Category: Turkiye

  • Turkish Banking Sector 2020

    The year started with expectations of growth and stability. Along came COVID-19, and the focus shifted to stability and survival. The Turkish banking sector, used to market turmoil, took proactive steps, and the authorities matched the effort.

    The start of 2020 was filled with optimism towards Turkish banks on the global stage after a challenging couple of years. The sector’s access to foreign financial assets boosted confidence and made it stand out among other industries, which continue to face difficulties due to fluctuations in the value of the Turkish lira. Their dependence on foreign currency income proved to be problematic in many sectors, while the banking sector remained healthy in comparison.

    The pandemic, however, changed the parameters of maintaining a healthy business in most sectors. Just as the economy raced to digitalize and ensure continuity in service provision, so banks as well changed their tactics and increased efforts to ensure a fast and smooth transition to digital platforms. With curfews and reduced working hours in bank branches and workplaces, customers needed to perform transactions in the virtual space. Some banks have reported that transactions through digital channels increased 30% or more during the pandemic period. 

    On a macro level, the slowdown in operations and loss of income in many sectors led to concerns both from the banks and borrowers about loan repayments. Various banks extended the repayment periods of loans and did not call events of default, although no official moratorium on repayments was announced. However, despite the relatively low percentage – 4.7% – of non-performing loans at the end of May, the high levels of corporate sector debt that were commonplace in the Turkish economy pre-COVID-19 became a grave concern for economic stability. A potential increase in non-performing loans in the near future could cause economic instability unless the market counteracts the adverse effects of the pandemic period. 

    As might be expected, financial restructurings emerged as another alternative to deferred repayments, and in some cases further financing from banks was obtained. The principles and methods of such restructurings are based on a Turkish law that entered into effect in 2018, regulating the restructuring of debts owed to the financial sector. This piece of legislation, as amended, also made it possible for foreign banks to participate in the restructuring phase, if they are preferred, and made it possible for borrowers to eliminate the risk of execution proceedings initiated by the banks that signed on to a so-called “framework agreement” with them. In some cases, the risk of bankruptcy was avoided.

    While banks were focused on the remedies available to them under the applicable law and the contractual arrangements to which they were parties, in March the banking watchdog – the Banking Regulatory and Supervisory Agency –  introduced certain measures to enable banks to provide relief on their minimum liquidity requirements. These measures will stay in effect until the end of 2020. The liquidity relief was followed by the introduction of a new asset ratio calculation formula in April 2020 that aims to minimize the effects of the pandemic period on bank balance sheets and, ultimately, to increase liquidity in the market with bank-injected funds.

    As the BRSA incentivized the banks to provide financing to the Turkish market, it has also applied monetary sanctions on several financial institutions which chose not to act in line with its instructions and the measures it introduced.

    Needless to say, the adverse effects of the pandemic are ongoing, and it will take some time for the Turkish market, including the country’s financial markets, to recuperate from its aftermath. COVID-19 shaped this year and presented a scenario that required businesses to adapt more quickly than they had planned to remote and digital-based operations, while trying to maintain the status quo in terms of the volume of transactions, and therefore income. Banks, borrowers, and other market players will need to continue to monitor the market and the measures implemented by the authorities and will hopefully bounce back from the relentless effects of the pandemic, which continues to create chaos in their operations. The Turkish banking sector will hopefully maintain a level of awareness that allows it to act tactfully in response to any bizarre situation to come.

    By Alaz Eker Undar, Co-Head of Banking & Finance, CMS Turkey

    This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Automatic Exchange of Information in Tax Matters

    As national borders lose their importance when it comes to capital mobility, tax revenues have decreased significantly and tax avoidance has become a matter of common concern for countries. Therefore, exchange of information in tax matters has become one of the most important topics on the agenda of countries and international organizations in recent years.

    Although the exchange of information was already addressed in many double taxation treaties concluded based on the models introduced by OECD and United Nations, the issue was treated for the first time on an exclusive basis by the USA following the 2008 economic crisis, with the adoption of the Foreign Account Tax Compliance Act. While there are three main methods of exchange (i.e., on request, automatic, and spontaneous), automatic exchange of information seems to be the main focus.

    Where Does Turkey Stand in Terms of Automatic Exchange?

    The Convention on Mutual Administrative Assistance in Tax Matters (the “Multilateral Convention”), which forms the framework for all types of exchange of information, was signed by Turkey on November 3, 2011 by Turkey. However, the ratification process to put the Multilateral Convention into force took more than six years, and it was ultimately concluded on November 26, 2017.

    Following the USA’s FATCA, the OECD presented the Common Reporting Standard (CRS): a common system to be used for the automatic exchange of information regarding financial accounts. In this respect, under Article 6 of the Multilateral Convention, the CRS Multilateral Competent Authority Agreement (the “CRS MCAA”) was drawn up and signed by Turkey on April 21, 2017. Despite having undertaken to start automatic exchanges by 2018, it took Turkey almost another two and a half years to keep its word, and the CRS MCAA was eventually put into effect on December 31, 2019.

    Turkey sent data regarding 2017 and 2018 to 1 and 2 partners, respectively. As of 2020, Turkey will be receiving financial account information from 75 jurisdictions, while it will only share its information with 55 jurisdictions, according to the list of activated exchange relationships published by the OECD; which means that some exchange relationships will be non-reciprocal by nature. It should be noted that these numbers include not only the exchange relationships based on the CRS MCAA but also the ones based on double tax treaties or specific bilateral treaties aiming to enable exchange of information. With that being said, Turkey currently has only two bilateral treaties on the exchange of information: with Norway and Latvia.

    A FATCA Model 1 Agreement signed on July 29, 2015, also serves as a basis for automatic exchange of information between Turkey and the USA.

    Is It Effective?

    Despite the international framework described above, the lack of secondary legislation for the effective application of the automatic exchange remains a chink in Turkey’s armor. Although Turkey intended to introduce legislation to implement the FATCA Agreement by September 30, 2015, it wasn’t able to complete the internal approval process until the publication of the Council of Ministers’ decision regarding the ratification of the Agreement on October 5, 2016. But yet, diplomatic negotiations to start the exchange of information persist. Once the reporting begins, all the information that would have been reported had the Agreement been in force as of September 30, 2015, will be subject to exchange.

    With regard to the CRS, a “Draft General Communiqué on Automatic Exchange of Financial Account Information on Tax Matters” was sent to the banks and other relevant institutions by the Ministry of Finance back in May 2017. Although that draft communiqué is still to be finalized, several Turkish banks have already declared that they are required to obtain certain information from customers to be able to comply with the CRS.

    It should also be noted that the term of declaration in order to benefit from the wealth amnesty that allowed Turkish taxpayers to regularize their undisclosed assets in and outside of Turkey expired on June 30, 2020. Taxpayers with undeclared assets in countries having an activated exchange relationship with Turkey now may be faced with tax penalties, as their financial data will be subject to exchange with Turkish tax authorities. We will see how and to what extent automatic exchange will affect tax revenues in upcoming days.

    By Ali Keskin, Partner, and Irem Nacar, Trainee Associate, Keskin & Keskin Attorneys at Law

    This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • A Review of Biometric Data Processing Systems Usage Under the Personal Data Protection Law and Secondary Legislation

    Personal data, one of the most discussed topics in the legal world, is protected in many countries, and it is regulated in Turkey under the Personal Data Protection Law, number 6698 (the “Law”), and secondary legislation. In addition, the decisions of the Personal Data Protection Board established under the Law (the “Board”), provide insight on the rules applicable to data controllers and processors.

    There are several general principles in the Law related to the processing of both personal and “sensitive” personal data, with decisions of the Board helping to determine the necessary degree of compliance with them. Biometric data, such as fingerprint, face, and DNA information, is considered sensitive personal data, the processing of which is subject to strict conditions and additional measures. The most important principle applied to processing of sensitive personal data is that it be “relevant, limited, and proportionate to the purposes of processing.

    The Board’s decisions in cases where data controllers providing sports club services processed members’ biometric data are instructive. In these decisions, the Board determined that obtaining the biometric data (related to palm prints) of members who wish to access sports club services is incompatible with the “being relevant, limited, and proportionate to the purposes of processing” principle, since it was possible to control their access by alternative means. As a result, the Board imposed administrative fines on the data controllers and instructed them to control access by alternative means and cease the processing of biometric data.

    State Council rulings related to biometric data processing are also instructive. The most important decision for these purposes concerns the rejection of an employee’s claim requesting the termination of a face-scanning system used to track employee shifts. The Administrative Court rejected the claim of the employee as: (i) the relevant method was not used in all units; (ii) the system was put in practice after the employer had encountered difficulties using alternative means to control of the employees’ shifts and, (iii) the face scans of employees were converted into digital codes. However, and despite the Administrative Court’s ruling, the State Council deemed the usage of face scanning a breach of right of privacy as not “relevant, limited, and proportionate to the purposes of processing” principle.

    Thus, although there is no established precedent for the usage of biometric data processing systems, the Board and State Council’s decisions demonstrate that the principle that the use of sensitive personal data be “relevant, limited, and proportionate to the purposes of processing” is of the highest importance. Therefore, data controller companies using systems that process biometric data, especially for the purposes of tracking personnel or building security, should evaluate whether there is a reasonable balance between the use of these systems and the benefit intended. As it is not yet clear which conditions the Board will accept as being in full compliance with the above-stated principles, data controllers are encouraged to apply additional administrative and technical measures set out in the Law and in compliance with the Board’s decisions. In the upcoming days, one can expect the conditions in which biometric data can be lawfully processed to become clearer as the Board’s decisions accumulate.

    By Derya Apaydin, Partner, and Ecem Yildirim, Associate, Apak | Uras

    This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Turkish Capital Markets 2020 Overview

    The Turkish capital markets have undergone many regulatory amendments and adjustments this year to provide a more robust environment in terms of transparency, competition, and stability for investors. As regulators have kept manipulative transactions in their sights to overcome the panic created by COVID-19, the Turkish Capital Markets Board (CMB) has imposed many sanctions and penalties.

    Amendments to Capital Market Law

    Amendments to Turkey’s Capital Market Law that came into effect on February 25, 2020 included regulations as to the sanctions and measures available to authorities for infringements and principles as to significant transactions and exit rights and security trustees, as well as increasing flexibility for crowdfunding platforms. The amended CML foresees that, in determining the administrative penalty for legal entities, the highest amount of either the gross profit or sales revenue will be taken into account, and an unintentional obstruction of an audit is included in the actions requiring an administrative penalty.

    Additionally, the amended CML enabled investment enterprises to engage in project finance transactions and to securitize project finance tools and introduced the Debt Instrument Holders Board to represent investors and issuers.

    Subsequently, as secondary legislation to the amended CML, Communique No. II-23.3 on Significant Transactions and Exit Rights came into force (as published in the Official Gazette of June 27, 2020), setting forth regulations as to the scope of significant transactions and exit rights of minorities. Pursuant to the Communique, certain transactions that had previously been regarded as significant transactions were excluded. Among other things, the Communique also regulates the determination of shareholders entitled to exit and the principles for determining the price of an exit right.

    Digitalization of Finance Agreements

    The Law Regarding the Amendments to Certain Laws and Decrees No. 7247 allows certain types of financial agreements, such as leasing agreements, factoring agreements, and agreements between finance companies and their customers to be concluded via remote or electronic forms of communication that the relevant institution accepts as a replacement for the written form and through which customer identity validation is possible.

    Restriction on Dividend Distributions for Capital Companies

    As a precautionary measure to mitigate the negative impacts of COVID-19, a transitional provision was added to the Turkish Commercial Code No. 6102. Accordingly, for all non-state-affiliated companies, where questions about the distribution of cash dividends concerning the 2019 fiscal year are on the agendas of general assembly meetings to be held before September 30, 2020: (i) profits of years before 2019 shall not be distributed; (ii) dividends from the 2019 fiscal year shall not exceed 25% of the net profit of 2019; and (iii) the board of directors shall not be granted the authority to distribute dividend advances.

    Amendments Regarding Mortgage Finance Companies

    Communique No. III-59.1 on Covered Securities, Communique No. VII-128.8 on Debt Instruments, and Communique No. III-58.1 on Asset-Backed and Mortgage-Backed Securities contained amendments to soften the principles and procedures that mortgage finance corporations (MFC) are subject to.

    In this regard, Communique No. III-59.1 states that the threshold regarding the circulation of covered securities will no longer be applicable for covered securities issued by MFCs, while fees payable to the CMB as to the issuance of covered securities will be half for MFCs. Additionally, the fees payable to the Capital Markets Board for MFCs will start to accrue after December 31, 2021.

    Furthermore, the amended Communique No. VII-128.8 foresees that the issue threshold stipulated by it is not applicable to MFCs, and fees payable to the Capital Markets Board for the issuance of debt securities will not be collected until the end of 2021 – and after the end of 2021, half of such fees will be collected.

    Finally, the upper issuance threshold under Communique No. III-58.1 will no longer apply for asset-backed and mortgage-backed securities issued by MFCs or funds founded by MFCs, and half of the fees payable to the Capital Markets Board will be collected for asset-backed and mortgage-backed securities issued by MFCs or funds founded by MFCs. Communique No. III-58.1 also foresees that fees payable to the Capital Markets Board for MFCs or funds founded by MFCs will start to accrue after December 31, 2021.

    By Hulya Kemahli, Partner, CMS Turkey

    This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • M&A Deals During the COVID-19 Outbreak

    COVID-19 has swiftly become a global outbreak, affecting not only people’s lives but also the global economic conjuncture. Like most countries, the Republic of Turkey, has adopted several measures to eliminate or lessen impacts of COVID-19 on the economy. With this article, we will provide an overview of the Turkish legal market and key legislation enacted during the COVID-19 outbreak.

    Overview of Legislative Amendments

    Knowing that corporations are the wheels spinning the economy, the Turkish Government has made several amendments to secure the stability and sustainability of the economy that directly affect corporations. Some of the important changes were introduced by the Law on Reducing the Impact of the COVID-19 Pandemic on Economic and Social Life and the Law on the Amendment of Certain Laws No. 7244 (the “Omnibus Law”). The Omnibus Law added an additional article to the Turkish Commercial Code that prohibited: the distribution of dividends by corporations before September 30, 2020 that exceed twenty-five percent of the company’s net profit generated in the 2019 fiscal year; the distribution of previous years’ profits and free reserves; and authorizations by the general assembly to the board of directors to distribute advance dividends. However, these restrictions do not apply where fifty percent or more of a company’s shares are held, either directly or indirectly, by: (i) the state, special provincial administrations, municipalities, villages, and other public entities, or (ii) funds with state ownership of fifty percent or more. This period may be prolonged by the President for a term of three months, until December 31, 2020.

    The Omnibus Law also introduced amendments to the Law on the Regulation of Retail Trade No. 6585 (the “Retail Law”) that will have important effects on the retail sector by prohibiting exorbitant price increases made by manufacturers, suppliers, and retail businesses, activities that prevent consumers from accessing goods, and activities that narrow the market or disrupt market equilibrium and free competition. These prohibitions will be monitored by the Unfair Price Evolution Board to be established in accordance with the Retail Law.

    Affects on Deals and Business

    Needless to say, the COVID-19 outbreak made it difficult for parties to a transaction to arrange physical meetings for due diligence exercises, negotiations, or signing or closing phases. Some deals have been postponed to a later date since signing or closing of transaction documents cannot not be done without the physical attendance of foreign investors affected by COVID-19 travel restrictions.  However, most transactions are still being conducted, online. From a drafting perspective, COVID-19 has impacted valuations, purchase prices, and payment mechanisms. From a representations & warranties point of view, sellers are preferring additional provisions to cover COVID-19-related aspects, in particular on employment law and compliance-related matters.

    In terms of retainer matters, companies have sought answers regarding the potential application of force majeure provisions under various types of agreements during the COVID-19 period. Another hot topic was related to renewal, adjustment, and termination of shopping mall and workplace lease agreements, since many companies have been unable to afford the rent or the workplace was determined to be unfit for employees. Last but not least, as the Ministry of Health has published regular guidelines and recommendations about COVID-19 process, many companies have sought advice on how best to comply with them.

    In conclusion, the Turkish Government is aiming to minimize the impacts of COVID-19 by adopting new regulations and thanks to the agile adaptation to an online working environment, companies were quick to act and able to sustain the ongoing business.

    By Ersin Nazali, Managing Partner, and Nilay Goker Duran, Partner, Nazali

    This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Tiptoing in Turkey

    A CEE Legal Matters special report on how international firms operate in Turkey – and the echoing silence that greets attempts to investigate.

    “A conspiracy of silence, or culture of silence, describes the behavior of a group of people of some size, as large as an entire national group or profession or as small as a group of colleagues, that by unspoken consensus does not mention, discuss, or acknowledge a given subject.”

    The relationship between international law firms and their domestic counterparts takes a number of different forms across CEE, with some of the region’s emerging markets doing more to protect their local champions than others. Turkey, unbound by the EU’s pro-competition requirements, has restrictive (though rarely invoked) bar rules applicable to international firms wishing to capitalize on the still-significant potential of the market.

    And yet, despite those restrictions, and while local law firms roll their eyes, a number of international firms in fact operate in Turkey, staying quiet and doing everything they can to avoid waking the bear.

    The Ottoman Omerta

    Under Turkey’s Lawyers’ Code of 2001, only Turkish lawyers are allowed to practice Turkish law or to have rights of audience with clients. “Foreign attorney partnerships” – that is, international law firms – “can only offer services of consultancy in foreign laws and international law.” As a result, those international firms wishing to open up shop in Turkey can not directly offer advice or representation on matters of Turkish law.

    To satisfy this rule, most international law firms have entered into some form of association agreement – as compared to full partnerships – with Turkish firms (see Bridging the Bosphorus Box, on page 48). The websites of the ILFs often share the same design as their associated Turkish firms indicating a unified presence, and some openly state on their websites that they have lawyers in Turkey who advise on all aspects of the law, apparently indicating that they are disregarding the literal language of the rule precluding them from advising on Turkish law, have found a legally effective way of avoiding the rule, or – most likely – are speaking in general terms on their international websites about the ability of their associated Turkish firms to assist clients with Turkish law matters.

    Either way, it appears most of the international firms interpret the rule loosely. As a result, one authority says with a smile, “you’ll see the same design language in the local office as you do in the international firm, but you just have a Turkish name on the door. Behind the name of the local partners, however, will simply be another ‘Markby, Markby, and Markby.”

    Still, and although nobody we spoke to was able to recall even one sanction being imposed for violations of the law, few international law firms are confident enough about their compliance to discuss it publicly. In fact, each and every one of the ten international firms that advertise a Turkish presence on their website declined our invitation to go on the record about the rule – sometimes abruptly, and with more than one requesting that we not even mention our attempt to contact them.

    In fact, several of those we reached out to predicted – while still insisting on their own anonymity – that it would be “nearly impossible” to find anyone from an international firm willing to contribute to this article. Similarly, their clairvoyance extended to the bar associations, as several predicted – again accurately – that it would be difficult to find someone at the Bar to speak to on the subject (and indeed, neither the Istanbul Bar nor the over-arching Union of Turkish Bar Associations replied or responded to our multiple requests, made by both phone and email, for comment).

    If it Ain’t Broke, Don’t Fix It

    Despite sharing the general skittishness, a partner at one international law firm in Turkey – we’ll call him Yusuf – is willing to speak candidly on the subject, as long as he can do so anonymously. “The rules allow only Turkish lawyers to practice Turkish law and advise clients,” he says. “Foreign firms can register, but only to practice and give advice on international law. It’s all crazy if you ask me.”

    Continuing, Yusuf insists that the rules that prohibit international firms from serving clients on matters of Turkish law are “adverse to globalization” and “go against the fact that capital has torn down national borders.”

    To a large extent, Yusuf says, the situation can be traced back to White & Case’s arrival in 1985 at the invitation of the Turkish government. According to Yusuf, the unique circumstances surrounding the White Shoe firm’s arrival meant that it was on the ground before rules about foreign firms had even been created. As a result, he says, despite the subsequent creation of a legal framework for foreign law firms, “this approach set the standard for how international firms continue to operate in Turkey to this day.”

    Still, in its early years, Yusuf reports, “White & Case faced a lot of investigations by the Istanbul Bar.” In fact, he says, “up until 2010, the Bar was quite harsh in trying to enforce these strict rules, especially with some local firms filing complaints and adding pressure on the Bar to act.”

    After 2010, Yusuf says, the Istanbul Bar seemed to back down. “The Bar knows that these firms are out there but they are not pursuing them and are no longer trying to enforce the rules aggressively. [Lawyers from our firm] actually met with the Chairman of the Istanbul Bar, and we were quite transparent from the get-go about being above board on everything and, because we never explicitly broke any rules – we’re good.” Other firms are benefitting from the tacit permission to keep operating on this basis as well, he says, noting the absence of any fines or penalties “at least in the past ten years – and if there were any issues it was all kept quiet.”

    Accordingly, it appears unlikely that the formal requirements will change anytime soon. The rules remain on the books, with no real push to have them revised or removed, and for the time being, Yusuf believes, the status quo is “pretty much accepted.” According to him, “international law firms go about their business, the Bars do not touch us, and the local law firms are not as vocal in their call to action anymore.” He smiles. “There seems to be a ‘don’t ask don’t tell’ approach here. We stay out of each other’s business and keep our heads down.”

    Not Everyone is Laughing

    Like their international counterparts, unaffiliated Turkish firms are cautious about speaking out on the matter. Still, those we reached out to rejected the suggestion that they are satisfied with the current arrangement.

    “The way these firms operate is that they find a local partner, they include them in their global structure – a partnership, a franchise, or something similar – and they put two names on the walls – a domestic one and a foreign one – and then claim that it is two different firms,” says Eymen (not his real name), a partner at an Istanbul-based law firm. “Behind the scenes, however, they share the entire infrastructure, back-office systems, document management systems, and IT. It’s all integrated. Even if the ‘local’ firm uses a different domain name, for example, the differences are purely cosmetic and are in place to go around the rules.”

    Eymen considers this a “dishonest” way of doing business, one that he believes clearly violates the spirit of Turkish law. “Our legal system specifically goes against workaround solutions – not just in this area, but in all areas,” he says. “That’s how it achieves the goals of its legal provisions – it cannot be interpreted only textually.” What the international firms are doing, he says, is “pure form over substance.”

    He insists that he is not opposed to foreign firms practicing law in Turkey, but he wants “them to play the game fairly.” Instead, Eymen says, the current system puts firms like his at a real disadvantage. “Turkish law firms are subjected to a higher standard of regulation than foreign firms, for example when it comes to billing. A foreign firm often charges its client via a tax haven and thus avoids the Turkish tax system altogether – which is a clear privilege and an advantage that local firms that play by the rules cannot have!” At the end of the day, he says, they should “stop pretending and play by the rules, comply with the law, and stop with these cosmetic differences.”

    Defne (not her real name), also a partner at a prominent Istanbul-based law firm, echoes Eymen about the financial advantage international firms may be receiving under the current system. “Not just invoicing from abroad, but also employing their lawyers from abroad – this creates a financial advantage,” she says. “Also, international law firms have a stronger footprint on the global market and do marketing far better than any of the local firms can – especially in Turkey where lawyers are explicitly prohibited from advertising in any way.” Indeed, she says, the marketing ban is so rigid in Turkey that lawyers are “not allowed to refer to themselves as experts in any way or to talk about their clients and practice. The greatest extent of advertising allowed is displaying one’s academic title!”

    Defne acknowledges the great value foreign firms have added, especially in the early years. “At the start, everything was new and exciting,” she recalls. “Foreign law firms brought a lot of know-how with them, especially in areas such as M&A, banking & finance, and securities law.” Still, she says, the good feelings didn’t last forever. “The legal market benefited greatly from their presence, but, over time, the local firms started feeling disadvantaged.”

    Thus, Defne says, “the international law firms are successfully going around the rules – not just the ones that apply to local firms, but also the ones that apply to foreign firms advising on foreign law. They get the best of both worlds, so why should they desire change?”

    Still, Defne insists that she does not feel threatened by the presence of international firms. “I feel no animosity,” she says. “Quite the opposite in fact. Like I’ve said before, the know-how these firms bring is great for us as well, and we’re able to learn a lot and improve our own practices.” She also says that foreign firms, while they may excel in some practices, “do not have an advantage over local firms when it comes to disputes, litigation, and arbitration. So there’s enough for everyone when it comes to work!”

    Despite the concern of the international firms, the frustration of unaffiliated Turkish firms, and the potential threat of severe penalties, nobody believes things are likely to change in the near future. “The ban will likely remain in place and the Code of Lawyers will probably not change at all,” Defne says. “There aren’t even any discussions on this right now.”

    Eymen agrees. “The Bar is well aware of this blatant violation of the law and is doing nothing about it, mostly because Turkey is not exactly known for 100% compliance with legal norms, and because the Bar has more pressing matters, like the recent changes to the Law on Lawyers, human rights issues, and overall Turkish problems.” He sighs. “A bunch of M&A lawyers hating on each other is not a priority.”

    * CEE Legal Matters believes that these unique circumstances justify an exception to our normal policy of requiring that sources be identified by name. We welcome comment and feedback from our readers on this, as on all, our stories.

    – The editors

    This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Altinkaya & Sancakli Opens for Business in Istanbul

    Lawyers Kubilay Altinkaya and Sinan Sezer Sancakli have joined forces to open up the Altinkaya & Sancakli Law Office in Istanbul.

    According to the firm, Kubilay Altinkaya has experience in “many legal fields, especially intellectual Property Law, Labor Law, Personal Data Protection Law and Foreigners Law.” Prior to setting up Altınkaya & Sancakli, he spent seven months with Gemicioglu Hukuk Burosu and six months with the Mihci Law Firm. He has an LL.B. from the Istanbul Bilgi University. 

    Sinan Sezer Sancakli, according to Altinkaya & Sancakli, has gained “deep experience… especially in the fields of Labor Law, Criminal Law, Commercial, and Corporate Law.” Sancakli holds an LL.B. from Uludag University. Prior to joining forces with Altinkaya, he spent almost two years with the Yanik Law Firm

    Altinkaya & Sancakli describes its goal as “gain[ing] a respectable identity by increasing prestigious client relationships. In addition, expanding our client portfolio in the field of Corporate Law and Personal Data Protection Law.” The firm states that it will also focus on providing legal advice to pharmaceutical companies and “local companies that do business in Turkey and earn large revenues.”

    The newly set-up law firm has, in addition to Kubilay Altinkaya and Sinan Sezer Sancakli, two other lawyers.

  • Freshfields Advises Lenders on Ankara Etlik Integrated Health Campus PPP

    Freshfields Bruckhaus Deringer has advised the EBRD, SACE, DEG, IFC, the Black Sea Trade and Development Bank, Intesa Sanpaolo, Barings, Credit Agricole CIB, Deutsche Bank, UniCredit, Akbank, Isbank, and the Turkish Industrial Development Bank on the EUR 1.1 billion restructuring of the PPP agreement related to the development, construction, maintenance and operation of the Ankara Etlik Integrated Health Campus.

    According to Freshfields, the Etlik project will include 11 different buildings housing a total of 3,566 beds.

    According to Freshfields, “the project faced a combination of cost increase, construction delays and adverse macro-economic changes since the deal originally closed in 2015. The project required the simultaneous implementation of a variation to the works and implementation of new regulations issued by the Turkish Ministry of Finance to support PPP projects, in addition to the consensual financial restructuring, all of which closed on September 11, 2020. This now allows construction funding to resume so that the hospital will be complete before 2022 and the project has a sustainable long-term basis.”

    Freshfields’s London-based team was led by Partner Alex Carver and Senior Associate James Chapman, with assistance from Associates Amanda Mapanda and Sara Barin. 

    Editor’s Note: After this article was published Herguner Bilgen Ozeke informed CEE Legal Matters that it had worked alongside Freshfields in advising the lenders. The firm’s team was led by Partner Senem Denktas and included Associates Nihat Aral, Ahmet Zafer Yilmaz, and Neslihan Donmez.

  • Pelister Atayilmaz Enkur and PwC Legal Advise on Elton Group’s Acquisition of Remainder of Elton Marmara

    Pelister Atayilmaz Enkur has advised the Greece’s Elton Group on the acquisition of the final 20% of Turkish chemical resellers Elton Marmara Kimya Sanayi ve Ticaret Anonim Sirketi from the Senlen Family. PwC Legal advised the Senlen Family on the deal.

    The Elton Group is an agent and distributor of industrial raw materials in Greece and the Balkans. 

    In 2015, the Elton Group acquired a 70% stake in Elton Marmara, and expanded that ownership to 80% following a recent capital increase. This recent acquisition, of the final 20%, was initiated in 2019.

    Pelister Atayilmaz Enkur’s team was led by Partner Gokhan Enkur and included Senior Attorney Senem Sarac and Attorney Mehmet Ali Sertac Kocahal.

    PwC Legal’s team was led by Legal Director Yavuz Dayioglu and Partner Nilgun Simsek.

  • Constitutional Court’s Decision on Inspection of Employees’ Correspondences on the Corporate E-mail Account

    Turkish Constitutional Court granted a decision (“Decision”) on September 17, 2020 regarding an applicant’s claims on violation of right to request protection of personal data under right to privacy and freedom of communication due to inspection of correspondences on corporate e-mail account and termination of employment contract on the grounds of these correspondences.

