Introduction
Turkey has, for the first time, introduced mediation as an alternative dispute resolution system in 2012. The Law on Mediation for Civil Disputes (“Law”) which was published in the Turkish Official Gazette on 22.06.2012 and came into force on 22.06.2013 mainly regulates the principles and procedures applicable in resolving civil disputes by mediation.
Introduction
Execution and Bankruptcy Law (“EBL”) enables a company in financial difficulty to propose a composition to its creditors to restructure its debts. However, EBL only provides formal proceedings and does not provide out of court workouts. As a result, courts do not have the authority to order a creditor to cooperate with an informal composition. Therefore there is a lack of safeguards in favour of debtors with regards to any informal composition proceedings under the current legislation.
Turkey has restructured methods for settelement with Finance Revenue Administration (“Administration”) for related party transcations. The developments widen and clarify the scope of advance pricing agreement methods, as well as introduce time limits for the Administration to consider taxpayer requests.
The Communiqué Amending the General Communiqué of Hidden Profit Distribution through Transfer Pricing (“Amendment Communiqué”) was published in Official Gazette number 30263 on 7 December 2017.
Turkey has updated rules related to pledges on movable assets. Notably, all future legal interests in a movable asset will now be directly covered by a pledge, together with the movable asset. If a production process is pledged together with a movable asset used in the process, the pledge will now be deemed to have been automatically established.
The Law Amending Certain Laws for Enhancing the Investment Environment number 7099 (“Omnibus Law”) was published in Official Gazette number 30356 on 10 March 2018.
A range of legislative changes have been made in Turkey following the attempted coup on 15 July 2016, as well as changes to the structures and compositions of government, military and judicial bodies. Notable aspects for companies include bankruptcy suspension requests being deemed invalid during the national three month State of Emergency, as well as increased powers for guardians appointed to companies under investigation.
Bankruptcy postponement requests suspended
A foreign creditor has the right to initiate a lawsuit or an enforcement proceeding against a debtor in Turkey even if there is no reciprocal agreement between Turkey and the creditor's own jurisdiction.
In Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd [2013] UKPC 2, the Privy Council held that a borrower may claim relief from forfeiture notwithstanding that the forfeited security has been appropriated by the lender in satisfaction of a debt.
American and British directors of corporations should be mindful of the different standards of conduct, obligations, and potential personal liability when holding directorships in Turkish companies, particularly if such companies’ financial situation is deteriorating.
Turkish corporates have increasingly utilised international debt markets in the last decade, particularly in the infrastructure and energy sectors. These corporates are now under pressure due to recent political instability and depreciation of the Turkish lira. Restructuring candidates in 2014 have included Yuksel, the construction company which was last in discussions with bondholders and local lenders mid-year. Below we take a look at key legal issues for loan traders in Turkey.
Turkey has amended and clarified the requirements for collecting public receivables. Changes particularly apply to obtaining documents to show an overdue debt, calculating the limitation period, as well as deleting records. Further explanatory information is also provided for existing requirements.
The Ministry of Finance-Revenue Administration published the General Communiqué regarding Collection of public receivables in Official Gazette number 29686 on 16 April 2016.
Key changes introduced by the amendments include: