Yildirim Group is an Istanbul-based company, with operations in nine sectors in 51 countries. The company employs 13,000 people around the globe.

The new Communiqué amending the Capital Market Board’s [“CMB”] Communiqué on Tender Offers No. II-26.1 [“Amendment Communiqué”] entered into force upon its publication in the Official Gazette dated October 16, 2021.

In this respect, within the framework of secondary regulation preparations and considering the recent amendments made to the Capital Market Law No. 6362, the CMB had previously submitted a draft version of the Communiqué Amending the Communiqué on Tender Offers No. II-26.1 [“Draft Communiqué”] to public opinion on February 1, 2021 by releasing a public press in its official website. [You can reach here our alert on the amendments introduced in the Draft Communiqué]. Now, with the Amendment Communiqué, new rules proposed in the Draft Communiqué entered into force as of October 16, 2021. These new rules can be summarized as follows:

1: Amendment Communiqué Defines Those Who Fall within the Ambit of Mandatory Tender Offer [“MTO”] and the Methods for Calculating the Number of Shares.

As per the Amendment Communiqué, only those who are shareholders as of the date on which the acquisition of the management control is disclosed to public will participate in the MTO. Moreover, the list to be provided by the Central Securities Depository [“CSD”] will be taken into account in the determination of the shareholders who can benefit from the MTO and their shares subject to the offer. Such list will be shared with the brokerage firm by the CSD on the business day preceding the launch of Court’s Assessment

2: The Principles regarding the Calculation of MTO Price Are Clarified, and the CMB will have great discretion to cease the tender offer or recalculate the price.

While the tender offer price remains unchanged for the shares of the companies listed on stock exchange, the Amendment Communiqué clarifies calculation of the tender offer price for the shares or share classes of the companies that are not listed on stock exchange. As such, the tender offer price for such shares and share classes shall not be lower than:

• the price determined in the valuation report prepared by the CMB by taking into account the privileges attached to the share classes if any, and
• the highest price paid for the same share classes of the target within the 6 [six] months’ period before the date on which the tender offer obligation arises.

Moreover, the CMB will be entitled to cease the tender offer or recalculate the tender offer price if it decides on existence of developments affecting the economy or the relevant industry.

3: Interest Rate-Related Principles to be applicable for Turkish Lira are Updated.

According to the Amendment Communiqué, if the offeror has no fault due to the delay in launching the tender offer, no interest will accrue on the tender offer price. Furthermore, the CMB replaced TRLIBOR, the reference rate applicable to Turkish Lira, with TLREF.

4: Scope of Circumstances which would not Give Rise to the MTO are Expanded.

The Amendment Communiqué envisages new exceptions to the obligation to launch a tender offer. In this regard, the obligation to launch a tender offer will not arise in the following cases:

• A shareholder who participated in the capital increase and acquired %50 or less of the voting rights of the public company sharing the public company’s control with the existing controlling shareholders, equally or to a lesser extent, and for the first time through a written agreement;
• Squeeze-out and sell-out rights arising as a result of obtaining the management control;
• As regards public companies listed on stock exchange, changes in management control as a result of new share acquisitions by existing shareholders through participating in share capital increases in which their pre-emptive rights have not been restricted;
• Unintended changes to management control as a result of events such as the suspension of voting rights of certain shareholders, capital decrease through share redemptions, amendments to the privileges attached to the shares, or share buy-backs by the company. 

Also, in case of occurrence of any of the foregoing events, those who acquired management control of the company will be required to make a public disclosure within 2 [two] business days.

5: Scope of Exemptions are also Broaden.

According to the Amendment Communiqué, the CMB will be entitled to grant exemption to the acquirer from the MTO obligation, if the acquisition of shares triggering change in management control results from [i.] inheritance, [ii.] partition of the inheritance or [iii.] the legal matrimonial property between spouses.

6: Content of the Brokerage Agreement are Regulated.

Pursuant to the Amendment Communiqué, it is possible not to exclude shares banned from transactions, subject to legal disputes or other third-party claims from the mandatory offer, by way of incorporating a clause into the brokerage agreement. If there are such shares within the offer, their purchase price will need to be reserved under a separate and interest-bearing account, until the ban is lifted, or legal claims are solved. 

7: Brokerage Firms can be Held Liable for the Information Form.

The Amendment Communiqué states that the brokerage firms who sign the information form are among those who are liable

for the information provided therein. Accordingly, in addition to the offerers, brokerage firms and the authorized  signatories of these firms can be held liable for the MTO information form, should the information on the form appear to be incorrect, misleading or incomplete.

By Zahide Altunbas Sancak, Partner, and Sevinc Jafarova, Associate, Guleryuz & Partners

Over the last decade, granting employees stock option rights for acquiring shares in the employer company has become a growing trend among companies operating in the technology sector, particularly in start-up companies. In this respect, companies favour “Employee Stock Option Plans” enabling employees to acquire a certain amount of shares in the company and conclude “Stock Option Agreements” with the employees for this purpose. In this article, the concept of stock options and various stock option plans will be discussed along with their implementation under Turkish law and in other jurisdictions.

Stock Options and Their Implementation in Turkey

There are many types of benefits companies grant to their employees as a part of their compensation. Nowadays, companies, wishing to provide various financial benefits to their employees beyond salary increases are offering employee stock option plans, an increasingly popular type of benefit, to their employees.

Stock option plans allow employees to acquire company shares or other benefits tied to company shares upon the fulfilment of certain conditions. While these plans were mainly popularized in the US, they are now increasingly being adopted by Turkish companies as well.

Companies prefer to establish stock option plans in order to award productive employees while also creating a connection between the interests of the company and the interests of its employees. Primary benefits of employee stock option plans include improved relationship between the company and the employees, bridging the gap between the company’s commercial interests and the employees’ interests and creating a common identity.

Stock option plans are currently not widely adopted in Turkey unlike other jurisdictions, due to the lack of a clear legislation on the matter. Having said that, stock option plans which have become relatively viable after the enactment of Turkish Commercial Code No. 6102 [“TCC”] in 2012, are mostly preferred by technology and start-up companies.

Stock Option Plans in Turkey

Direct Shareholding of Employees

In this type of plans, company shares are granted directly to the employee and the employee becomes a shareholder of the company. Therefore, employees enjoy the shareholding rights provided by the TCC, like any other shareholder of the company.

The direct employee shareholding plans generally consist of the following three phases:

Granting: In this phase, company grants an option to the employee(s) to acquire a certain amount of company shares provided that they fulfill the conditions set by the company and/or continue to work for the company for a certain period of time.

Vesting: In the vesting period, employees become entitled to share option upon the fulfillment of the conditions set forth in the stock option agreement concluded between the company and the employee [e.g., after the expiration of the 3-year period specified as an exercise date in the stock option agreement].

Exercising: In the exercising phase, employees that are included in the plan acquire company shares by exercising their options provided that conditions stated in the stock option agreement have been fulfiled. It is worth noting that in the foregoing phases, employees have not yet acquired the actual shares.

In this context, to the extent permitted by Turkish legislation, direct employee shareholding plans can be executed in three alternative ways:

Conditional share capital increase and issuance of new shares: In this method, in the exercising stage where the employee becomes a shareholder, new shares are issued in a conditional share capital increase, and the employee becomes the owner of the newly issued shares.

For a conditional share capital increase, the articles of association of the company must contain specific rules. Therefore, in order to grant shares to employees through a conditional share capital increase, the articles of association of the company will have to be amended in the granting phase by the shareholders via a general assembly resolution. Moreover, existing shareholders will typically have the pre-emptive right during a capital increase. As such, they have the right to purchase newly issued shares on a pro-rata basis to their shareholding. Hence, in order for the employees’ participation in the company to be deemed as a justifiable reason to restrict the pre-emptive rights of existing shareholders, the articles of association should specifically contain a provision addressing this matter. Accordingly, the pre-emptive rights of the existing shareholders can be restricted for the conditional share capital increase, provided that the other conditions set by the TCC have also been met. 

This method, although rarely used, is generally preferred by corporations in which registered share capital system is adopted or by publicly held companies. It is also worth noting that conditional share capital increase in public companies with the registered capital system is subject to the rules of the Capital Markets Board’s Communiqué on Shares no. VII-128.1.

Existing shareholders’ commitment to transfer shares to the employee: In this method, all or some of the existing shareholders commit to transfer a portion of their shares to the employee in accordance with the share option plan. Therefore, the capital increase procedures are mitigated, and current shareholders waive a part of their shares and transfer those shares to the employee. Where a corporation opts for this method, the promising shareholders transfer their committed shares to the employee upon fulfillment of the agreed conditions. In any case, this plan would merely constitute a contractual relationship between the shareholders and the employee and may not be binding on the shareholder in terms of corporate law.

