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Turkey: Special Purpose Acquisition Companies

Special Purpose Acquisition Companies ("SPAC"), which are incorporated to achieve the purpose of investing and merging with a non-public company, were first introduced in the United States in 1990s and recently increased its popularity globally. Unlike other countries, SPACs entered into Turkish legal system relatively late with the Communiqué on Common Principles Regarding Significant Transactions and Appraisal Right (Communiqué No. II-23.1) of the Capital Markets Board ("CMB"), published in the Official Gazette dated 24.12.2013 numbered 28861("Appraisal Right Communiqué"). Currently, there is no SPAC listed under Borsa Istanbul ("BIST") in Turkey. SPACs are very similar to venture capital structure and can be considered as a strong alternative for investors and shareholders in Turkey as well. I. Introduction Special Purpose Acquisition Companies ("SPAC"), which are incorporated to achieve the purpose of investing and merging with a non-public company, were first introduced in the United States in 1990s and recently increased its popularity globally. Unlike other countries, SPACs entered into Turkish legal system relatively late with the Communiqué on Common Principles Regarding Significant Transactions and Appraisal Right (Communiqué No. II-23.1) of the Capital Markets Board ("CMB"), published in the Official Gazette dated 24.12.2013 numbered 28861("Appraisal Right Communiqué"). Currently, there is no SPAC listed under Borsa Istanbul ("BIST") in Turkey. SPACs are very similar to venture capital structure and can be considered as a strong alternative for investors and shareholders in Turkey as well. II. Characteristics of SPACs Article 4/1(a) of the Appraisal Right Communiqué defines SPACs as well as the exemptions and limitations that will apply. In general, Article 4/1(a) describes SPACs as joint stock companies bearing the phrase "special-purpose acquisition company" in their title, incorporated for the purpose of publicly offering at least half of their shares which will represent the capital after going public and merging thereafter with a non-public company in which SPACs intend to invest, in line with a timing and investment strategy predetermined by the prospectus filed during initial public offering ("Prospectus"). In this respect, characteristics of SPACs inferred from Article 4/1(a) could be listed as follows:  -          SPACs ultimate purpose is to merge with a non-public company ("Target Company") after going public. To achieve this purpose, SPACs can determine potential Target Companies, negotiate with them, conduct legal, financial and tax due diligence and hire consultants for such purposes.[1] -          SPACs can use up to ten percent of the proceeds from the public offering for their activities. It is important to note that the activities should be specified in SPACs' articles of association and/or in the Prospectus. -          SPACs undertake, until the merger is completed, to utilize the proceeds of the initial public offering by investing in investment instruments such as deposits, government debt securities and similar instruments. Accordingly, SPACs are required to explain their cash management policies to the public with the Prospectus. -          SPACs are required to return any remaining amount from the proceeds to the non-founding shareholders in the event the intended merger is not completed within the predetermined time period. -          SPAC shareholders might benefit from voluntary buy back provisions instead of appraisal rights. As it can be ascertained from their characteristics, SPACs, when compared with other types of public companies, have many advantages. For example, unlike private equities, SPACs do not have to spend much time and effort to find financing since they can use the money collected through going public instead of searching for investors.[2] Additionally, from the perspective of the Target Company, SPACs offer a cheaper and simplified public offering process and allow the Target Company to become public (indirectly) even if it does not satisfy initial public offering criteria defined under relevant capital markets law regulations.[3] In accordance with the principles above and the provisions contained in Turkish Commercial Code numbered 6102 ("TCC"), SPAC will be incorporated as non-public joint stock company. Subsequently, SPAC will offer its shares to the public as per CMB regulations. The regulations, for instance, require all of SPAC's capital to be paid, SPAC to use authorized institutions when going public, amend its articles of association and obtain approval of CMB etc. Different from such rules, Article 4/1 (a) of the Appraisal Right Communiqué also requires SPAC to publicly offer at least half of its shares that will represent its capital after going public. When calculating such percentage, total capital of SPAC including the shares offered to the public will be taken into consideration.[4] Lastly, SPACs will have to apply to BIST within two years after going public, provided that they do not merge with the Target Company or dissolve as a result of not merging within the intended time period. In order to get listed, SPACs will have to satisfy the conditions stated under Article 11 of the Quotation Regulation of BIST. According to Article 11, (i) market value of SPACs' publicly offered shares must be minimum TRY 200 million and the ratio of its offered shares to paid-in or issued capital after public offering must be at least 50%, (ii) at least 80% of SPACs' shares offered to public must have been sold to institutional investors, (iii) the ratio of total shares held by SPACs' founders, board members and authorized managers to the capital of SPAC must be at least 10%; and (iv) SPACs' founders, board members and authorized managers should undertake not to sell the shares they held before public offering inside or outside BIST from the date of public offering until the merger and for 12 (twelve) months following the merger. However, the new company will have to apply to BIST instead of SPAC and satisfy other conditions under the Quotation Regulation if the merger occurs within the two year period since SPAC will either dissolve or lose its status as a special acquisition company following the merger.[5] III. SPAC Mergers Mergers of public companies are mainly regulated with the Communiqué on Mergers and Demergers (Communiqué No. II-23.2) published in the Official Gazette dated 28.12.2013 numbered 28865 ("Merger Communiqué"). Although there are several exemptions under CMB regulations, general rules of the Merger Communiqué are applicable to SPACs and the Target Company. As a result, both companies will take board of director and general assembly resolutions, apply to CMB, obtain opinion of expert institution, prepare merger agreement/report and make public announcement. In this context, exemptions granted to the SPACs with the CMB regulations could be briefly explained as follows: -          Restrictions regarding mergers that could result in change of control will not apply to SPACs.  According to Article 12/4 and Article 12/5 of the Merger Communiqué, mergers where public company's shareholders end up as minority shareholders are prohibited. However, SPACs will be able to merge with companies with greater net assets and end up being the minority since they fall into the exemption.[6] -          Pursuant to Article 4/1 (b) of the Merger Communiqué SPACs will acquire, within the scope of the price and other terms defined under the Prospectus, the shares of (i) the shareholders who voted against the merger in the general assembly meeting and (ii) the non-founding shareholders in case of dissolution of SPAC, instead of acquiring shares in line with appraisal right provisions. -          In the event where the SPAC is the acquirer and a change of control happens as a result of the merger, SPAC can be exempted from making tender offer to the shareholders who have voted against the merger as per Article 18/1 (d) of the Communiqué on Takeover Bids (Communiqué No. II-26.1), as long as SPAC buys such shares in accordance with the buy-back provisions. Unlike the other exemptions, an application has to be made to CMB in order to benefit from this exemption. -          Share sale restrictions will not apply to mergers where SPACs are a party. According to Article 6 and Article 7 of the Merger Communiqué, if the acquiring company's shares were not traded in the exchange before the merger, such shares cannot be sold in the exchange in 6 the (six) month period after the date the acquiring company's shares began to be traded in the exchange. As a result of the exemption, SPACs will be able to trade such shares in the exchange. On the other hand, it is important to note that SPACs can only become the acquired company if the Target Company is a joint stock company since only shares of joint stock companies can be publicly traded in the capital markets. Finally, SPACs will dissolve and enter into liquidation process in accordance with the TCC if they cannot find the Target Company or complete the merger transaction due to other reasons (e.g. shareholders reject the proposed company in the general assembly meeting) within the intended time period. In such case, SPACs will buy shares of the non-founding shareholders before liquidation process as per the voluntary buy back provisions. IV. Conclusion While the SPACs have been introduced to the Turkish legal system with the Appraisal Right Communiqué in 2013, it is still not a preferred option in Turkey, regardless of the easier merger structure and advantages provided by the CMB. However, with the rising trend of incorporating SPACs in other countries, it is likely that Turkish investors will be inclined to use SPACs as an investment tool in the future. Authors: Gönenç Gürkaynak, Esq., Damla Doğancalı and Defne Kahveci of ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on October 15, 2019) [1] Derin Altan & Nil Acar, Yeni Bir Alternatif Yatırım Aracı: Birleşme Amaçlı Ortaklıklar, Dokuz Eylül Üniversitesi Hukuk Fakültesi Dergisi vol.16, 1, 251-268 (2014) [2] Nilsson, Gül Okutan, Sermaye Piyasası Hukukunda Birleşme Amaçlı Ortaklık 58 (1st ed. 2016) [3] Id. at 68 [4] Id. at 75 [5] Id. at 219 [6] Id. at 190
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Corporate & Commercial

Communiqué on Equity Crowdfunding Is Officially Published

By way of background, in January 2019, the Capital Markets Board (“CMB”) had issued an announcement on its website on the Draft Communiqué on Equity Crowdfunding[1]. The CMB has now officially published the Communiqué on Crowdfunding No. III-35/A (“Communiqué”), on October 3, 2019. The Communiqué entered into force as of October 3, 2019. [1]http://www.mondaq.com/turkey/x/769986/Fund+Management+REITs/Capital+Markets+Board+Announces+The+Draft+Communiqu+On+Crowdfunding The Communique appears to be in line with its draft, and addresses several main topics such as, (i) crowdfunding platforms, (ii) activities of crowdfunding platforms, (iii) subscription to crowdfunding platforms and the campaign process and (iv) areas for the use of the funds and venture capital firms. The Communique requires crowdfunding platforms to apply to CMB for listing and to comply with specific requirements. For instance, a crowdfunding platform must be established as a joint stock company with a fully paid minimum capital of TL 1,000,000 and must include “Crowdfunding Platform” in its trade name. Per the Communiqué, crowdfunding platforms cannot carry out activities other than crowdfunding, except for consultancy services to be provided to venture capital firms. They are also required to establish a campaign website for each venture capital firm or project and provide periodical updates for a period of 5 years, in addition to instantaneous updates on the target and remaining amount of funds to be collected, number of investors and the remaining period for each project. The Communiqué determines a maximum limit of TL 20,000 or 10% of the investor’s declared yearly net income (which cannot exceed TL 100,000) for the amount each investor may invest in a given project within one year, and the maximum amount of funds project owners and venture capital firms may raise through crowdfunding: this is limited to the issue threshold announced by the CMB through its annual bulletin. The Communiqué also limits crowdfunding platforms’ promotional activities, where crowdfunding platforms can only promote completed projects and/or achieved venture capital firms within their advertisements and other promotional activities. As for the platforms located outside Turkey, the Communiqué excludes crowdfunding activities participated by Turkish citizens through platforms which are located outside of Turkey, and the accounts which are opened and operated abroad for this purpose, on the condition that no promotional or marketing activity has been carried out for these crowdfunding activities in Turkey, in a manner that targets residents in Turkey. For the purposes of this exclusion, establishing a workplace in Turkey by foreign platforms, establishing a Turkish website, directly or indirectly, through persons or institutions resident in Turkey, promoting crowdfunding activities will be deemed as “activities that target residents in Turkey” and will fall under the scope of the Communiqué.
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Litigation & Dispute Resolution

Turkey signs the Singapore Convention: A New Era in Enforceability of Mediation Agreements

Turkey signs the Singapore Convention: A New Era in Enforceability of Mediation Agreements in Foreign Countries The mediation procedures have become a mandatory stage of commercial litigations in Turkish Law as of January 01, 2019. After only 4 months of practice, it appears that the success rate of mandatory mediation procedures is %65, according to the data published by the Mediation General Office of Justice Ministry of Turkey. As the national mediation procedure seems to be useful thus far, Turkey took a new step and signed the United Nations Convention on International Settlement Agreements Resulting from Mediation be known as the "Singapore Convention on Mediation" ("Convention"), which provides enforceability to international mediation agreements, on August 07, 2019 in Singapore.  I.          Introduction The Convention has been drafted by the United Nations Commission of International Trade Law ("Commission") and adopted by the General Assembly during the 62nd plenary meeting held on December 20, 2018. The main motivation of the Commission is "to become an essential instrument in the facilitation of international trade and in the promotion of mediation as an alternative and effective method of resolving trade disputes". Indeed, the mediation has always been a low-cost, swift and efficient way to resolve a dispute, in comparison to other dispute resolution methods, which can also be observed from the data obtained in Turkey, from a micro perspective. Heretofore, the mediation agreement breaches were brought before different dispute resolution venues, such as Courts or arbitrative alternatives, if any respective clause was placed in the mediation agreement. Considering that mediation itself is a way to avoid dispute through mutual agreement of both parties on certain topics; the bringing breach of agreement to courts practically beats the purpose of mediation, as it brings litigation back on the table again. Henceforward, direct enforceability of the international mediation agreements in any event of breach might steer parties of a commercial relationship into mediation. II.       Scope of the Convention The Convention is, basically, designed for the international mediation agreements concluded after a commercial dispute. However, the mediation agreements, even on commercial disputes, are still required to have some certain qualifications for the Convention to be applicable. Thus, the Convention is still inapplicable for commercial mediation agreements other than the ones described in the articleA1/1 of the Convention. Besides that, the mediation agreements, which are specifically mentioned in Article 1/2 of the Convention are also excluded from the scope of the Convention and accordingly, the Convention cannot be applied on them. a.         Mediation agreements that are included to the Convention The mediation agreements that are included into the scope have been clearly defined under Article 1/1 of the Convention. The qualifications required for applicability of the Convention have been described in the Article 2 of the Convention. With reference to the first article of the Convention, the parties are required to have the qualifications indicated below:                              i.          The agreement should be borne from a mediation process The motion of "mediation" has been defined in Article 2/1(3) for the purpose of clarifying article 1/1. Accordingly, mediation has been described as a process during which the parties are trying to reach a mutual conclusion on the dispute with the assistance of a third party, the mediator. It has been specifically mentioned that the mediator is not entitled to impose a solution upon the parties. Accordingly, it can be understood that the mediator only has the authority to lead the parties to a mutually beneficial solution. Mediation, on the other hand, has a slightly different definition in the Turkish Mediation Law numbered 6325 ("Mediation Law"), regulating that mediation is a process wherein the parties gathers to find their own solution through communicating with and understanding each other with the assistance of an objective and specialized mediator who can offer solutions when the parties are not able to find their own solution. Comparing the mediation definitions in the Convention and the Mediation Law, it is seen that the understandings of two legislations are quite similar, except for the slightly broader authorities of a Turkish mediator due to the capacity to "offer" a solution. Other than this, the concept of mediation is regulated in a very similar way in both the Convention and Mediation Law.                            ii.          The agreement must be concluded in written form A written agreement is one of the musts for applicability of the Convention. Therefore the Convention has a clear definition on the topic. While the wording implicates that the mediation agreement can only be written on paper, Article 2/1(2) provides that recordings of the content of the mediation agreement in any form is sufficient to fulfill this requirement. The tools that record the communication include electronic communication as well, provided that the information contained is accessible to be used as a subsequent reference later on.   When it comes to the Mediation Law, there is no particular wording that provides an obligation regarding written or any other form with respect to the mediation agreement. However, the mediation process implied in Mediation Law stipulates almost every stage to be in written form.  Having said that, the mediation process should be applied to, preceded and completed with separate written reports, signed by the parties and the mediator. Therefore, regardless of this issue not being clearly stipulated in Mediation Law, the written form can be deemed to be mandatory in Turkish mediation procedures and it is not acceptable to put down any record in any form, except written form.                          iii.          The agreement must be resolving a commercial dispute The convention does not have a definition or explanation on what a commercial dispute is. Certain concepts are excluded from the scope of the Convention, from which can be derived what a commercial dispute is "not". However, as seen in Article 1/1 of the Convention, in assessment of whether a dispute can be considered "international", the locations of the place of business are regarded. Considering that "international" aspect of the dispute is the first and foremost condition for application of the Convention, which will be explained later on, it could be said that a commercial dispute is any dispute that pertains to the business affairs. The definition of "commercial dispute", in other respects, is defined in Turkish Commercial Code, stating that every interaction related to a commercial undertaking is a commercial transaction. Accordingly, every dispute related to a commercial transaction is also considered as commercial dispute. At this stage, we believe it would be accurate to argue that, despite lack of a clear definition in the Convention, a commercial dispute can be understood as "any dispute in relation to a commercial undertaking in concordance with Turkish Commercial Code".                           iv.          The dispute must be international. Article 1/1 provides a detailed structure on what "international dispute" is. The element of "international" has been divided into two prongs. The first is the parties' having places of businesses in different State. The second is the parties' having places of businesses in the same State, with two optional additional conditions being met. That is to say; if the substantial part of the obligations under the mediation agreement is performed in a State different than the place of business, the dispute is considered as an international one. On the other hand, if the subject matter of the meditation agreement is most closely connected to a place other than the place of business, then this would suffice for the dispute to be deemed international, as per the Convention. Having those requirements compared to Turkish Civil Private International Law, it is seen that the internationality element has been regulated in a very similar to the Turkish Civil Private International Law. b.        Mediation agreements that are not included to the Convention Article 1/2 of the Convention introduces several circumstances topics where the Convention will not be applied. To begin with, the first principle - as explained above - is the mediation agreement being concluded as a result of a commercial dispute. Besides the first principle, the Convention does not include in its purview the mediation agreements that are concluded as a result of disputes that are related to (i) personal, (ii) family, or (iii) household transactions of either party. This issue is important since, in Turkish Law, if one party is merchant, then the transaction is deemed to be a commercial one too. The Convention however excludes such transactions from its scope. In addition, mediations agreements concluded as a result of family law, inheritance law or employment law related disputes are excluded from the purview of the Convention as well. Article 1/3 of the Convention excludes mediation agreements on certain specific matters as well. That is to say; if a mediation agreement has been approved by a court or concluded in the course of a court proceeding, the Convention is not applicable to those mediation agreements. In the same vein, if the mediation agreement is enforceable as a judgement, the same goes for those mediation agreements as well. Finally, the mediation agreements that are recorded and enforceable as arbitral award cannot be subjected to the Convention either. Put succinctly any mediation agreement that has ever been made subject to any dispute resolution method is excluded from the purview of Convention. III.    Legal Outcome of the Convention with Respect to Enforceability of Mediation Agreements The Convention renders the mediation agreements having the characteristics explained above enforceable under the procedural rules of the enforcing State and conditions laid down in the Convention. To be able to enforce a mediation agreement, the party relying on to the mediation agreement must provide a signed copy of the settlement agreement and necessary evidence documenting that the agreement has been concluded as a result of a mediation process. The Convention provide few examples to these evidence, such as mediator's signature on the mediation agreements, and not stated as numerus clausus and can be tailored according to the conditions of the present case. The competent authority can always require any necessary document in order to verify that the requirements of the Convention are met, as per Article 4/4 of the Convention. The Convention will be applicable to the mediation agreements that are issued after the Convention enters into force, i.e. six months after deposit of the third instrument of ratification, acceptance, approval or accession, which is already completed done by 45 signatory States. Grounds for refusal of enforcement: The party against whom the mediation agreement is being enforced can object to enforcement of the mediation agreement, provided that;                   i.            Either party of the mediation agreement was under some incapacity,                   ii.            The mediation agreement to be enforced is null and void,                  iii.            The mediation agreement to be enforced is not binding or final,                  iv.            The mediation agreement to be enforced has been subsequently changed,                  v.            The obligations of the mediation agreement have already been performed,                  vi.            The obligations of the mediation agreement are not clear or comprehensive,                  vii.            The enforcement of the mediation agreement would be contrary to the terms of the mediation agreement itself,                  viii.            If the mediator made a serious breach of the standards that are applicable to the mediator or the mediation, without which breach that party would not have entered into the mediation agreement, and                 ix.            There is a doubt on the mediator's impartiality or independence that has a material impact or undue influence on a party without which failure that party would not have entered into the mediation agreement.  The competent authority on the other hand can refuse the enforcement in case;                   i.            The enforcement would be a contrary to the public policy of the enforcing State                   ii.            The subject matter is cannot be subjected to the mediation as per the local laws of the enforcing State.  IV.    Effects of the Convention to Turkish Law Turkey is adopting a position encouraging mediation to lower litigation-related costs and time spent on long and complex litigation procedures. To that end Turkey signed the Convention on August 7, 2019 and the Convention will be deemed to be a part of Turkish Law after its due ratification. In comparison of the Convention and mediation regulations in Turkish Law, it is evident that the provisions are very similar each other with respect to legal understanding, overall system and motions. Further, the Convention provides that enforcement actions will be taken according to the State's local law in compliance with the conditions of the Convention. As a result of the Convention, there will be no need to file cases based on breach of contract to enforce mediation agreements and the mediations agreements that have the qualifications and characteristics explained will directly be enforceable under Turkish legal system. Then again Turkish Enforcement Law has several different types of enforcement procedures and the Convention does not impose any method of enforcement, leaving this issue to the States. As this is the case, in Turkey these mediation agreements should be enforced as a Court decision, which is the procedure applied to the mediation agreements signed by both the parties and their attorneys and concluded as a result of mandatory mediation procedures. Also Article 4/5 of the Convention provides that the competent authority of the enforcing State should act expeditiously and the most expeditious method in Turkish Law regarding the enforcement procedures is the one allowed for the court orders. Authors: Gönenç Gürkaynak, Esq., Tolga Uluay and Doruk Altın of ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on September 18, 2019)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
TMT ( Technology, Media & Telecoms)

Constitutional Court’s Decision on Access Ban to News Content on Social Media

Turkish Constitutional Court granted a decision on April 17, 2019 regarding an applicant's claims on violation of his freedom of expression and press due to access ban of a news article (which is taken from a newspaper) posted by his social media account with the comment "Interesting confession from the judge of the July 22th investigation". The decision was published on the Official Gazette on May 15, 2019. The Constitutional Court accepted the applicant's claim by stating that the access ban of the news article violated the applicant's right to freedom of expression and press. Background of the Case The applicant ("Applicant") is a journalist and also a member of parliament. The applicant is the owner of a social media account on a social media website, wherein he shares news content. According to the decision, the Applicant shared a news article (which is taken from a Turkish newspaper) on his social media account under the title "Parallel Judge: I have my signature in the wiretapping" along with the comment "Interesting confession from the judge of the July 22th investigation". The news article related to the statements of a criminal judgeship of peace's judge, who was assigned for a case regarding the arrest of policemen based on the claim that the policemen, who allegedly had connections with an illegal organization infiltrated into the government, conspired against high-level public officials. The news article further stated that the judge did not accept the case, due to his workload and that he was the one who decided to wiretap in one of the investigations carried out regarding a terrorist organization. After the news article was published on the Applicant's social media account, the criminal judgeship of peace, which is subject to the news article, has filed a complaint before Istanbul 6th Criminal Judgeship of Peace and obtained an access ban decision regarding the news article published on the social media account on the basis that the content violates his personal rights. Applicant filed an objection against Istanbul 6th Criminal Judgeship of Peace's decision and his objection is rejected by Istanbul 1st Criminal Judgeship of Peace, as the higher court. Accordingly, the Applicant filed an individual application before the Constitutional Court (2015/4821) on March 16, 2015 by claiming that its freedom of expression and press has been violated. The Constitutional Court's Evaluation Constitutional Court evaluated the access ban procedure under Turkish law and noted that access ban decision based on the Law No. 5651 should only be granted in urgent cases of the existence of a "prima facie violation", where the violation is apparent without the need of a detailed examination, such as the cases of nude pictures or videos of an individual and cited its earlier Ali Kidik decision. According to the Constitutional Court, the individual has the option to file a lawsuit before civil or criminal courts, since, in the present case, there has to be detailed information to determine whether the content of the news article mirrors the reality and whether this publication harms the honor and dignity of the relevant judge, who is the complainant of the access ban. Constitutional Court stated that Istanbul 6th Criminal Judgeship of Peace failed to provide a convincing decision regarding the urgent need to access ban the news article by proving the prima facie violation, considering that the access ban decision is granted after four years of the publishing of the news article. Constitutional Court also noted that there is not enough reason for applying access ban measure in the case at hand considering the content of the news article. The Constitutional Court emphasized that access ban decision granted by way of non-contentious jurisdiction can only be acceptable if there is an imminent and visible violation occurring at the first glance. The Constitutional Court evaluated that in the case at hand, the lower court failed to explain the need to immediately and swiftly eliminate the alleged attack against the honor and dignity through the relevant content, without applying to a contentious trial, as the content of the articles subject to the complaint are not as serious as to grant an access ban decision as per Article 9 of the Law No. 5651. The Constitutional Court finally stated that in unlawful interventions against people's honor and dignity due to expressions of ideas and thoughts on the internet medium, the main goal is to relieve the damages of the injured party, and there are more effective, useful and beneficial legal and criminal remedies, especially in terms of the disputes such as the case at hand. Consequently, the Constitutional Court concluded that the reasons for access banning of the content without a detailed examination are not relevant and adequate and thus the Applicant's freedom of expression and press which is protected under Articles 26 and 28 of the Constitution is violated. Authors: Gönenç Gürkaynak Esq., Ceren Yıldız, Burak Yeşilaltay and Yasemin Doğan, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on August 19, 2019)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
TMT ( Technology, Media & Telecoms)

Presidential Circular on Information and Communication Security Measures

Presidential Circular on Information and Communication Security Measures ("Circular") is published in the Official Gazette of July 6, 2019. The aim of the Circular is reducing of security risks and governing measures to be taken to ensure safety of information which is critical to national security and public order. The Circular imposes several security obligations on public institutions regarding (i) storage and transfer of critical information (i.e. health, contact and biometric information), confidential information and corporate information, (ii) cyber threat notifications and (iii) industrial check systems. According to the Circular, "Information and Communication Security Guidelines" ("Guidelines") will be prepared and published by the Presidency's Digital Transformation Office ("Office") in light of the national and international standards on information security on the Office's website at www.cbddo.gov.tr. All public institutions and operators providing critical infrastructure services will be obliged to (i) comply with the procedures and rules in the Guidelines when setting up new information systems and (ii) review and revise the existing systems to ensure compliance with the Guideline. The Circular also obliges public institutions to set up internal reviewing mechanisms and examine compliance with the Guidelines at least once a year. Public institutions will be reporting the examination results and corrective and preventative actions taken by the relevant institution to the Office. While the Circular generally imposes information security obligations on public institutions, the following measures listed in the Circular and which are new to this regulatory landscape can be relevant for the providers of cloud services and electronic communication services: - Information pertaining to public institutions shall not be stored in cloud services. The exception to this is the storage on relevant institutions' private systems or on the systems provided by local service providers which are under the control of the relevant public institution. - Authorized electronic communication service providers (operators) are obliged to set up internet exchange points in Turkey. According to the Circular, measures will be taken in order to prevent the cross-border transmission of domestic communication traffic which needs to be exchanged domestically.   Authors: Gönenç Gürkaynak Esq., Ceren Yıldız, Burak Yeşilaltay and Ekin Ince, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on July 9, 2019)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Corporate & Commercial