    The Decision was published on the Official Gazette on October 14, 2020. The Constitutional Court accepted the applicant’s claim by stating that the constitutional protection regarding personal data under right to privacy and freedom of communication were not taken into consideration during the proceedings, thus the right to request protection of personal data and freedom of communication of the applicant are violated. One key point that has caused the violation was that the employee in question was not informed beforehand that the employer can inspect the communication in workplace devices when deemed necessary. So this point made by the Constitutional Court actually confirmed the significance of informing employees about the employer’s right for inspection or getting consent for this when needed in case of internal investigation, which is an issue that we have always made our clients aware before starting such internal proceedings in order the safeguard the legitimacy of the actions that might be taken against the employees afterwards.

    Background of the Case

    The applicant (“Applicant”) was working with a team of five people, and following a discussion in the workplace, three members of the team filed a complaint against the Applicant to the management of the firm and stated that the team manager has lost objectivity in his relationship with the Applicant, thus supported the Applicant in each case and left other team members in a difficult situation, that the Applicant was generally rude to the team members and that the necessary environment for healthy execution of the projects was lost.

    Consequently, further to the interview with the Applicant, the management of the firm inspected the Applicant’s correspondences on the corporate e-mail account. As a result, the firm terminated the Applicant’s employment contract. In the termination notification, it was stated that the correspondences on the corporate e-mail account, which is used to ensure the continuity of the business and also known to be controlled at any time by the employer and kept confidential for security reasons at the enterprise network, had been inspected to investigate the claims against the Applicant.

    The Applicant stated that the personal correspondences made over his corporate e-mail account were inspected by the employer without his consent, that there was no written or verbal rule at the workplace that employees’ corporate e-mail accounts could be inspected.

    As a consequence, the Applicant filed a lawsuit against the employer to be reinstated at his job. The court of first instance dismissed the case and the decision was appealed by the Applicant. The 9th Civil Chamber of the Supreme Court approved the decision of the first instance court. Accordingly, the Applicant filed an individual application before the Constitutional Court (2016/13010) on July 15, 2016 with the claim that the right to request protection of personal data and freedom of communication has been violated. 

    The Constitutional Court’s Evaluation 

    Constitutional Court stated that the Applicant’s e-mail information and correspondences should be considered within the scope of “information relating to an identified or identifiable natural person“, therefore the access, use and processing of this information should be examined in terms of the right to request protection of personal data under the right to privacy and freedom of communication.

    Constitutional Court also noted that in principle, the employer can control the communication instruments made available to the employees within the scope of its management authority in order to ensure the efficient conduct of the business and the control of the information flow, and to establish certain rules regarding the use of communication instruments. At that point the Constitutional Court adds that unless employees were informed beforehand that the employer can monitor and inspect the communication in workplace devices when deemed necessary, the employees can reasonably expect that there will be no such oversight. The Constitutional Court also emphasized that the management authority of the employer is limited to the conduct of the business in the workplace and ensuring the order and safety of the workplace.

    The Constitutional Court consequently stated that within the scope of the positive obligations of the State, the courts should examine to the extent possible whether certain safeguards are provided by the third party who intervenes with the certain right. To that end the courts should observe (i) whether there are legitimate reasons for the inspection of communication instruments made available to the employees and the content of the communication made through these instruments, (ii) whether the processing is transparent and the employer informs the employees in advance of the processing activities, (iii) whether the intervention on the employee’s right to request protection of personal data and freedom of communication is related to and efficient for the purpose of investigation, (iv) whether there is another method less intrusive to achieve such purpose, (v) whether the intervention is proportionate and related and limited to the purpose and (vi) whether the balance between the consequences and impact of the inspection of the employee’s communication and conflicting interests and rights of the employer is considered.

    The Constitutional Court unanimously concluded that the constitutional safeguards regarding the right to request protection of personal data and freedom of communication were not taken into consideration during the proceedings, thus the right to request protection of personal data and freedom of communication of the Applicant were violated. Accordingly, Constitutional Court stated that there is a legal benefit in retrial in order to eliminate the consequences of violation of the right to request protection of personal data and freedom of communication.

    By Gonenc Gurkaynak, Partner, Tolga Uluay, Partner, Ceren Yildiz, Partner, Noyan Utkan, Associate, and Dila Erol, Associate, ELIG Gürkaynak Attorneys-at-Law