Share transfer by the company: Under Turkish law, companies are entitled to acquire their own shares up to 10% of its share capital. Those shares owned by the company can be offered to the employees as stock options in the future.

Given that direct employee shareholding stock option plans are not explicitly regulated under Turkish law and considering the employers’ concerns in granting shareholding rights to the employees, companies in Turkey are inclined to prefer phantom stock option plans described below.

Phantom Stock Option Plans

In simple terms, employees do not directly own shares in these plans. However, they have financial rights attached to these shares such as receiving dividends or certain benefits in various scenarios, such as in case of exit. In this method, which is frequently known as the “Phantom Stock Option Plan” or synthetic equity, employees receive the respective benefits depending on the ratio or amount of shares on the date of commitment.

In practice, especially in phantom stock option agreements concluded between the founding shareholder and the employee, the shareholders promise to pay a part of the dividend they receive from the company to the employee. That is to say, such undertaking establishes a purely contractual relationship between the employer-shareholder and the employee and may not be binding in terms of corporate law.

This method is frequently preferred in Turkey. On the other hand, some companies choose to merge both methods and offer stock options allowing employee to be a direct shareholder to their high-ranking senior managers and phantom stock options to other employees. The type of options to be offered by the company should be evaluated for each employee according to the company dynamics.

Stock Option Plans in Other Jurisdictions

There are various alternative mechanisms to the above stock option plans. While these alternative mechanisms are yet to be widely used in Turkey since they are not directly regulated, they are preferred in many parts of the world. Some of these methods are as follows:

Plans to Acquire Shares in an Associated Company: In this method where some procedures applicable in direct employee shareholding are mitigated, employees  are granted shares not in the main company, but in another company related to the main company [e.g., a different legal entity with the same founders].  Accordingly, some rights and receivables are transferred to the associated company by the main company. In this method, while the employee becomes a shareholder in the associated company; the shareholding structure of the main company is preserved in its current form.

Stock Bonuses: Stock bonuses are performance rewards granted to the employees depending on the fulfilment of performance objectives for a time period determined by the employer. In these stock plans, incentives/bonus payments can be granted as company stocks as well as in cash.

Employee Stock Ownership Plan: This plan provides the employees with the opportunity to directly own company shares by purchase. However, to allow employees to buy the shares, it is necessary to set up a trust fund within the company consisting of issued shares of stock reserved specially for the employees.

Stock Appreciation Rights [“SAR”]: Employees will be entitled the cash equivalent of a stock’s appreciation over the period between the grant date and the vesting date without acquiring the ownership of the company shares. In this case, the employee does not need to purchase the stock beforehand. Although SAR is similar to phantom stock option plans in that regard, the latter is are designed to pay employees in cash over the market price of the shares at the exercise date while SARs are designed for the employees to receive the sum of the increase in the stock value.

By Zahide Altunbas Sancak, Partner, and Sevinc Jafarova, Associate, Guleryuz & Partners

Paksoy, working with global counsel Linklaters, has advised PwC on the agreement to sell its Global Mobility Tax and Immigration Services business to US private equity group Clayton, Dubilier & Rice. Debevoise & Plimpton was global counsel to the buyer.

According to Paksoy, “the business is the global leader in employee tax, immigration, business travel, mobility managed services, and payroll solutions to multinational organizations and their employees. The transaction is expected to close in the first half of 2022.”

Paksoy’s team included Partner Elvan Aziz, Senior Associate Gulce Saydam Pehlivan, and Associate Asli Eryilmaz.

Editor’s Note: After this article was published, Kocian, Solc, Balastik announced that it had advised Clayton, Dubilier & Rice on the deal. The firm’s team included Partner Martin Solc, Lawyers Jakub Porod and Ota Mach, and Junior Lawyer Klara Dvorska.

Subsequently, Havel & Partners informed CEE Legal Matters that it had worked with Linklaters to advise the seller. The firm’s team included Partner Jan Koval, Counsel Petra Sochorova, and Managing Associate Silvie Kiraly.

According to Clayton, Dubilier & Rice, the acquired business unit, now known as Vialto Partners, will be led by CEO Peter Clarke, who had served as Global Managing Partner of PwC Global Mobility Services. “Vialto Partners will accelerate its investment in technology and new services to create a more efficient, end-to-end mobility experience for organizations and their mobile employees.”

Paksoy has advised Turkish biotechnology company Anatolia Geneworks on its TRY 516,9 million initial public offering.

The shares were admitted to trading on Borsa Istanbul on October 21, 2021. According to Anatolia, “the offering was oversubscribed 9.75-times with demand from 113,032 investors for shares with a total nominal value of TRY 20 million. In the offering made through a combination of capital increase and shareholder sales, 20.9% of Anatolia Geneworks shares were sold.”

Anatolia is a molecular diagnostics company with expertise in designing, developing, and manufacturing Real-Time PCR kits, nucleic acid extraction kits, and automated nucleic acid extraction instruments. 

“As one of the pioneers in the field of molecular diagnostics in Turkey, our biggest goal is to expand our product range, which is accepted worldwide, and to increase our market share and become one of the ten largest diagnostic companies in the world in the next 20 years,” Anatolia Geneworks Chairman Alper Akyuz commented. “Achieving this success is our most significant debt to both our country and our investors.”

Paksoy’s team included Partners Omer Collak and Sera Somay, Counsel Okkes Sahan, Senior Associates Soner Dagli and Merve Kurdak, and Associate Bulent Ozturk.

Paksoy has advised on the initial public offering of Gelecek Varlik Yonetimi, an asset management company operating under the Fiba Group.

According to Paksoy, Gelecek Varlik’s IPO reached a size of TRY 360,4 million and was oversubscribed, with very strong demand from investors. The company’s shares were listed on Borsa Istanbul on October 21, 2021.

Paksoy’s team included Partners Omer Collak and Sera Somay, Counsel Okkes Sahan, Senior Associates Soner Dagli and Merve Kurdak, and Associate Bulent Ozturk.

All countries have had to deal with the intensifying effects of climate change in recent years. As a direct response, we are in the process of moving toward a low-carbon future. The Paris Agreement and the EU’s Green Deal have already urged all sectors to take measures to reduce carbon emission levels, and the energy transition movement is rapidly growing. COVID-19 has also hastened this global movement.

The main plan for reducing carbon emissions is to increase electrification and decarbonize the electricity sector through renewables. This is a great plan, as far as it goes, but electrification of all industries is not an easy target, and renewables have their own struggles. Unlike fossil fuels, which are available at any time, wind and solar power plants generate electricity only when the sun is shining and the wind is blowing. A huge challenge arises as electricity is, in principle, generated and consumed simultaneously. Additionally, renewables cannot replicate certain qualities of fossil fuels, such as high heat.

Cutting-edge technologies help increase the share of renewables in the energy sector. Storage technology, which was previously only employed in niche markets, can now be broadly used since the average cost of batteries has fallen drastically. This will allow renewable-based power plants to increase reliability and balance. Smart grid technologies and grid digitization, on the other hand, will reduce losses incurred through grid operation.

Based on these latest developments, increases in the share of renewables in the electricity generation mix are expected to push to 30% in 2021 globally, according to the International Energy Agency, the highest rate ever achieved. A strong drive by governments toward de-carbonization also helps to increase the share of renewables and causes a downward shift in oil and gas demand. Therefore, it is not surprising that upstream investments have slowed. The share of renewables in Turkey is also increasing, in line with global trends, and is expected to reach at least 30% of the electricity generation mix by 2023. Heavy dependence on oil and gas imports also compelled Turkey to prioritize renewable energy resources.

Although technology and governmental acts help the move away from fossil fuels, achieving climate change targets based only on electrification and renewables will be a long plateau. We still need oil and gas in the energy transition process. According to BP’s Statistical Review of World Energy 2021, oil continues to hold the largest share of the energy mix with 31.2%, while natural gas holds a share of 24.7%, among all primary sources in the world. Regarding the regions, natural gas dominates in the CIS and the Middle East, while oil remains the dominant energy resource in Africa, Europe, and the Americas. If energy transition trends lead to a shortfall in investments, they could cause future supply shortages risks. Therefore, we can expect to see regulations that continue to support the oil and gas market, in parallel with regulations supporting renewables. Turkey also continues to invest in domestic oil and gas exploration and production activities. Especially for natural gas, transmission and distribution networks and storage facility capacities have been increased of late, and new international pipelines have been implemented. The Turkish Natural Gas Futures Market will also open on October 1, 2021.