Simplified Mergers in Turkey under Turkish Commercial Code

Merger, in general, is a complex procedure which requires detailed and long formalities. Simplified merger creates an option for the joint stock companies to merge in a faster way without being subject to certain transactions. I.              Introduction Merger, in general, is a complex procedure which requires detailed and long formalities. Simplified merger creates an option for the joint stock companies to merge in a faster way without being subject to certain transactions. In order to shorten merger procedures for companies that already own at least 90% or more of the voting rights, the Turkish Commercial Code numbered 6102 ("TCC") has adopted the concept of simplified merger from Swiss Merger Law and incorporated similar provisions contained therein. The underlying reason for narrowing the shareholding percentages was that the risks that may arise for the minority shareholders in case of a merger of two companies with a prior shareholding relationship are usually lower or less significant.[1] However, the TCC also limits the type of companies that can benefit from the simplified merger procedures. Preamble of TCC expressly states that simplified merger procedure is only applicable to capital stock companies (i.e. joint stock companies and limited liability companies). Simplified mergers of capital stock companies are categorized into two types under the TCC. In the first group the acquiring company owns 100% of the voting rights of the acquired company and in the second group it owns 90% of the voting rights of the acquired company. II.  Types of Simplified Mergers and Facilitations Under Turkish Commercial Code (a)   Mergers Where the Acquiring Company Owns All of the Voting Rights of the Acquired Company Pursuant to first paragraph of Article 155, simplified mergers where the acquiring company holds 100% of the voting rights of the acquired company are divided into two sub-categories: (i)      Acquiring company holds all (100%) of the shares with voting rights of the acquired company; or   (ii)     A company or a real person or a legally or contractually connected group of persons hold all (100%) of the shares of the merging              companies. Under the first option where the acquiring company holds all of the shares with voting rights, the merging companies are generally parent and subsidiary companies. However, it is usually the parent company who acquires the subsidiary and a reverse merger is not likely to happen under simplified merger procedures.[2] Under the second option where a company or a real person or a legally or contractually connected group of persons hold all of the shares with voting rights,  the merging companies are generally two sister companies or subsidiaries. For example, if a joint venture or a holding company owns all of the voting rights of both Company A and Company B and those two merge, such merger will be subject to the rules of a simplified merger.[3] When compared with the ordinary merger procedures, companies are under lesser obligation to provide documentation and in granting rights to the shareholders when they merge in accordance with the first paragraph of Article 155 of the TCC.  For example, in ordinary mergers, merging companies have to prepare a merger report that explains the purpose and consequences of the merger and a merger agreement (which will be submitted for the general assembly's approval) and should subsequently submit the merger agreement and merger report in their head offices and branches for the shareholders to inspect. Instead, in simplified mergers defined under this section, companies are not obliged to prepare a merger report or grant shareholders the right to inspect the merger agreement and merger report. Nevertheless, the companies are still obliged to prepare a merger agreement containing fewer clauses, which will be explained in detail below. However, they have the option to not submit the agreement for the general assembly's approval. In any case, the merging companies have to have the balance sheet audited, which is the basis of the merger as year-end balance sheet, by an independent auditing company, alongside its year-end financial statements.[4] For the validity of the merger agreement, it is sufficient to include the information mentioned below: (i)      Trade names, legal status, headquarters of companies participating in the merger; in the case of a merger by formation of a new company, type, trade name and headquarters of the new company, (ii)      Cash payment for withdrawals in accordance with Article 141, if necessary, (iii)      Date on which the transactions and activities of the acquired company is considered as performed on the account of the acquirer company, (iv)      Special benefits granted to managing bodies and managing partners, (v)       Names of the shareholders with unlimited liability, if necessary. (b)     Mergers Where the Acquiring Company Owns Shares with At Least 90% Voting Rights of the Acquired Company Pursuant to the second paragraph of Article 155, a merger where the acquiring company holds at least 90% of shares of the acquired company that has voting rights will be subject to the rules of simplified merger provided that: (i)        the minority shareholders are offered, in addition to the participation rights in the acquiring company, a cash or other compensation payment in accordance with TCC, which is equivalent to the real value of the participation rights; and (ii)        no additional payment or personal performance liability or personal responsibility of minority shareholders arise due to merger. Similar with the first type of simplified merger, companies do not have to prepare certain documents. Pursuant to the second paragraph of Article 156, merging companies are not obliged to prepare a merger report. However, the companies are obliged to grant shareholders right to inspect and prepare a merger agreement containing fewer clauses. The company should grant the right to inspect 30 (thirty) days before the application to the trade registry for the registration of the merger. On the other hand, the company has the option to not to submit the agreement for the general assembly's approval. For the validity of the merger agreement, it is sufficient to include the information mentioned below: (i)        Trade names, legal status, headquarters of companies participating in the merger; in the case of a merger by formation of a new company, type, trade name and headquarters of the new company, (ii)       Transfer rates of company shares, and, if provided, equalization amount; explanations regarding shares and rights of shareholders of the acquired company in the acquiring company, (iii)       Cash payment for withdrawals in accordance with Article 141, if necessary, (iv)       Date on which the transactions and activities of the acquired is considered as performed on the account of the acquirer, (v)       Special benefits granted to managing bodies and managing partners, (vi)       Names of the shareholders with unlimited liability, if necessary. III.           Conclusion The simplified merger implemented by the TCC has created a more convenient and time efficient merger structure for companies that are already in a shareholding relationship. Thus, the simplified merger procedure has become more preferable for such companies, especially since ordinary merger procedure results in unnecessary delays and higher costs. Authors: Gönenç Gürkaynak, Esq., Nazlı Nil Yukaruç and Defne Kahveci, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on June 19, 2019)   [1] Pulaşlı, Hasan, Şirketler Hukuku Şerhi, 3rd ed., Book 1, January 2018, pg.273 [2] Pulaşlı, Hasan, Şirketler Hukuku Şerhi, 3rd ed., Book 1, January 2018, pg.274 [3] Id. [4] Pulaşlı, Hasan, Şirketler Hukuku Şerhi, 3rd ed., Book 1, January 2018, pg.276
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Employment

Garden Leave under Turkish Labor Law

 1.         Introduction The concept of garden leave is not a familiar concept to Turkish labor law as the legislation does not regulate this concept explicitly. The employers however in practice might have the need to make use of this concept for various reasons. Below we first introduce the concept of garden leave in general and then examine this concept under Turkish labor law. 2.         The Concept of Garden Leave The garden leave is a debated matter under labor law. By rule employment agreements executed between the employer and the employee can be terminated with a notice given to the other party. On the other hand there are certain distinct situations where the employee spends the notice away from work, though by rule employee is supposed to be working during notice period. So the concept of the garden leave pertains to notice period practices. The garden leave refers to the period during which employees spend their notice period away from the workplace, despite the employment relationship still being alive (i.e. there is no resignation or dismissal or mutual separation). During that period employees are not required to be present and working in the workplace, but still remain on the payroll. So instead of working in an active way, the employees remain passive and only receive salary for that period. The concept of garden leave is developed further to the need that arises in certain situations for keeping employees away from workplace due to a myriad of reasons. For instance the employer resorts to garden leave when there is a legitimate concern that the employee who has been or has given notice might disrupt the peace in the workplace. In the same vein employer might have doubts about receiving due performance from the employee who has been or has given notice and therefore prefers to just keep that employee away from work stream. Garden leave is frequently exercised as a part of internal investigations as well. Indeed the subject of the investigation could be put on garden leave during the course of the investigation with a view to ensure that the investigation proceeds in an effective and undisrupted way. In such cases the main concern is that the subject of the investigation could get in the way of the investigators or even endeavors to destroy evidence of wrongdoing. So in general garden leave is a precaution that is taken to eliminate various undesired possibilities that might realize if employee is allowed in the workplace and allowed to keep working. 3.         The Notion of Garden Leave under Turkish Labor Law Below we examine the notion of garden leave under Turkish labor law. We will start with examining the notion of garden leave in terms of present Turkish labor law legislation and then elaborate on practices that can be adopted as alternatives to garden leave under Turkish law. Lastly, we will explain the possible consequences of imposing garden leave under Turkish law. 3.1.      In Terms of Present Legislation The concept of garden leave is not regulated under Turkish Labor Law No. 4857 and under any other labor law legislation. In other words, Turkish labor law does not grant an explicit right on the employers to exercise garden leave. Therefore, suspending the employee by granting garden leave would mean creating a whole new labor law practice that cannot be deduced from any labor law regulations even by making far-fetched interpretations. That being said, there is no explicit rule under Turkish law that prohibits use of the notion of garden leave if both parties, i.e. the employer and the employee, agree on this notion. This agreement can be executed as part of the employment agreement or a separate agreement. However, for evidentiary purposes, such agreement must be in writing; otherwise, it would be difficult to prove existence of the agreement on garden leave in a possible dispute. Consequently, although Turkish law does not explicitly regulate the notion of garden leave, it does not explicitly restrict its use if both parties agree on it. 3.2.      Practices as an Alternative to Garden Leave under Turkish Law As explained above, Turkish law does not explicitly restrict use of the concept of garden leave if both parties agree on it. Therefore, it is possible to provide a provision in the employment agreement or execute a stand-alone agreement regarding the garden leave. In certain cases the company directives positively regulates the concept of garden leave and this could entitle the employer to use the concept of garden leave in certain cases. That being said, there is an alternative practice that can be used, instead of garden leave under Turkish law. If the concept of garden leave is not regulated under the company directives and/or the employee's employment agreement, but the employer still wishes to cut the employee's ties with the company for a certain period of time, the employer could consider offering the employee to grant paid leave during this process without deducting these "used leave days" from the employee's annual paid leave entitlements. It must be noted that the employee's consent to such practice is a must. Because without the consent, it could be seen as executing "garden leave" under the guise of "granting leave", which could, as explained below, expose the employer to unilateral termination of the employee along with compensation claims connected thereto. 3.3.      Consequences of Imposing Garden Leave under Turkish Law There might be severe consequences of imposing garden leave on an employee despite the concept of garden leave not being regulated in the company directives and the employment agreement under Turkish law. Considering the Turkish labor courts' tendency to favor the employee vis-à-vis the employer, due to Turkish labor law's motto to protect the weak, imposing garden leave on an employee could be labeled as an unfair and unwarranted treatment and also as violation of the employee's constitutional freedom of work due to having no legal ground in the legislation and case law, as explained above. This could give way to the interpretation that the employer de facto terminated employment under the guise of garden leave. Besides that such a practice of the employer could justify "for cause unilateral termination" of the relevant employee due to being "scapegoated" with no concrete proof, especially in cases where this practice is done due to an ongoing internal investigation. This could bring a non-pecuniary compensation claim based on the distress suffered. Therefore it is advisable for the employers not to take the risk of facing these chain reactions. 4.         Conclusion As explained above, although Turkish law does not explicitly regulate the notion of garden leave, it does not explicitly restrict its use if both parties agree on it. Moreover, the company directives may provide certain provisions regarding the concept of garden leave. But if the company directives and employment agreement does not regulate the concept of garden leave at all, the employer could consider offering the employee to grant paid leave during this process without deducting these "used leave days" from the employee's annual paid leave entitlements, provided that the employee has consented so. Imposition of garden leave on an employee has severe consequences under Turkish law such as unilateral termination of the employment agreement by the employee and claims for compensation of non-pecuniary damages, etc. Authors: Gönenç Gürkaynak, Esq., Tolga Uluay and A. Bahadır Erkan of ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on March 6, 2019)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
TMT ( Technology, Media & Telecoms)

Turkish DPA Warns with Principle Decision on Promotional Communications

On November 1, 2018, Personal Data Protection Board ("Board"), acting under the Personal Data Protection Authority, published its principle decision with number 2018/119 in the Official Gazette, which then corrected on November 7, 2018 ("Decision"). Board's Decision is regarding prevention of promotional notifications, e-mail messages, text messages and calls that data subjects might receive from data controllers and data processors. A. Rationale In the beginning of the Decision, the Board indicates that they received numerous complaints based on the Law No. 6698 on Protection of Personal Data ("Law No. 6698") from individuals, who claim to have received promotional and advertorial calls, text messages, e-mail messages from parties, whom they did not give consent for such communications. The Board also indicates that, upon receiving such complaints, an investigation has been conducted on the matter by the Board, results of which were used for determining the principles set forth in the Decision. B. Obligations of Data Controllers & Processors I. Cease of Activity The Decision orders data controllers, which direct promotional communications to data subjects without obtaining data subjects' consents or without meeting the conditions under Article 5/2 of the Law No. 6698, to immediately cease such processing activities immediately. Additionally, the Decision also orders data processors that send such communications on behalf of data controllers, to cease their data processing activities immediately, as well. The Decision lists sending text messages to or calling data subjects phone numbers; and sending e-mails to data subjects; as methods of communication. Although, the wording of the Decision appears to be limited to these methods of communication, considering the purpose of Board's decision, one might argue that the Board will highly likely apply this principle to every other form of electronic communication, provided that it is promotional and/or advertorial and the conditions of the Law No. 6698 are not met. According to Article 5/2 of the Law No. 6698, it is possible to process personal data without the explicit consent of the data subject where one of the conditions below apply; it is explicitly foreseen by laws data has been made public by the data subject processing personal data of the parties of a contract is necessary, on condition that processing is directly related to the execution or performance of such contract processing is necessary; for compliance with a legal obligation which the data controller is subject to for the establishment, exercise or defense of a legal claim for the purposes of the legitimate interests of the data controller, provided that such interests do not violate the fundamental rights and freedoms of the data subject to protect the vital interests or the bodily integrity of the data subject or of another person where the data subject is physically or legally incapable of giving his consent In this order, the Board refers to its authority under Article 15/7 of the Law No. 6698, which entitles the Board to decide on cease of data processing or transfer of data abroad, if there is an obvious violation of laws and there are irrevocable damages or damages that are hard to recover. In that sense, one might argue that the Board evaluates such activities as violations of the Law No. 6698 and is inclined to interpret such activities as damaging to data subjects, which might be used against data controllers within the scope of claims by data subjects pertaining to non-pecuniary damages. II. Precautions By referring to Article 12 of the Law No. 6698, the Decision explicitly states that data controllers are obliged to take all technical and administrative measures in order to ensure an adequate level of security for the purposes of (i) preventing unlawful processing of personal data, (ii) preventing unlawful access to personal data; and (iii) protecting personal data. Furthermore, it is also noted in the Decision that if personal data is processed by another real person or legal entity on behalf of the data controller, the data controller shall be jointly liable with the data processor for taking the foregoing measures. III. Sanctions The board states that they will impose the measures provided under Article 18 of the Law No. 6698 for those who conduct such processing activities, which sets forth administrative fines for those who fail to comply with certain obligations under the Law No. 6698. Article 18/1(b) Article 18/1(c) Those who fail to fulfill the obligations relating to data security referred to in Article 12 of this Law shall be subject to an administrative fine ranging from 15,000 Turkish Liras up to 1,000,000 Turkish Liras. Those who fail to abide by the decisions rendered by the Board per Article 15 of this Law shall be subject to an administrative fine ranging from 25,000 Turkish Liras up to 1,000,000 Turkish Liras. The Board also warns that, taking into account the possibility that personal data process for such activities might be collected unlawfully, they will notify the relevant public prosecutor's office, so that criminal proceedings could be initiated for the crime of illegal dissemination and seizure of data in accordance with Article 136 of the Turkish Criminal Code, under which illegal seizure, transfer or dissemination of personal data constitutes a crime under and is subject to an imprisonment up to four years. Although the Decision does not explicitly indicates any time period for data controllers and processors to cease their activities found to be in violation of the Law No. 6698, it is implied in the Decision that the Board is not eager to punish on-going activities of data controllers and processor, but merely confines itself to warn and urge them to cease such activities and act in accordance with their obligations within the scope of the Law No. 6698. IV. Checklist for Compliance Please find below a short checklist of items that might be considered by data controllers before sending out promotional communications, for the purposes of compliance with the Law No. 6698 and Board's principle decision. 1.      Taken necessary precautions and measures to protect the contact information which will be collected from data subjects (such as creating a dedicated storage space for the relevant data, limiting the number of personnel accessing such data to senior marketing managers etc.), 2.      Informed data subjects about using their contact information for promotional communications before or, at the latest, during collection of their personal data and recorded such notice for evidential purposes (be it on paper with data subject's signature, a voice record or vie electronic logging), 3.      If using contact information collected previously for other purposes where data subject might not be reasonably expected to know that it might be used for such communications, informed data subject about using their contact information for this new purpose, before starting processing activities for that purpose; and recorded such notice for evidential purposes, 4.      Have a legal basis for using their contact information for such communications (please see the table above for the list of valid legal grounds), 5.      If not, obtained data subject's explicit consent; and recorded such consent for evidential purposes. Please note that data processors should also consider whether the data controllers, on whose behalf they process personal data and send promotional communications, are in compliance with the Law No. 6698; and vice versa, since they are both jointly liable for violations of the Law No. 6698, as explained above. In any case, it is clear that individuals are starting to take control of their personal data more and more, as legislations provide them with new ways to exercise their rights. The Board's decision show that complaints from individuals impelled the Board to act on its authority and warn data controllers and processors about the current state of affairs with respect to their promotional activities. Authors: Gönenç Gürkaynak Esq., İlay Yılmaz and Türker Doygun, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on February 6, 2019)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Finance

Capital Markets Board Announces the Draft Communiqué on Crowdfunding

In September 2018, the Capital Markets Board ("CMB") had issued an announcement on its website, declaring that a secondary legislation for crowdfunding was underway. Just recently, on January 4, 2019, CMB published the Draft Communiqué on Equity Crowdfunding No. III-35/A ("Draft Communiqué")[1]. In the announcement, CMB states that the Draft Communiqué aims to ensure the effective penetration of the crowdfunding model into the capital markets legislation and create a regulatory framework for crowdfunding activities. The Draft Communique addresses principles on (i) crowdfunding platforms, (ii) activities of crowdfunding platforms, (iii) subscription to crowdfunding platforms and the campaign process and (iv) areas for the use of the funds and venture capital firms. The Draft Communique requires crowdfunding platforms to apply to CMB for listing and comply with the specific requirements set forth by CMB. The Draft Communique is open to public comments until February 4, 2019. Authors: Gönenç Gürkaynak, Esq. and Ceren Yıldız, ELIG Gürkaynak Attorneys-at-Law  (First published by Mondaq on January 8,  2019) [1] Full text of the announcement and the Draft Communiqué is available at http://www.spk.gov.tr/Duyuru/Goster/20190103/0
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Corporate & Commercial

Court of Appeals Sheds Light on “Just Cause” for Termination, Exit Right and Squeeze-out

The Court of Appeals Sheds Light on "Just Cause" for Termination, Exit Right and Squeeze-out of Shareholders "Just cause" is a term that is used frequently under the Turkish Commercial Code No. 6102 ("TCC"). In broad terms, "just cause" may be defined as a situation in which the relationship between a shareholder and the company and/or between a shareholder and other shareholders becomes unbearable or untenable for valid legal reasons. Although the term "just cause" is frequently employed under the TCC, Turkish lawmakers did not opt to provide an explicit definition of this term under the TCC and instead delegated this duty to the doctrine and the courts. In this article, we will focus on the use of the term "just cause" in the context of the termination of limited liability companies, exit right and squeeze-out of shareholders in limited liability companies, and we will assess and evaluate the purpose and meaning of the term in light of the recent Court of Appeals decisions. I.   Termination by Just Cause Article 636 of the TCC lists the circumstances in which a limited liability company shall be terminated. In addition to the customary reasons for termination, such as termination pursuant to the articles of association, initiation of the bankruptcy process following a bankruptcy decision, termination through a resolution of the general assembly of shareholders, or termination as foreseen by other laws, the provision also allows each shareholder to file a lawsuit against the company to request the termination of the limited liability company, if there is "just cause" to terminate the company. Upon request, the court may terminate the company or rule for the "squeeze-out" of the plaintiff shareholder, or for another resolution that is acceptable and suitable for the case at hand. The reasoning of Article 636 of the TCC refers to Article 531 of the TCC, in which the termination of joint-stock companies by "just cause" is regulated. The reasoning of Article 531 also confirms that the TCC does not explicitly define what constitutes "just cause," and that its definition is left to be decided by the relevant doctrine and the courts. The reasoning of Article 531 lists certain examples of "just cause" that have been accepted and recognized under Swiss legal doctrine. For example, unlawful invitation of the shareholders to the general assembly meetings, continual violations of the minority shareholders' rights or the personal rights of the shareholders, obstruction or hindrance of the right to demand information and examination, continuous losses incurred by the company, and constant declines in profits are listed among the examples of "just cause" that are recognized under Swiss doctrine. Since there is no clear-cut definition or elucidation on the scope and content of the term "just cause" in Turkish law, courts have been required to evaluate each matter on a case-by-case basis. Accordingly, the Court of Appeals has shed light on the meaning of "just cause" for the termination of limited liability companies over the years through its rulings. In one illuminating case, where (i) the limited liability company had incurred continuous losses, (ii) significant disagreements existed between the shareholders, (iii) the limited liability company was in debt, (iv) the limited liability company could not carry out its business activities, and (v) the shareholders had no interest in the continuation of the company, the 11th Civil Chamber of the Court of Appeals ruled for the termination of the limited liability company (decision dated October 18, 2016, and numbered 11101/8204). In another significant case, the 11th Civil Chamber of the Court of Appeals ruled (with the decision dated June 13, 2016, and numbered 10730/9482) for the termination of a family-run limited liability company due to the following factors: (i) shareholders were divorced, (ii) defendant shareholder had established another company with a different scope of activity, (iii) the manager had failed to provide due care for the management of the company. Furthermore, in several other cases, the following reasons have also been accepted and recognized as "just causes": (i) mismanagement of the company, (ii) personal interests coming to the forefront (i.e., being prioritized) among the shareholders of the limited liability company, (iii) company being in debt, (iv) the fact that it has become impossible to realize or fulfill the common objectives of the limited liability company. However, the Court of Appeals has also ruled that there are certain circumstances which do not constitute "just cause" for the termination of a limited liability company, such as the existence of due tax debts or the non-distribution of dividends. II.     Exit Right of Shareholders Article 638 of the TCC sets forth that each shareholder has the right to exit and depart from a limited liability company by filing a lawsuit if there is "just cause" and if there is a provision in the articles of association of the company providing an "exit right" for shareholders. The Court of Appeals has illuminated what constitutes a "just cause" that is sufficient to allow a shareholder to exercise its exit right in a limited liability company. In this context, the Court has ruled that (i) disagreements between shareholders, (ii) continuous violation of a shareholder's right to obtain information on the management and activities of the company, (iii) the alienation of a shareholder from the company, and (iv) a situation in which the company falls into debt due to the actions of the directors, would be deemed as "just causes" (11th Civil Chamber of Court of Appeals' decision dated June 22, 2016, and numbered 2015-9114/6883). III.   Squeeze-out of Shareholders Article 640 of the TCC regulates that a company may request the "squeeze-out" of a shareholder from a limited liability company due to (i) the presence of circumstances set forth in the articles of association of the company (pursuant to a general assembly decision), and (ii) "just cause."  The 11th Civil Chamber of the Court of Appeals has ruled (in a decision dated November 21, 2016, and numbered 2015-11660/8995) that (i) adverse statements against other shareholders, and (ii) breach of the duty of loyalty toward the company and other shareholders, will be deemed as "just causes" for squeezing out the relevant shareholder from the limited liability company. IV. Conclusion The continuity and preservation of companies is a fundamental tenet under Turkish laws. Therefore, the termination of a company should be the last resort for resolving disputes between shareholders and/or between a shareholder and the company. On the other hand, taking into account the necessities and dynamics of business relationships, Turkish laws do value and consider the possibility of the parties' wishing to leave a business partnership. Therefore, the concept of "just cause" is of great significance in cases where one or more parties would like to terminate a business partnership. Since there is no explicit definition of the term "just cause" provided under Turkish laws, the courts exercise broad discretion to define the term according to doctrine and their own judicial philosophies, and practitioners will be well advised to continue to follow the decisions of the Court of Appeals very closely. Authors: Gönenç Gürkaynak, Esq., Nazlı Nil Yukaruç and Büşra Üstüntaş, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on December 3,  2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Intellectual Property

Understanding the Registration Obligation under Turkish Data Protection Law

I. Scope of the registration obligation under Turkish legislation Data controllers processing personal data in the Turkish jurisdiction (including processing activities that are conducted abroad, but have an effect in Turkey) are required to enroll to the Data Controllers' Registry ("Registry"). This requirement is regulated under Article 16/2 of the Data Protection Law ("DP Law"), which expressly states that "real persons or legal entities processing personal data are obliged to enroll to the Data Controllers' Registry." Although the letter of the law seems applicable to all data controllers, the Data Protection Board ("Board") has introduced certain exemptions to this obligation, which will be explained in detail below. According to the DP Law, a data controller will need to register prior to commencing its data processing activities. However, the Board has provided certain grace periods for the registration requirement in a recent decision (No. 2018/88), and it has established the applicable deadlines for the registration of data controllers who are already in possession of and processing personal data. Data controllers are obliged to provide certain information, such as (i) identity, (ii) address, and (iii) purpose of the data processing activity, during the registration process. Once a data controller is enrolled to the Registry, any changes to the registered information will need to be notified to the Registry as well. Data controllers will register to the Registry through an online information system known as "VERBIS." The information requested from the data controllers will vary depending on which of the following three categories a data controller belongs to: (i) real person or legal entity resident in Turkey, (ii) real person or legal entity resident abroad, and (iii) public institutions. If data controllers fail to comply with the registration obligation, the Board may impose an administrative fine. II. Turkey's registration obligation compared to EU Directive 95/46/EC and the GDPR The DP Law is mainly based on the EU Directive 95/46/EC ("Directive"), with certain relatively minor differences. Thus, the registration obligation is quite similar to the requirements of the Directive. Similar to the DP Law, the Directive stipulates that the data controller (or a representative) must notify the supervisory authority before commencing or carrying out a data processing activity. The Directive further indicates that the notification must specify certain information, such as the name and address of the data controller and of its representative, if any; the purpose or purposes of the processing; and a description of the category or categories of the data subject, as well as a description of the data or categories of data relating to them, among others. The Directive requires the EU member states to take the necessary measures to ensure that data processing activities are publicized. On the other hand, the EU General Data Protection Regulation ("GDPR") differs significantly from the European Council's approach in the Directive. When the GDPR came into force on May 25, 2018, the regulation regarding the requirement to provide notification to the supervisory authority has changed. Data controllers are no longer obliged to register their personal data processing activities to a registry system. Rather, the GDPR adopts a self-regulating approach, and depends on the accountability of the data controllers. Accordingly, the GDPR requires that data controllers shall maintain the relevant records internally under their own care and responsibility, and make them available to the supervisory authorities upon request. III. Exemptions Pursuant to Article 16/2 of the DP Law, the Board is entitled to provide and specify certain exemptions to the registration obligation. According to the Board's decision No. 2018/32, the following data controllers are exempt from the obligation to register: (i) real persons and legal entities that process personal data by non-automatic means, on the condition that such data are part of a data-filing system, (ii) notaries operating under the Notary Law No. 1512, (iii) associations founded under the Law No. 5253 on Associations, foundations established per the Law No. 5737 on Foundations, and trade unions established under the Law No. 6356 on Trade Unions and Collective Bargaining Agreements, who only process the personal data of their own employees, enrollees, members and donors, in accordance with the applicable legislation and its purposes and within the scope of their field of activity, (iv) political parties founded in accordance with the Law No. 2820 on Political Parties, (v) attorneys who are working under the Attorneyship Law No. 1136, and (vi) certified public accountants and sworn-in public accountants operating under the Law No. 3568 on Public Accountancy and Auditing. The Board published another noteworthy decision recently (No. 2018/87), which is applicable to all data controllers, wherein it announced that data controllers who have fewer than fifty (50) yearly employees and whose annual financial balance sum does not exceed the amount of twenty-five million Turkish Liras (TL 25,000,000) will be exempt from the registration obligation, as long as their main business activity does not concern processing special categories of personal data (such as personal data relating to race, ethnic origin, political opinion, philosophical belief, religion, sect or other belief, clothing, membership in associations, foundations or trade-unions, health, sexual life, convictions and security measures, as well as biometric and genetic data). IV. Registration procedure The procedures and principles with regards to the registration obligation have been regulated and stipulated under the Regulation on the Data Controllers' Registry ("Regulation"). According to the Regulation, all transactions regarding the registry should be conducted by the data controllers through an information system called "VERBIS." VERBIS went live and became operational on October 1, 2018. The Personal Data Protection Authority ("DPA") published a privacy information notice, and according to this notice, the information provided by data controllers during their registration to VERBIS (e.g., names, tax numbers, representative's personal data, etc.) will only be used by the DPA in relation to the registration obligation. Furthermore, data subjects may apply to the DPA, which will be acting as the data controller in terms of such information, regarding the use of their data. In order to access VERBIS, data controllers will be required to first sign up to the system by filling out a form. The information that will be requested from the data controllers during the registration process are as follows: 1. For data controllers residing in Turkey: (i) Identity number (for real persons) or tax identity number and registered tax office information (for real person or legal entity data controllers), (ii) Corporate electronic mail addresses, as the Regulation states that that all notifications and communications regarding VERBIS will be conducted by using this e-mail address, (iii) Landline phone numbers or mobile phone numbers, (iv) Address number of the data controller (the 10-digit address number may be obtained through the online system at https://adres.nvi.gov.tr/VatandasIslemleri/AdresSorgu), and (v) "Registered electronic mail (KEP) address" for data controllers who have a registered electronic mail address (however, this is not mandatory for data controllers who do not possess a registered electronic mail address). 2. For data controllers residing outside of Turkey: (i) Title, electronic mail address, telephone number, address information, country of residence, date of the decision appointing the data controller's representative ("Representative") and, if available, the number of this decision. If the appointed Representative is a Turkish citizen, his/her identity number ("TCKN"); if the Representative is a legal entity established in Turkey, its tax identity number along with its registered tax office, (ii) Corporate electronic mail address, (iii) Representative's address, and (iv) Representative's registered electronic mail (KEP) address for data controllers who have a registered mail address (however, this is not obligatory if the Representative does not have a registered electronic mail address). Data controllers may access the VERBIS system and assign a Representative for themselves once the sign-up process is completed. Thus, the Representative may also access VERBIS by using Turkey's digital platform for its citizens (known as "e-devlet" and available at https://www.turkiye.gov.tr/), and the Representative will be asked to provide information regarding the data controller's personal data processing activities and may hereafter complete the data controller's registration process. V. Registration Timetable The Board has recently issued a decision (No. 2018/88), which sets forth certain grace periods for data controllers to enroll to the Registry. Data controllers are required to comply with their registration obligations according to the following schedule, depending on their categorization: (i) Between October 1, 2018, and September 30, 2019, for data controllers whose number of yearly employees exceeds fifty (50) or whose annual financial balance sum exceeds twenty-five million Turkish Liras (TL 25,000,000), (ii) Between October 1, 2018, and September 30, 2019, for data controllers who are resident or established abroad, (iii) Between January 1, 2019, and March 31, 2020, for data controllers whose number of yearly employees is less than fifty (50) and whose annual financial balance sum does not exceed twenty-five million Turkish Liras (TL 25,000,000), but whose main business activity concerns the processing of special categories of personal data (as listed above), (iv) Between April 1, 2019, and June 30, 2020, for data controllers who are public entities or public institutions. Since the Registry has only recently become operational, and since we are still within the grace period(s) as of the date of this article, we may expect certain practical issues and problems to arise during the registration process that might require addressing. At this stage, data controllers should make use of the aforementioned grace periods to finalize their internal preparations (such as the identification and classification of their data processing activities) before enrolling to the Registry, in order to ensure compliance with the registration obligation in due time. Authors: Gönenç Gürkaynak, Esq., İlay Yılmaz and Burak Yeşilaltay of ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on November 7, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Corporate & Commercial

Restrictions on Use of Foreign Currencies in Certain Agreements between Turkish Residents

The Presidential Decree dated September 12, 2018, on the Amendment of Decree No. 32 on the Protection of the Value of the Turkish Lira ("New Decree"), introduced significant restrictions on the use of foreign currencies in certain agreements between Turkish residents. Below, we explain the scope of the New Decree and discuss possible issues and problems that may arise in relation to the implementation of the New Decree. We also assess the potential effects of the Communiqué (2018/32-51) on the Amendment of the Communiqué on Decree No. 32 on the Protection of the Value of the Turkish Lira (2008/32-34) ("Communiqué"), which was published in the Official Gazette on October 6, 2018, and lists the exceptions to the restrictions imposed by the New Decree. 1.     What Does the New Decree Bring? With the New Decree, the following paragraph was added to Article 4 of Decree No. 32 on the Protection of the Value of the Turkish Lira ("Decree No. 32"), which regulates foreign currency transactions in Turkey: "Except under certain circumstances to be specified by the Ministry [of Treasury and Finance], contract prices and other payment obligations in sales agreements for movables and immovables, lease agreements for movables and immovables, including vehicle leases and financial leasing agreements, leasing agreements, employment agreements, service agreements, and contracts for work between Turkish residents cannot be determined in a foreign currency or indexed to a foreign currency." Moreover, the following provisional article (Article 8) has been added to the Decree No. 32 with the New Decree: "Except under certain circumstances to be specified by the Ministry [of Treasury and Finance], contract prices that were denominated in a foreign currency in agreements that were executed prior to this Decree and that are subject to Article 4(g) of this Decree shall be re-determined by the parties in Turkish currency within thirty days as of the date on which Article 4(g) of this Decree comes into force." Therefore, the New Decree has not only imposed significant restrictions on the use of foreign currencies in certain agreements to be executed between Turkish residents in the future, but it has also imposed an obligation to revise contract prices and re-determine them in Turkish Liras for certain agreements that had already been executed before the announcement of the New Decree. 2.  Agreements Falling into the Scope of the New Decree and the Communiqué As the New Decree imposes significant restrictions on the use of foreign currencies in certain agreements, it is of paramount importance to first determine which agreements fall within its scope. The New Decree only provides a general list of several types of agreements that are covered by the new rules and authorizes the Ministry of Treasury and Finance ("Ministry") to specify exemptions to the New Decree. Accordingly, the Communiqué published on October 6, 2018, which provides detailed provisions on this front, must also be taken into consideration while examining the scope of the New Decree. 2.1.   Turkish Residency Requirement The first and most fundamental precondition for an agreement to be covered by the New Decree is that both parties to the agreement must be "resident in Turkey." Therefore, an agreement may only fall within the scope of the New Decree if it is executed between real and/or legal persons resident in Turkey. As per Article 2(b) of the Decree No. 32, "persons resident in Turkey" means real or legal persons who have legal residency in Turkey, including Turkish citizens that are working abroad as employees, self-employed persons or private business owners who maintain a legal residence in Turkey. Pursuant to this definition, Turkish citizens and foreigners who are legally resident in Turkey and companies that are established in Turkey are deemed as "persons resident in Turkey" for the purposes of the New Decree. Pursuant to the Communiqué, foreign branches, representatives, offices, and liaison offices of persons resident in Turkey, funds established abroad that are operated or managed by persons resident in Turkey, and companies established abroad whose majority shares (50% or more) are owned by persons resident in Turkey, and foreign companies that are directly or indirectly owned by persons resident in Turkey are also considered and treated as "resident in Turkey" in terms of the New Decree and the Communiqué. The Communiqué provides a number of exceptions in terms of the residency requirement for certain individuals, institutions, and types of agreements. For instance, there are specific exclusions for public institutions and companies belonging to Turkish Armed Forces Foundation. Moreover, the Communiqué provides certain exemptions for contractors who carry out work related to the performance of agreements executed by public institutions in foreign currencies. Another significant exception is provided for banks with regard to the agreements that they have concluded in relation to the Law No. 4749 on Public Finance and Debt Management. Commercial airlines, companies providing technical maintenance services to airplanes or for their motors and other components, as well as companies delivering ground services at airports and their affiliates are also allowed to conclude and carry out certain agreements in foreign currencies. Other particular circumstances, in which certain real or legal persons are exempted from the currency restrictions provided in the New Decree and the Communiqué, are discussed under the relevant sections below. Pursuant to the Communiqué, if parties who are exempted from the scope of the New Decree nevertheless mutually agree to conclude an agreement in Turkish currency or to re-determine a contract price for an agreement that was previously concluded in a foreign currency (despite being entitled to continue using foreign currencies in their agreements according to the Communiqué), such contract prices must still be re-determined and converted into Turkish currency. Therefore, all existing agreements must be carefully examined in terms of the residency status of the contracting parties, in order to determine whether they are covered by and subject to the New Decree. 2.2. Types of Agreements Specified by the New Decree and the Communiqué As indicated above, (i) sales agreements for movables and immovables, (ii) rental agreements for movables and immovables, including vehicle rents and financial leasing agreements, (iii) leasing agreements, (iv) employment agreements, (v) service agreements, and (vi) contracts for work all fall within the scope of the New Decree. That being said, the Communiqué provides a number of exemptions and exceptions for certain agreement types and puts these kinds of agreements out of the purview of the New Decree. We will further elaborate on these exemptions below. 2.2.1.  Sales Agreements for Movable and Immovable Properties The New Decree covers sales agreements for movable and immovable properties. However, the Communiqué makes a critical distinction between the sale of movables and immovables. Accordingly, contract prices and other payment obligations arising from sales agreements for immovables located in Turkey including free zones (including residences and roofed workplaces) executed between Turkish residents cannot be determined in a foreign currency or be indexed to a foreign currency. On the other hand, contract prices and other payment obligations arising from sales agreements between Turkish residents for movables other than vehicles (including construction equipment and work machinery) are allowed to be determined in a foreign currency or indexed to a foreign currency. At this point, it would be beneficial to elaborate on what is considered as "movable" and "immovable" property in Turkey. Under Turkish law, land, independent and continuous rights that can be registered in a land registry, and real estate that can be recorded on an applicable land registry are categorized as "immovable." As a rule, all types of property that fall outside the scope of the "immovable" category are considered as "movable" property. For instance, anything that can be moved from one place to another, as well as natural resources such as electricity and natural gas, receivables, industrial property rights, agreements regarding economic rights, and all vessels (regardless of whether or not they are registered) are considered as "movables" under Turkish law. Furthermore, these definitions and classifications are also applicable to other types of agreements, as will be explained below. Therefore, we note that, as a general rule, the New Decree prohibits the use of foreign currencies with respect to the sales of immovable properties, while it is permitted for the sales of movables, except for vehicles (including construction equipment and work machinery). 2.2.2.  Rental Agreements and Leasing Agreements As explained above, rental agreements for movables and immovables, including vehicle rents and financial leasing contracts, and leasing agreements are covered by and subject to the New Decree. The Communiqué sets forth rules in more detail regarding such lease and rent agreements. Just like in sales agreements, the Communiqué makes a crucial distinction between rental agreements for movables and immovables. Although contract prices and other payment obligations in rental agreements for immovables located in Turkey including free zones (including residences and roofed workplaces) executed between Turkish residents cannot be determined in foreign currencies or be indexed to foreign currencies, this restriction does not apply to rental agreements for movables, except for vehicles (including construction equipment and work machinery). There are other exemptions and exclusions stipulated in the Communiqué with respect to leasing and financial leasing agreements for vessels, as well as for financial leasing agreements that fall under the scope of Articles 17 and 17(A) of the Decree No. 32. These agreements generally concern loans obtained from domestic and foreign sources. Accordingly, foreign currencies can continue to be used in such agreements under the New Decree. 2.2.3.  Employment Agreements As a general rule, employment agreements fall within the scope of the New Decree and are subject to its restrictions with respect to the use of foreign currencies. However, there are certain exceptions provided by the Communiqué with regard to employment agreements. Firstly, contract prices and other payment obligations arising from employment agreements between Turkish residents cannot be denominated in a foreign currency or be indexed to a foreign currency. However, this rule does not apply if the work subject to the employment agreement will be performed outside of Turkey. Secondly, employment agreements that are concluded by individuals who are not Turkish citizens, but who are Turkish residents, are also deemed to fall outside the scope of the New Decree. Therefore, contract prices and other payment obligations in such employment agreements executed with Turkish non-citizen residents can be determined in a foreign currency or be indexed to a foreign currency. Thirdly, contract prices and other payment obligations arising from employment agreements executed by branches, representatives, offices, and liaison offices of those parties residing abroad, by companies whose majority shares (50% or more) are owned by persons residing abroad, and by companies operating in free trade zones, can be determined in a foreign currency or be indexed to a foreign currency. In light of this exemption, we conclude that it will be possible to continue to use foreign currencies in employment agreements that are carried out between employees and subsidiaries, branches, offices or liaison offices of foreign companies. 2.2.4.  Service Agreements In accordance with the New Decree, the Communiqué prohibits the use of foreign currencies in service agreements, including consultancy, brokerage, and transportation and carriage agreements. However, there are four important exclusions provided by the Communiqué, stipulating the circumstances in which contract prices and other payment obligations can be determined in a foreign currency or be indexed to a foreign currency: (i) service agreements to be executed by persons who are not Turkish citizens, (ii) service agreements that are concluded for exports, transit trades, sales and deliveries that are deemed as exports, and services and activities that bring foreign currencies into Turkey, (iii) service agreements concluded with Turkish residents regarding activities to be conducted abroad, and (iv) service agreements between Turkish residents for electronic communications starting from Turkey and ending abroad or starting abroad and ending in Turkey. Moreover, the final exemption provided for employment agreements is also deemed to be applicable to service agreements by the Communiqué. Accordingly, contract prices and other payment obligations in service agreements that are concluded by branches, representatives, offices, and liaison offices of parties residing abroad, by companies whose majority shares (50% or more) are owned by persons residing abroad, and by companies operating in free trade zones, can be determined in a foreign currency or be indexed to a foreign currency. 2.2.5.  Contracts for Work Pursuant to the Communiqué, agreements to produce a piece of work (i.e., contracts for work) are also covered by the New Decree, with only one exception. This exception pertains to agreements to build vessels (which are legally deemed as contracts for work) as well their repair and maintenance, and asserts that such agreements will be excluded from the scope of the New Decree. Therefore, contract prices and other payment obligations arising from such vessel construction agreements can be determined in a foreign currency or be indexed to a foreign currency. 2.2.6.   Other Exceptions In addition to the exceptions provided above, the Communiqué also provides that foreign currency can be used in agreements related to sales, licensing and service agreements for software and hardware produced abroad as part of information technology. Moreover, provided that the relevant provisions of Decree No. 32 are reserved, use of foreign currency in issuance, sales, and other transactions related to capital market instruments (including foreign capital market instruments, depositary receipts, and shares of foreign investment funds) based on Capital Markets Law No. 6362 and other related legislation is possible. 3.  What is the Scope of "Indexing to a Foreign Currency"? The New Decree introduces a prohibition against determining contract prices and other payment obligations arising from certain agreements in a foreign currency or indexing them to a foreign currency. As per the Communiqué, this means that negotiable instruments that are issued in relation to an agreement that is covered by the New Decree and the Communiqué cannot be drawn in a foreign currency or be indexed to a foreign currency either. Furthermore, pursuant to the Communiqué, agreements indexed to the prices of precious metals or commodities, whose prices are determined in a foreign currency in the international markets and/or indirectly indexed to a foreign currency, are also considered as agreements in which prices are "indexed to a foreign currency." Therefore, the Communiqué expands the meaning of "indexing to a foreign currency" by specifically including the practice of indexing contract prices to the prices of precious metals or commodities in its scope. 4.  Effects of the New Decree and the Communiqué on Existing Agreements It is important to note that the New Decree and the Communiqué do not only impose restrictions on the use of foreign currencies in agreements to be concluded after the New Decree enters into force, but also require the amendment of existing agreements whose contract prices or other payment obligations were previously concluded in foreign currencies or indexed to foreign currencies. Accordingly, prices that were established in foreign currencies in certain existing agreements (as specified above) must also be re-determined by the parties in Turkish currency within thirty (30) days as of the date on which the New Decree enters into force, (i.e., September 13, 2018). Therefore, such price re-determinations must be completed by October 13, 2018. Agreements falling into the scope of the exclusions provided by the Communiqué, and which were concluded before the New Decree entered into force on September 13, 2018, are also exempt from the obligation to re-determine contract prices and other payment obligations in Turkish currency. Therefore, such agreements can continue to be executed as is, without having to re-determine contract prices and other payment obligations in Turkish currency. However, it should be noted that there is one crucial exception to this rule. Although rental agreements for vehicles (including construction equipment and work machinery) are covered by the New Decree and should be subject to the rule regarding price re-determination in Turkish currency, the Communiqué indicates that rental agreements for vehicles (including construction equipment and work machinery) that were concluded before the New Decree entered into force are excluded from the price re-determination requirement. Therefore, rental agreements for vehicles (including construction equipment and work machinery) that were concluded before the New Decree entered into force can continue to be executed in a foreign currency, while rental agreements for vehicles (including construction equipment and work machinery) that are executed after the New Decree entered into force must use Turkish currency to determine contract prices and other payment obligations. The Communiqué is silent on the issue of whether it is possible to continue with the foreign currency after renewal of a rental agreement for vehicles (including construction equipment and work machinery) that were concluded before the New Decree entered into force. Considering that it is merely a time extension, not conclusion of a new agreement, it can be concluded that foreign currency can be used after the renewal too. 4.1.   What Does "Re-Determination" Mean? As indicated above, the New Decree and the Communiqué require the "re-determination" of contract prices and other payment liabilities in Turkish currency for certain agreements. It is important to note that both the New Decree and the Communiqué refer to a process in which the "re-determination" is carried out by the parties to an agreement, without providing any further guidance or direction as to how such re-determinations should be carried out. Although, at first glance, one might reasonably assume that such re-determinations can/should be carried out by using the applicable exchange rates to convert prices, it would actually be a mistake to jump to this conclusion, as the New Decree and the Communiqué both refrain from using the term "conversion," possibly on purpose. Therefore, it is possible to conclude that "re-determination by the parties" actually refers to the process of determining the contract price and other payment obligations in Turkish currency, which would presumably be undertaken by the parties as if they were concluding the agreement for the first time. This would surely involve a significant amount of re-negotiation between the parties and would require the mutual consent of both sides to the re-determined prices. At this point, the most vital question for practitioners is: What happens if the parties cannot agree on the re-determination of the contract price and other payment obligations in Turkish currency? 4.2.  What Happens if the Parties to a Contract Cannot Agree on Price Re-Determination? Unfortunately, the New Decree fails to provide any definitive answers with respect to the question of what happens if the parties to an existing contract cannot come to an agreement on re-determining the contract price and other payment obligations in Turkish currency. The New Decree's silence on this crucial issue has raised serious concerns among scholars, legal practitioners, and in judicial and business circles, as this omission has caused a significant amount of legal and commercial uncertainty. However, the Communiqué has provided some clarity on this point by establishing a reference date for the currency exchange rates that must be used in cases of disagreement on price re-determination. Accordingly, if the parties to an existing contract cannot come to an agreement on re-determining the contract price and other payment obligations in Turkish currency, then the Turkish Central Bank's effective foreign currency exchange rates for January 2, 2018 (1 USD = 3.7776 TL and 1 EUR = 4.5525 TL) must be used for agreements in re-determination of the contract price and other payment obligations in Turkish currency. But the monthly consumer price index rate (as determined by the Turkish Statistical Institute) from January 2, 2018, until the date of re-determining, must be applied to the amount calculated by using the relevant exchange rate in order to calculate the final amount. In terms of rental agreements for residences and roofed workplaces, the Communiqué provides that the re-determination must be carried out for two (2) years. In case of dispute regarding the contract price for the next rental term, the consumer price index rate (as determined by the Turkish Statistical Institute) must be applied to the last amount that was determined in Turkish currency, and the increase will be as such the end of the two-year period. Consequently, this means that the re-determined Turkish currency contract price shall remain for two years as of re-determination and after that period, the agreement can revert back to foreign currency. But this is the case only for rental agreement for residences and roofed workplaces concluded before the New Decree.  On a last note, it is important to highlight that the obligation for re-determination does not apply to receivables already collected or receivables that are due but not collected. 4.3.   Is Termination of an Existing Agreement an Option for the Parties? If one of the parties to an existing agreement covered by the New Decree does not wish to continue with the agreement due to the requirement of re-determining the contract price and other payment obligations in Turkish currency, does that party have the right to terminate the agreement without being exposed to any potential legal consequences? Regrettably, neither the New Decree nor the Communiqué provides a clear answer to this critical question. The party who would prefer not to continue with the agreement in light of the price re-determination requirement should theoretically be allowed to argue that an obligation to amend the contract price arose after the agreement was executed and that it would be unfair to oblige the party to continue honoring such an agreement. This party could reasonably contend that an essential element of the agreement was changed without its consent after the agreement was concluded, since contract price is a fundamental and objective component of any agreement. On the other hand, the counterparty may also easily claim that the party wishing to terminate the agreement is using the New Decree as an excuse to wriggle out of the contract and avoid its obligations thereunder, which would basically constitute an "abuse of right" claim. Therefore, we can expect that commercial and legal disputes will arise with respect to this issue, and such claims and counterclaims will be brought before the courts in these types of contract termination cases. As both the New Decree and the Communiqué are silent on whether parties to an existing agreement are entitled to terminate such agreements due to the newly introduced obligation of price re-determination in Turkish currency, the legal uncertainty on this front continues. 5.  Possible Sanctions in Case of Non-Compliance with the New Decree and the Communiqué The New Decree was promulgated by the President as per Article 1 of the Law No. 1567 on the Protection of the Value of the Turkish Lira ("Law No. 1567"), with the declared aim of protecting the value of Turkish currency. As per Article 3 of the Law No. 1567, parties who fail to comply with the obligations set forth in Presidential decrees as per the Law No. 1567 will be sanctioned with an administrative monetary fine ranging from TL 3,000 to TL 25,000. If such non-compliance is perpetrated for the benefit of a legal person, the same administrative monetary fines shall be imposed on that legal person as well. The law also states that the sanctions will be doubled if there is a repeat violation. These sanctions are imposed by the public prosecutors. Hence, we conclude that such administrative monetary fines may be imposed on parties who determine the contract price or other payment obligations in an agreement covered by the New Decree and the Communiqué in a foreign currency or by indexing to a foreign currency. Furthermore, these fines will be applicable to those parties who fail to re-determine contract prices and other payment obligations in Turkish currency by the applicable deadline (i.e., October 13, 2018) for agreements that were concluded before September 13, 2018, and that fall under the scope of the New Decree and the Communiqué. It is also important to note that each non-compliance or breach of the New Decree entails a separate legal sanction. In other words, for each agreement that fails to comply with the requirements of the New Decree and the Communiqué, there will be a separate administrative monetary fine imposed on the liable parties. Authors: Gönenç Gürkaynak, Esq., Tolga Uluay and Bahadır Erkan of ELIG Gürkaynak Attorneys-at-Law (First Published by Mondaq on October 8, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Corporate & Commercial

Capital Markets Board Issues an Official Announcement on Initial Coin Offerings and Crowdfunding

The Capital Markets Board ("CMB") issued an announcement on September 27, 2018, on its website and addressed the much-disputed status of digital tokens and Initial Coin Offerings ("ICO"). In this announcement, the Capital Markets Board stated that it does not regulate or supervise ICOs, and also noted that it does not regulate or supervise most practices in which blockchain technologies are being used, such as cryptocurrency offerings and token offerings. By way of brief background on the matter: Simply put, ICO refers to the creation and sale of digital tokens. It is perceived and used as an alternative fundraising mechanism to traditional financial markets. In an ICO, a project creates a certain quantity of a particular cryptocurrency, which are then sold to investors in the form of "tokens" ("coins"), in exchange for real currency or other pre-existing cryptocurrencies, such as Bitcoin or Ethereum. The company holding the ICO uses these funds in order to launch its product(s) or its digital currency and, in exchange, the investors hope (and expect) that the tokens will provide them with a beneficent return on their investment. In its recent announcement, the CMB, which is the regulatory and supervisory authority in charge of the securities markets in Turkey, expressed its view that, although some ICOs may involve clear and concrete commitments (such as the financing of a company or a project), they usually include only vague promises. In this respect, the CMB emphasized that ICOs are risky and speculative investments, and warned investors to consider, recognize and acknowledge the risks listed below when investing in ICOs, and advised them to ensure that they perform a detailed analysis of their expected results: - Most ICOs are not regulated or supervised by any regulatory bodies due to their structure; - Token values may be subject to excessive fluctuations, as is the case with cryptocurrencies; - The collected funds may not be used for the stated/communicated purposes by the ICO holders; - Sales documentation for the ICO may contain incomplete or misleading information; - The investment project may fail or the investment funds may be lost completely, as funded projects are usually at a premature stage. In the same announcement, the CMB also provided an update on the legal framework for crowdfunding activities. Back in December 2017, the CMB had taken the first step toward introducing and regulating the concept of "crowdfunding" through an amendment to the Capital Markets Law. Now, with the recent announcement, the CMB has declared that the secondary legislation for crowdfunding is under way. It also indicated that the status of ICOs (which is similar to IPOs and crowdfunding) and whether or not they will fall under the supervision of the CMB will vary on a case-by-case basis. Finally, the CMB emphasized that unauthorized transactions under the name/pretext of "crowdfunding" that are carried out before the secondary legislation goes into effect will be subject to administrative and penal sanctions and warned investors to disregard and not participate in any potential sales of cryptocurrencies that occur under the guise of "crowdfunding". Authors: Gönenç Gürkaynak, Esq., Ceren Yıldız and Nazli Gürün, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on October 3, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Intellectual Property

Evaluation of the European Commission’s Conclusions in the 2018 Report on IP Law in Turkey

I. Introduction The European Commission ("Commission") has released a report on April 17, 2018, which contained important findings of fact and assessments regarding Turkey's political situation, economic development, regional issues and international obligations. This document summarizes and evaluates the conclusions put forth by the Commission in its report ("Report") with respect to intellectual property law in Turkey and its suggestions for the coming years.  II. Current Status of Intellectual Property Law in Turkey Chapter 7 of the Report examines the state of intellectual property law in Turkey and declares that "Turkey has a good level of preparation in the area."[1] The Commission has chosen to use the word "good" in order to emphasize that while the current level of preparation is adequate, there is still room for improvement. The Report also underlines the fact that good progress has been made on legal alignment with the European Union acquis. In order to evaluate the progress that has been made by Turkey in this particular area, it would be useful to compare this Report with the previous report of the Commission. The previous report, which was released in 2016, stated that "there was some progress in improving administrative capacity and coordination but enforcement remained problematic."[2] The previous report also proposed that Turkey should adopt pending industrial property and copyright legislation in line with the EU acquis. On the other hand, the Report of 2018 states that the adoption and entry into force of the new Industrial Property Law is a significant part of the "good progress" that the Report has identified. This is one of the most valuable and noteworthy developments regarding intellectual property law in Turkey, as the Commission has also underlined in its Report. The Report offers further details on this issue and indicates that this new law enables and provides enhanced legal alignment between Turkish IP law and the EU intellectual property rights acquis in relation to trademarks and designs. Furthermore, it updates the Turkish intellectual property rights system in line with international agreements and practices. Unlike the previous report, the Report of 2018 also notes that simplified registration procedures have been introduced by the new law. However, the Report also highlights the (disappointing) fact that the new law lacks specific provisions for biotechnological inventions. The Report also mentions that an Intellectual Property Rights Academy was set up in July 2017, which will be responsible for all intellectual property rights training for civil servants in Turkey. Thus, the Regulation on the Code of Conduct and Disciplinary Measures for Trademark and Patent Agents, which entered into force in May 2017, addresses a legal gap with regard to the liability of trademark and patent agents registered with the Turkish Patent and Trademark Office. Finally, the Report observes that the Turkish Patent and Trademark Office has strengthened its consultation on trademark registration services with owners of intellectual property rights and their representatives. III. Recommended Steps to Be Taken The Report suggests that three (3) steps should be taken by Turkish lawmakers and public authorities in the upcoming years with respect to the protection of intellectual property rights. The Commission recommends that Turkey should take the following concrete steps: (i) Adopt pending copyright legislation in line with the acquis: The previous report of 2016 also recommended that Turkey should take three (3) steps in the coming years for the legal protection of intellectual property rights. The first one was the adoption of the pending industrial property and copyright legislations in line with the European Union acquis. The first half of this step was fulfilled with the passage of the new Industrial Property Law. However, the Report of 2018 now states that Turkey should adopt, in particular, pending copyright legislation in line with the acquis, which is the Draft Law Amending the Law No. 5846 on Intellectual and Artistic Works ("Draft Law"). The Draft Law proposes numerous amendments to the current text of the Law No. 5846 on Intellectual and Artistic Works, which include revisions to the provisions concerning online piracy, collecting societies, databases and exceptional uses, such as temporary reproductions, reproduction through photocopying and other similar means, freedoms for purposes of use by disabled persons, and temporary reproductions by radio or television enterprises. The Report specifically highlights this issue by stating that, "Collective rights management remains an outstanding issue that the new copyright law should address, particularly in relation to foreign producers, public performance rights and reproduction rights." The Draft Law actually focuses on the issue of reproduction rights; however, it does not specifically address treatment of foreign producers and public performance rights. For this reason, in order to be brought in line with the recommendations of the Commission, the Draft Law (or other regulations) should include and incorporate these rights as well. Another recommended step in the previous (2016) report was to improve enforcement measures in fighting against piracy and counterfeiting. When the Draft Law enters into legal force, the Intellectual Property laws in Turkey will finally address the issue of piracy. (ii) Improve enforcement measures to combat infringements of industrial and intellectual property rights: While the new Industrial Property Law aims to deliver a higher level of legal alignment with the EU Enforcement Directive, that is still not deemed adequate by the Report. Since the number of intellectual property right infringements and the level of counterfeiting and piracy activities are still quite high in Turkey, the Report suggests that the implementation of the accelerated destruction procedure and the efficient functioning of the criminal justice system in dealing with intellectual property rights need to be improved. (iii) Sustain a constructive dialogue with intellectual property right (IPR) owners, increase awareness regarding counterfeiting and piracy and focus on the benefits of a strong IPR protection system for economic growth: The Report explicitly states that, "Turkey should in particular, sustain a constructive dialogue with intellectual property right (IPR) owners, increase awareness regarding counterfeiting and piracy and focus on the benefits of a strong IPR protection system for economic growth." This suggestion, once again, highlights the need for specific legal provisions regarding IPRowners, as well as addressing issues of counterfeiting and piracy, and it also raises an important point regarding the application of the laws. In fact, this is the reason why Turkey may not be able to follow and abide by this recommendation in the coming years, since both the application and the enforcement of the relevant laws might take some time and are likely to happen only gradually. IV. Conclusion The Report clearly indicates that the state of Intellectual Property Law in Turkey has been improved since the release of the previous report, which was accomplished primarily through the adoption of the new Industrial Property Law. However, there are still a number of issues and challenges that need to be addressed with respect to IP law in Turkey, which are highlighted in the Report, especially in practice. In other words, while significant positive steps have been taken with respect to IP legislation in Turkey, the application and enforcement of the IP rights enshrined in such legislation still leaves much room for improvement. [1] /developments/wp-content/uploads/sites/19/2018/08/20180417-turkey-report.pdf [2] /developments/wp-content/uploads/sites/19/2018/08/20161109_report_turkey.pdf Authors: Gönenç Gürkaynak, Esq., İlay Yılmaz and Burak Yeşilaltay of ELIG Gürkaynak Attorneys-at-Law First published by Mondaq on August 8, 2018
ELIG Gürkaynak Attorneys-at-Law - December 16 2019
Corporate & Commercial