In any case, the oil and gas sector now rapidly needs to reorient investments based on the energy transition trends. Future investments should be environmentally friendly and impact-focused, and they should adopt new strategies accordingly. The first priority of oil and gas companies should be to maintain a low cost and lower carbon emissions. Indeed, it has become increasingly common for oil and gas companies to provide commitments to reduce emissions and move to supply a diverse range of fuels and electricity for that purpose. They are working on alternatives such as (1) biofuels, which when burned release the same amount of carbon the plant captured when growing, provided that the process of turning plant matter into usable fuels runs on zero-carbon energy; (2) green hydrogen, to be produced based on renewable energy; and (3) carbon capture, storage, and use.

The oil and gas sector appears trapped between electrification and decarbonization strategies and the trends to replace fossil fuels with renewable resources. Although we will need oil and gas in the energy mix for years to come, the future of the sector depends on how successfully it can adapt to a sustainable low-carbon structure.

By Nigar Gokmen, Head of Energy, Mining and Infrastructure at Esin Attorney Partnership

This Article was originally published in Issue 8.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Turunc has advised Turkish venture capital fund HiVC on its secondary capital raise.

According to HiVC’s parent company, Gedik Investment Menkul Degerler, “the issued capital of our subsidiary HiVC Girisim Capital Yatirim Ortakligi, which is TRY 25 million within the registered capital ceiling of TRY 125 million, has been increased by TRY 12,88 million to TRY 37,88 million, all of which will be covered in cash by restricting the rights of existing partners to purchase new shares.”

According to the company’s website, HiVC is a public fund that provides extensive support to early-stage startups through all the necessary entrepreneurial steps, from idea to exit. Their portfolio includes Aposto!, Helo!, Hop!, HoustonBionics, Insumo, Robomotion, and VR Lab Academy.

Turunc’s team included Partner Iltem Dokurlar and Associate Naz Esen.

The Turkish Government, in its statement at the United Nations General Assembly, had given signals beforehand that it would submit the Paris Climate Agreement [“Paris Agreement” or “Agreement”], for parliamentary approval which it signed on April 22, 2016. Following his statement, the Agreement entered into force with the Law on Approval of the Paris Agreement and the Presidential Decision, both published on the same day, on 7.10.2021 in the Official Gazette. Please see our previous article about the content and purpose of the Paris Agreement.

What are Turkey’s Obligations Under the Paris Agreement?

First of all, it should be noted that the Paris Agreement is based completely on a voluntary basis. In other words, the contracting parties set their own contribution goals for the achievement of the contractual objectives. In this regard, no reservations can be made to the Agreement as per Article 27, as the Paris Agreement already contains provisions encouraging parties to set more ambitious goals rather than being coercive.

On the other hand, Turkey ratified the Agreement with the statement of “on the basis of equity, common but differentiated responsibilities and respective capabilities, and recalling the resolutions adopted at the Conference of the Parties to the United Nations Framework Convention on Climate Change, and within the framework of nationally determined contribution statements, provided that the Agreement and its mechanisms do not prejudice the right to economic and social development as a developing country”. The concepts stated in the declaration are basically the repetition of the principles already set forth in the preamble and various articles of the Agreement, and therefore the statement has no practical value. However, the emphasis on the signing of the Agreement as a “developing country” can be interpreted as a message that expectations should not be raised too high in terms of Turkey’s ambition and determination to implement the Paris Agreement.

If an evaluation is to be made within the framework of the general objectives of the Agreement, Turkey must first develop and issue its national contribution goals as per Article 4, and immediately implement intranational measures of reduction in order to achieve the foregoing. These goals need to be revised and re-reported every five years. “Transparency” is one of the most highlighted issues in the Paris Agreement. In this regard, it is critical that the steps taken to achieve the contribution goals, as well as progress reports are presented in an honest, realistic, and timely manner. Because the Agreement’s key goal, namely keeping global average temperature rise below 2°C compared to pre-industrial levels, can only be achieved in this way, and the fight against climate change, which is a global threat, can only be accomplished with global determination. Establishing mutual trust among all parties is critical for the progress, and transparency plays a key role in the achievement of this, as also stressed in Article 13 of the Agreement.

In order to achieve the national contribution goals within the framework of the Agreement, first and foremost, an energy transformation in the industrial sector, as well as the development of long-term emission reduction measures are required. In this context, after submission of the Paris Agreement to Parliament for approval, the Turkish Industry and Business Association [TUSIAD] stated that the public and private sectors should work together for the transformation introduced by the Paris Agreement. A ‘green bulletin’ has also been launched on the Istanbul Chamber of Industry’s website, where the activities carried out within the scope of green transformation in the industrial sector will be shared with the public on a regular basis. 

Furthermore, Turkish Ministry of Energy and Natural Resources stated that the ratification of the Paris Agreement brought digital transformation, therefore, the Paris Agreement, the European Green Deal and digital transformation should be carried out simultaneously. In this context, it has been announced that the Digital Transformation Office has been established, with its scope of operation encompassing all sectors of e-Government, artificial intelligence, and cyber security.

Following the harmonization policies mandated by the Paris Agreement is also important so as to prevent Turkey’s exports to the European Union [“EU”] from being jeopardized. Because production from clean sources is necessary to be able to get a foothold in the new order – also known as the green market –and the transformation initiated by EU.

However, the Agreement’s requirements should not be viewed solely from an environmental aspect. According to Article 7 of the Agreement: “Parties acknowledge that adaptation action should follow a country-driven, gender responsive, participatory and fully transparent approach, taking into consideration vulnerable groups, communities and ecosystems, and should be based on and guided by the best available science and, as appropriate, traditional knowledge, knowledge of indigenous peoples and local knowledge systems, with a view to integrating adaptation into relevant socioeconomic and environmental policies and actions, where appropriate.” In this context, the issue should not be considered independently of social policies.

Where Does Turkey Stand in Terms of Compliance with the European Green Deal?

It can be said that the EU has taken the Paris Climate Agreement objectives one step further and materialized it in terms of method, by addressing the issues of greenhouse gas emissions, global warming and climate change with the European Green Deal published in November 2019. The said deal is important for all countries that have economic and geographical interaction with the EU, since new financial and tax regulations regarding imports are introduced in order to protect the newly established green market. The agreement generally aims to reduce greenhouse gas emissions to net zero by 2050 and to reduce net greenhouse gas emissions by %55 by 2030 compared to 1990 levels.

The Green Deal Action Plan was published by the Turkish Ministry of Commerce earlier this year for harmonization with the European Green Deal. The action plan explains how to achieve the transformation that would enable the transition to a sustainable and green economy under three main headings -scope, goals and calendar- in line with Turkey’s development plan. 

In the action plan, carbon border adjustment mechanism [“CBAM”], which is an important strategy in achieving the targets set in the Green Deal, is also extensively addressed. In the proposal by the European Commission dated 14 July 2021, which commits EU importers to pay carbon tax for the carbon emissions of their products, CBAM is introduced to ensure environmentally friendly production and to protect the competitiveness of local manufacturers. In this respect, it was pointed out that the Ministry of Commerce will be determining Turkey’s position on carbon pricing and the activities to reduce greenhouse emissions.

The statements made by the Ministry of Commerce indicate that the steel industry will be the most affected industrial area within the framework of CBAM and that a change has begun in Europe by producing steel from clean sources. It is suggested that industries such as steel and aluminum would be given precedence in terms of transition to clean energy generation, but green transformation will eventually be mirrored in industries such as automotive, textiles, and ceramics. At the same time, it was noted that the Ministry of Environment has begun to develop the infrastructure of the emissions trading system [“ETS”] and particularly the land transportation will be based on ETS in the future. The CBAM tax is the most crucial issue on the agenda, since if harmonization is not reached, the tax liability that would take effect in 2026 might have a significant burden for Turkey.

In the meantime, the Banking Regulation and Supervision Agency [“BRSA”], conducts studies for the development of sustainable finance. Among the topics on the agenda are the publication of a “Environmental, Social, and Governance” [ESG] guide for banks, supporting the environmental labeling application for financial products and services, strengthening international cooperation [Membership of the Network for Greening the Financial System], and ensuring active participation in “National Green Taxonomy” studies as part of the transition to a sustainable economy. In this respect, the BRSA is expected to share the Sustainable Banking Strategy Document with public before the end of 2021.

By Zahide Altunbas Sancak, Partner, and I. Selin Nacar Ozturk, Associate, Guleryuz & Partners