Significant Amendments and Novelties to Turkish Capital Markets Legislation

Turkey: Significant Amendments and Novelties to Turkish Capital Markets Legislation during the First Half of 2018 This article will address significant amendments and novelties introduced for Turkish capital markets legislation during the first half of 2018 as in line with specific needs and interests of public and private institutions, companies, shareholders and/or investors being subject to such legislation. In this respect, the following legislation will be examined in this article toward the past: -     Communiqué on Takeover Bids (Communiqué No. II-26.1) -     Communiqué on Real Estate Investment Trusts (Communiqué No. III-48.1) -     Istanbul Settlement and Custody Bank (Takasbank) - Central Clearing And Settlement Regulation -     Communiqué on Common Principles Regarding Significant Transactions and Appraisal Right (Communiqué No. II-23.1) -     Communiqué on Material Events Disclosure (Communiqué No. III-15.1) I.        Amendments and Novelties 1.       Communiqué on Takeover Bids (Communiqué No. II-26.1) The Communiqué No. II-26.1 mainly focuses on share takeover bids in companies. Within this scope, the communiqué stipulates that in case any person or persons acting in concert acquire(s) management control of a company through share transfer(s) partially or wholly, then such person(s) shall be liable to make a takeover bid to other shareholders of the target company by protecting their rights.  Article 18 of the Communiqué No. II-26.1 stipulates certain circumstances that the Capital Markets Board ("CMB") may grant exemption for the foregoing takeover bid requirement, upon application of the relevant parties and as the case may be. In accordance with the recent amendments published on the Official Gazette on June 5, 2018 which was entered into force on the same date, two new circumstances have been inserted to Article 18 of the Communiqué No. II-26.1. As per these changes, the CMB may grant exemption for the takeover bid requirement in case of the following circumstances as well: -     As a result of a default of repayment a loan which has been secured by the shares granted to the bank, transfer of those shares to a special purpose vehicles (SPV) incorporated by the bank; acquisition of those shares by third parties from the bank or SPV; -     Transfer of shares to fulfil a regulatory requirement which determines shareholding qualification. 2.  Communiqué on Real Estate Investment Trusts (Communiqué No. III-48.1) According to Article 45/2 of the Communiqué No. III-48.1, real estate investment companies are not allowed to distribute cash dividend before public offering or sale of the shares to qualified investors. However, in accordance with the recent amendment published on the Official Gazette on May 10, 2018 and which was entered into force on the same date, the foregoing limitation will not be applied for the real estate investment companies which operate a portfolio consisting of exclusively infrastructure investments and services until December 31, 2019. Before this amendment, the foregoing date was stipulating in the Communiqué No. III-48.1 for such real estate investment companies as December 31, 2017. The amendment has extended that term for 2 (two) years more. 3.       Istanbul Settlement and Custody Bank (Takasbank) Central Clearing and Settlement Regulation (Central Clearing and Settlement Regulation) As per the amendments published on the Official Gazette on May 8, 2018 which was entered into force on the same date, Central Bank of the Republic of Turkey ("Turkish Central Bank") has been introduced as de facto member of central clearing and settlement institution and it has been ruled that the Turkish Central Bank is not subject to provisions of the Central Clearing and Settlement Regulation and relevant market directives and procedures. Furthermore, two new transaction collateral types have been defined in Article 38 of the Central Clearing and Settlement Regulation. Within this scope, (i) publicly traded precious metals and (ii) electronic product securities are accepted as new types of transaction collaterals. 4.       Communiqué on Common Principles regarding Significant Transactions and the Appraisal Right (Communiqué No. II-23.1) In general, provisions of the Communiqué No. II-23.1 are related to types of  significant transactions, obligatory procedures of those, concept of appraisal rights granted to the shareholders and mandatory takeover bids in companies. This being the case, Article 12 of the Communiqué No. II-23.1 defines certain significant transactions which do not grant appraisal right to shareholders. In accordance with the amendments published on the Official Gazette on April 18, 2018 and which was entered into force on the same date, a new significant transaction - which does not grant appraisal right to shareholders - has been inserted to Article 12 as follows: -       Asset transfers to third parties (other than related parties), on the condition that at least 90% of the funds arising from the asset transfer will be used for payment of the cash loans and/or other debts arising from the issued debt instruments within 1 (one) month, for the purpose of strengthening financial position of the company. However, if entire of funds will be used for payment of the cash loans and/or other debts arising from the issued debt instruments, the foregoing ratio (i.e. 90%) is not taken into consideration. In parallel of said amendment, Article 12/3 of the Communiqué No. II-23.1 has been revised as stipulating that the board of directors of a company engaging a significant transaction as explained above shall adopt a board resolution and disclose that resolution together with details of payment(s) (i.e. payment amounts, realization of payments etc.) to the public. 5.       Communiqué on Material Events Disclosure (Communiqué No. III-15.1) According to the amendment published on the Official Gazette on February 13, 2018 and which was entered into force on the same date, it has been stipulated in Article 12/4 of the Communiqué No. III-15.1 that in case a real person or legal entity directly reaches or falls below 5%, 10%, 15%, %20%, 25%, 33%, 50%, 67% or 95% of shares representing share capital of a publicly traded company, the relevant disclosure liability is performed by the Central Registry Agency (MKK) without prejudice to other disclosure requirements of said real person or legal entity arising from other paragraphs of Article 12.  II.     Conclusion Capital markets have sensitivities and may rapidly be affected by economic circumstances. Therefore, as a consequence of global and/or domestic economic developments (i.e. economic turmoil, cash deficiency etc.), Turkey frequently amends and updates its capital markets legislation. While some of those amendments are related to internal functioning of capital markets institutions, many of them are related to direct interests and rights of the companies, shareholders and/or investors. Authors: Gönenç Gürkaynak, Esq., Damla Doğancalı and Selen Sakar, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on July 9, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
TMT ( Technology, Media & Telecoms)

Data Controllers’ Handbook to Inform Data Subjects About Their Rights

Under the Turkish data protection law ("DPL"), data subjects have the right to learn who processes their personal data, the purposes and legal bases of these processing activities, and to whom and for what purposes such personal data are transferred. These rights arise from the data controllers' obligation to inform data subjects about their processing activities. During the collection of personal data, the data controller or any other person authorized by the data controller is obliged to provide data subjects with certain information, such as the identity of the data controller and of his representative (if any), the purposes of the processing, to whom and with what purpose the processed personal data can be transferred, and the method and legal reason/basis of collection. The same article of the DPL further requires data controllers to provide information to data subjects about certain other rights, as discussed below. Data subjects have the right to know the third parties within or outside the country to whom personal data are transferred, and to ask for the rectification of any incomplete or inaccurate personal data processing as well. They may also request the erasure or destruction of their personal data (within the framework of the conditions set forth under Article 7) and request the notification of these operations to third parties to whom personal data have been transferred. According to this law, data subjects have the right to object to any consequence or situation that is to his/her detriment that results from an analysis of the processed data exclusively by means of automated systems, and to request compensation for the damages incurred due to the unlawful processing of personal data. Interpretation of These Provisions The Turkish Data Protection Authority has published the Communiqué on the Procedures and Principles for Compliance with the Obligation to Provide Information ("Communiqué")[1] in order to provide guidance for the interpretation of these articles. The Communiqué sheds light on the methods to be used for providing information and specifies that data controllers may provide information to data subjects either physically or by using electronic means (e.g., verbally, in written format, by voice recordings, or through call centers), and also clarifies when data subjects must be informed. According to the Communiqué, data controllers are obliged to inform data subjects of their rights in all cases or circumstances in which their personal data is processed. Furthermore, they must also inform data subjects whenever the purpose of processing changes, prior to starting the data processing activity. For instance, if a data controller processes a data subject's address information for the purpose of delivering the goods/services that the subject has ordered and will further process the same address information for marketing purposes in the future, then it needs to inform the data subject since the purpose of the data processing activity will change. If different divisions/units of a data controller process personal data for different purposes, then the data controller must inform data subjects separately for each purpose. For instance, if the name, last name and phone number of a data subject is processed by the marketing department of a company for marketing purposes, and the same personal data is also processed by the human resources department to evaluate the job application of that data subject, then the data subject must be informed of both processing purposes. The information that the data controllers provide to the Data Controllers' Registry must be in line with the information they provide to the data subjects. It is also extremely critical for data controllers to realize and keep in mind that compliance with the obligation to provide information does not require the data subject's prior request, and that the burden of proof is on the data controller to show that it has complied with all its obligations under the law. The Communiqué also states that the explicit consent of data subjects must be obtained separately from the information provided to data subjects. In other words, data controllers are not allowed to obtain explicit consent from data subjects by using the same text or document with which they inform them. Personal data must be processed for specific, explicit and legitimate purposes. Similarly, data controllers must also be clear and specific when providing information to data subjects, and they should avoid deficient, misleading or inaccurate statements. Moreover, they must steer clear of ambiguous or broad terms in the information provided to data subjects. For example, data controllers should not state that the personal data of data subjects might be processed for marketing purposes in the future. Rather, data subjects should be informed of the purpose for which their personal data is processed, not the possible purposes that might arise in the future. It should be noted that ambiguousness/vagueness is a crucial red line when it comes to providing information to data subjects, and data controllers must avoid such ambiguity whenever possible. In addition, the information that will be communicated to data subjects must include: (i) the legal purpose of the personal data processing (in other words, the basis of the data processing activity), (ii) the recipients of the personal data, and (iii) the purpose of the data transfer. While data controllers are required to provide data subjects with information about the processing of their personal data prior to data collection, this may not always be possible in practical terms. If personal data is obtained from an indirect source, such as the news media or public records, then data controllers must fulfill their obligation to provide information to data subjects (i) within a reasonable period of time after the personal data is obtained, (ii) in the first communication, if the personal data is obtained for the purpose of communicating with the data subject, and (iii) if the personal data is to be transferred, then at the first moment that the personal data is being transferred, at the latest. Comparison of the DPL and the General Data Protection Regulation ("GDPR") The GDPR, which has entered into force on May 25, 2018, also brings similar requirements for data controllers. Some of the information stipulated under the GDPR which data controllers are required to provide to data subjects are not included in the DPL, such as (i) the right of data subjects to withdraw their consent at any time, (ii) the right of data subjects to lodge a complaint with a supervisory authority, and (iii) storage periods and the criteria used to determine the duration of such data storage, even though data subjects do, in fact, have those rights under the Turkish data protection legislation. Another difference between the GDPR and the Turkish data protection legislation concerns indirect data collection practices. According to the GDPR, when personal data is collected indirectly, data controllers are not obliged to inform data subjects of such activity if (i) it is impossible, or (ii) it requires disproportionate effort, or (iii) it would render impossible or seriously impair the purpose of the data processing. Neither the DPL nor the secondary legislation in Turkey sets out similar exceptions or follows the GDPR on this issue. However, in practice, if a data controller is unable to inform data subjects about indirect personal data collection despite its best efforts and can demonstrate its efforts (i.e., show that it has genuinely attempted to inform data subjects), such activities should not raise any legal concerns under the DPL either. Nevertheless, keeping in mind that there is no clear definition of "sufficient effort" or provisions regulating this matter in the DPL, one cannot exclude the possibility of a data controller facing sanctions in this context. Despite these differences, the GDPR requires data controllers to use clear and plain language in communicating with data subjects, similar to the DPL, and to provide data subjects with the information regulated under the DPL. Conclusion Interpreting the obligation to inform data subjects correctly is of paramount importance to data controllers, since failing to fulfill the obligation to provide information may result in an administrative fine ranging from 5,000 Turkish Liras up to 100,000 Turkish Liras. Therefore, data controllers should implement the Communiqué with the utmost care and be able and ready to demonstrate that they provide data subjects with the necessary information in order to fulfill their legal obligations and avoid such administrative penalties. Authors: Gönenç Gürkaynak Esq., İlay Yılmaz and Noyan Utkan of ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on May 29, 2018) [1] See http://www.resmigazete.gov.tr/eskiler/2018/03/20180310-5.htm, last accessed on May 25, 2018.
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Employment

Working Arrangements for Non-Resident Foreign Companies’ Turkey Operations

Working Arrangements for Non-Resident Foreign Companies' Turkey Operations Conducted through Local Individuals Introduction In our globalized world where trade has no borders, it is a usual practice for companies to conduct operations in different countries, including Turkey. Some foreign companies prefer having an establishment in Turkey, such as a local subsidiary company, while conducting their operations in Turkey, whereas some foreign companies prefer to stay as non-resident in Turkey and conduct their operations in Turkey through local individuals. The main reason for companies choosing the latter may be that the works that needs to be performed in Turkey may require only a few individuals, thus having an establishment for such a small business may be considered as a burden for the company. In this article, some of the commonly preferred working arrangements used by non-resident foreign companies for their operations in Turkey conducted through local individuals are explained. Commonly Preferred Working Arrangements (1) Direct Employment by Foreign Company The most straightforward working arrangement used by non-resident foreign companies for their operations in Turkey conducted through local individuals is execution of an employment agreement between the local individual and the foreign company, i.e. direct employment by foreign company. There is no legal provision under Turkish labor law that prevents a foreign company from executing an employment agreement with an employee for performance of certain works in Turkey. Having the employee under the payroll of the foreign company while having her/him stayed in Turkey is possible to the extent that regulations of the country where the company is established allows to do so. However, when in such a case, the employee cannot benefit any advantage or securities provided by Turkish Social Security Institution ("SSI") as she/he will not be registered as an employee (insured) with SSI. For this employee to be able to benefit from medical care services in Turkey, there is a specific procedure to complete. The employee should first obtain a document, evidencing her/his revenue from the respective country's authorized body and convey it to public bodies authorized by SSI in Turkey. Then, SSI determines the amount of premium to be paid for providing general health insurance and herewith the employee may benefit the health insurance. The possibility of direct employment by foreign company must be examined in light of the scenario where a dispute arises between the parties. In case a dispute arises between the parties in the future and the employee initiates a lawsuit against the employer (foreign company) before Turkish courts, two issues are of significance: (i) the question of whether Turkish courts have jurisdiction to hear such a case and (ii) the question of which law will be applicable to the employment agreement. Article 6(1) of Labor Courts Law No. 7036 ("Law No. 7036") provides that in addition to the courts of the employer's residence, the courts where the work is being performed have jurisdiction to hear the disputes connected to labor relationships. In case of direct employment by foreign company, the employee will perform the work in Turkey. Therefore, if the employee initiates a lawsuit against the employer (foreign company) before the courts where the employee performs the work, i.e. a Turkish court, based on Article 6(1) of Law No. 7036, the court will conclude that it has jurisdiction to resolve the dispute. In other words, Turkish courts will have jurisdiction in a possible lawsuit that may be initiated by the employee against the employer in case of direct employment by foreign company. After establishing its jurisdiction, Turkish court will determine the applicable law to the employment agreement for resolution of the dispute. The applicable law to agreements containing a foreign element, such as the employment agreement to be executed between the employee and the foreign company, is determined pursuant to the provisions of Law on Private International and Procedural Law No. 5718 ("Law No. 5718"). Article 27(1) of Law No. 5718 allows parties to choose the applicable law to their employment agreement. Therefore the employee and the foreign company can choose the applicable law to the employment agreement with a choice of law clause. That being said, such a choice is respected "as long as the minimal protection that is provided by the mandatory provisions of the law of the employee's habitual work place are reserved". Thus mandatory provisions of the law of the employee's habitual work place are seen as the "minimum protection". Based on these it can be concluded that even if the parties chooses the applicable law to the employment agreement in case of direct employment by foreign company, the minimum protection provided by the mandatory provisions of Turkish labor law must be regarded as a benchmark since these will be seen as the "minimum standards" that cannot be circumvented with the choice of law. Considering that almost all provisions of Turkish labor law are deemed mandatory in nature, practically Turkish labor law will be applied to the employment agreement. Article 27(2) of Law No. 5718 provides that "In cases where the parties have not designated a law, the law of the habitual work place of the employee shall govern the employment agreement." Pursuant to this provision, in case the parties do not choose the applicable law to their employment agreement in case of direct employment by foreign company, Turkish labor law as the law of the habitual work place of the employee will be applied by Turkish courts. As a result, it can be concluded that in practice, Turkish courts will apply Turkish labor law to the employment agreement in a possible lawsuit that may be initiated by the employee against the foreign company in case of direct employment by foreign company. (2) Liaison Office Another working arrangement used by non-resident foreign companies for their operations in Turkey conducted through local individuals is establishment of a liaison office in Turkey and employ the relevant individual through the liaison office. A company established under the laws of a foreign country may open a liaison office in Turkey upon the conditions that; (i) all expenses of the liaison office will be covered by the foreign currency brought from abroad, (ii) no commercial activity will be undertaken by the liaison office, and (iii) the liaison office will not generate any profits. In case a foreign company establishes a liaison office in Turkey, the relevant liaison office should be registered both with the tax office and SSI. Below elaborates on liaison offices under Turkish law. Companies established in accordance with the laws of foreign countries are authorized to open liaison offices in Turkey upon the permit granted by the Ministry of Economy, General Directorate of Incentive Implementation and Foreign Investments ("FIGD") located in Ankara. Liaison offices established in Turkey cannot engage in commercial activities. Liaison offices may engage in the certain activities such as (i) market research, (ii) providing technical support (providing trainings and technical support to distributors and supporting services to manufacturing suppliers in order to increase their quality standards), (iii) advertisement of products and services of the foreign company, (iv) operation as a regional management office for the foreign company (providing coordination and management services regarding activities such as preparation of investment and management strategies, planning, advertisement, sale, services following sale, brand management, financial management, technical support, research and development, external supply, testing of newly developed products, laboratory services, research and analysis, training of the employees), and (v) representation and accommodation (representation of the foreign company before relevant institutions and at relevant organizations, coordination and organization of the business contacts of the foreign company's authorized persons in Turkey, answering the office use needs of such persons). Liaison offices, in their first applications, are granted operation permits for 3 years at most. For term extensions, liaison offices are required to make an application before the expiration of their permissions. However, the permits obtained for market research or promotion of products or services of the foreign company cannot be extended. Liaison offices are not allowed to have a share capital. Liaison offices are represented by individual(s) to be appointed via a certification of authorization issued in accordance with the respective jurisdiction of the foreign parent company. (3) Contractor / Service Provider Execution of a service agreement with an individual or a company is another working arrangement used by non-resident foreign companies for their operations in Turkey conducted through local individuals. Below elaborates on these two options. (a) Service Agreement with an Individual It is possible to execute a service agreement with an individual for the performance of the works to be conducted in Turkey for the foreign company's Turkey operations. The most important point regarding this working arrangement is that the individual, who is party to the service agreement, is not an employee of the foreign company; she/he is an independent contractor who performs the services requested by the foreign company in return for a service fee. In other words, there is not employment relationship between this individual and the foreign company and the fee received by this individual is only service fee, not wage. Therefore, rules of Turkish labor law will not be applicable in case of execution of a service agreement with an individual. (b) Service Agreement with a Company It is also possible to execute a service agreement with a company for the performance of the works to be conducted in Turkey for the foreign company's Turkey operations. In this case, the service provider company will provide the services specified in the agreement in return for a service fee. Surely the service provider company will employ some employees for realization of the services. However, there will be no employment relationship between these employees and the foreign company. In other words, these employees will remain as employees of the service provider company. Conclusion As explained above, there exist different working arrangements used by non-resident foreign companies for their operations in Turkey conducted through local individuals. While the working arrangement of having a liaison office requires having an establishment in Turkey, other working arrangements, i.e. direct employment by foreign company and execution of service agreement with an individual or company, do not require any establishment. The foreign companies are considered as employer in cases of direct employment by foreign company and establishment of liaison office, whereas in case of execution of service agreement the foreign company is only party to the agreement and not have the status of employer. All of these working arrangements have advantages and disadvantages compared to each other and choosing one depends on the specific needs and commercial discretion of the relevant foreign company. Authors: Gönenç Gürkaynak, Esq., Tolga Uluay and Bahadır Erkan, ELIG Gürkaynak Attorneys-at-Law (First published by Mondaq on May 2, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
Corporate & Commercial

Turkey Moves to Improve the Investment Environment

I.    Introduction The Law on the Amendment of Certain Laws for the Improvement of the Investment Environment No. 7099 ("Law") was published in the Official Gazette last month (March 10, 2018) and introduced significant amendments to various laws, including the Turkish Commercial Code No. 6102 ("TCC"), the Tax Procedural Law, the Law on Legal Fees and the Law on Movable Property Pledges in Commercial Actions. This article addresses significant amendments and new rules stipulated by the Law for the Turkish Commercial Code. The Law aims to enhance Turkey's investment environment by reducing the number of transactions required to set up a company, by supporting investors, and by lowering the expenses associated with the incorporation of joint stock and limited liability companies. Save for certain exceptions as explicitly stated in the Law, the Law entered into effect on March 10, 2018. II.       Explanations on amendments regarding the Turkish Commercial Code By amending Article 40/2 of the TCC, the Law requires every merchant to submit its trade name and signature to be used under such trade name to the relevant Trade Registry. If the merchant is a legal entity, the trade name and signature specimens of persons authorized to sign documents on behalf of the legal entity must also be submitted to the Trade Registry. Signature specimens may be given in the presence of an authorized officer of any Trade Registry by submitting a written statement. This amendment repealed the notarization requirement for trade names and signature specimens before an authorized Notary Public prior to submission to the relevant Trade Registry. On the other hand, prior to this amendment, individuals residing outside of Turkey were permitted to have their signature specimens signed, notarized and apostilled abroad. However, following this amendment, individuals residing outside of Turkey will be required to sign their signature specimens in the presence of an authorized officer of a Trade Registry in Turkey. Pursuant to the changes made to Article 64 of the TCC, opening approvals of company books of joint stock companies and limited liability companies shall only be processed by the Trade Registries. With this amendment, Notary Public officials are no longer authorized to carry out opening approvals of company books. Therefore, investors are released from the requirement to pay additional notary fees for opening approvals of company books during the establishment of joint stock and limited liability companies. Prior to the changes put into effect by the Law, if a company recommended a person affiliated with the company to its shareholders to represent them during shareholders' meetings, Article 428 of the TCC obliged such a company to recommend another person for the same position, who should be completely independent and neutral, and to announce both of these persons to their shareholders. In practice, this obligation caused substantial problems and put significant additional burdens on small-scale joint stock companies. In light of this, Articles 428, 430 and 431 of the TCC have been repealed in order to reduce the obligations imposed on small-scale joint stock companies. The justification of the abolishment decision also stipulates that representative appointments set forth under Article 428 were introduced for joint stock companies listed on the stock exchange and for public companies whose shares are distributed to numerous shareholders; however, due to the text of Article 428, this rule also created additional burdens for small-scale joint stock companies. It is also put forth in the justification that, since Article 428 will not be applicable within the scope of the Capital Markets Law No. 6362, as per Article 30 thereof, small-scale joint stock companies should not face additional costs due to the representative appointment rules as foreseen under Article 428. In light of the amendments to Articles 575, 585 and 587, Notaries Public are no longer authorized to approve the signatures of founders and the articles of association of limited liability companies. The articles of association must be signed by the founders in the presence of authorized officers from the directorates of the Trade Registry. This amendment has entered into effect as of March 15, 2018. Thanks to these amendments, investors are no longer required to pay additional notary fees for the approval of the signatures of the founders and the articles of association of limited liability companies during the establishment of such limited liability companies. Article 585 of the TCC has been amended and the requirement concerning the payment of at least one-fourth of the subscribed capital prior to the establishment of a company has been abolished for limited liability companies. This amendment has also entered into effect as of March 15, 2018. As per Article 68 of the Law on the Amendment of Certain Laws for the Improvement of the Investment Environment No. 6728, published in the Official Gazette on August 9, 2016, Article 543/2 titled "Distribution after Liquidation" has been amended and the prescribed period for the distribution of a company's remaining assets to its shareholders following the latest announcement to the company's creditors has been decreased from one year to six months. III.    Conclusion These amendments to the Turkish Commercial Code aim to improve the investment environment in Turkey, boost the national economy, and reduce the costs of company incorporation and doing business in Turkey. The Law also introduces significant amendments regarding the liquidation and incorporation of companies and secondary legislation may be required in order to bring uniformity to the practice of Notaries Public and Trade Registries in Turkey. Authors: Gönenç Gürkaynak, Esq., Nazlı Nil Yukaruç and Büşra Üstüntaş, ELIG, Attorneys-at-Law (First published by Mondaq on April 11, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
TMT ( Technology, Media & Telecoms)

Turkey Regulates Broadcasting Services Provided Through the Internet

I. Introduction Turkey recently enacted an amendment to the Turkish radio and television legislation that will regulate radio, television and on-demand broadcasts provided through internet and have these services and their providers (media service providers and platform operators - please see their definitions under II) under the supervision and authority of the Radio and Television Supreme Council ("RTUK"). The amendment entered into force on March 28, 2018. Providers of radio, television and on-demand services through internet and platform operators transmitting these broadcasts will need to obtain a license from the RTUK as of this date. The amendment does not only relate to local broadcasters in Turkey, but also concerns and covers foreign media service providers and platform operators targeting audience in Turkey, regardless of whether they provide their service and broadcasts in Turkish language. This amendment was included in "the Draft Law Amending the Tax Law, Certain Laws and Certain Decrees", which was enacted on March 21, 2018 with the law number 7103 ("Law No. 7103") and published in the Official Gazette of March 28, 2018 and entered into force on the publication date. The amendment proposes addition of a new article (Article 29/A) to the Law No. 6112 on the Establishment and Broadcasting Services of Radio and Television Enterprises ("RT Law") with the title "Broadcasting services through internet". This amendment had wide media coverage and created a serious public discussion throughout its legislative process. The initial text of this amendment was quite controversial and raised concerns as to whether RTUK will be vested with an authority to regulate, monitor and supervise all contents in the internet medium and to impose restrictions on social media websites, video sharing platforms and other websites. By virtue of these discussions, the text of this amendment was subject to certain modifications before its enactment, in a way to make its scope clearer. II. Legislation Prior to the Amendment RT Law was previously not applicable to and RTUK did not have authority over broadcasts through internet. The scope of the RT Law covered the services that are provided by conventional broadcast entities operating under a license obtained from the RTUK who broadcast directly to customers, such as radio programs or television channels operating under an authorization obtained from RTUK. RT Law defines media service providers under Article 3 as legal entities that have the editorial responsibility to choose content for radio, television and on-demand-broadcast services and who choose the way to regulate and broadcast these services. As per RT Law, media service providers are obliged to obtain broadcast license from RTUK to broadcast through means of terrestrial, satellite and cable transmissions. RT Law also defines platform operators as enterprises which transform multiple media services or multiple signals into one and provide their transmission, through satellite, cable and similar networks either in an encoded and/or decoded form that is accessible directly by viewers. As both definitions did not refer to broadcasts through internet and only refer to means of terrestrial, satellite or cable transmission, RTUK did not have authority over broadcasts through internet under the legislation. However, now that the new amendment (Article 29/A) entered into force, RT Law is applicable to certain broadcasts through the internet. III. Changes Introduced by the Amendment According to first paragraph of Article 29/A of RT Law, which has been introduced by the recent amendment, even if the services are provided through internet, media service providers willing to broadcast their radio, television and on-demand broadcast services through internet are obliged to obtain a broadcasting license from RTUK and platform operators willing to transmit these broadcasts are obliged to obtain broadcast transmission authorization from RTUK. The article also states that media service providers which have temporary broadcast right and/or broadcast license from RTUK (e.g. radio and television channels operating under a license and/or right issued by RTUK) may broadcast through Internet and in accordance with the RT Law and the Law No. 5651 on Regulation of Broadcasts via Internet and Prevention of Crimes Committed through Such Broadcasts ("Law No. 5651"). In other words, RTUK is now authorized to monitor such broadcasts and their contents, and decide on measures such as banning broadcasts or imposing monetary fines that are determined within the scope of RT Law. The reasoning of the foregoing as explained in negotiation process of the amendment indicates that "Due to technological developments in information technologies sector and the widespread use of broadband internet services, radio and television broadcasts started to gravitate to the internet. Special contents to be broadcasted through internet are also being produced frequently. Media service providers making licensed broadcasting through terrestrial, satellite and cable means started to broadcasting through internet at the same time. Additionally, many institutions that do not have a license obtained from RTUK began to broadcasting their radio and television contents through internet without permission.". Taking into account the reasoning and the letter of the law together, the main purpose behind this article appears to be to regulate institutions that are broadcasting through both conventional means and internet such Fox TV, CNN Turk or the institutions broadcasting radio and television contents through internet such as BluTV. The second paragraph of Article 29/A states that, in the event that RTUK determines that broadcasting services of real persons or legal entities who do not have temporary broadcast right and/or broadcast license or whose broadcasting license has been cancelled are transmitted through internet, criminal judgeships of peace may render a decision for removal and/or access ban of contents upon RTUK's request. While the initially proposed version of second paragraph stated that criminal judgeships of peace decisions shall be sent to Access Providers Union for execution, the final and published version of Article 29/A refers to Information and Communication Technologies Authority ("ICTA") instead of Access Providers Union. Criminal judgeship of peace judge shall render its decision within twenty four hours at the latest, without hearing. However, it is still possible to appeal such decisions within the scope of provisions of the Turkish Code of Criminal Procedure. The article also refers to third and fifth paragraphs of Article 8/A of the Law No. 5651 which requires access ban decisions to be rendered regarding specific URL addresses and sets forth monetary fines for those who do not comply with access ban decisions, respectively. The newly introduced Article 29/A further states that even if the content or hosting provider is in a foreign country, the foregoing principles and restrictions also apply to transmission of broadcasting services of platform operators or of media service providers that are under the jurisdiction of another country if RTUK determines these broadcasts to be in violation of RT Law, international treaties which the Republic of Turkey is a party to and RTUK's assigned position; and in terms of broadcasting institutions which broadcast in Turkish through internet targeting Turkey or in another language but targeting Turkey and including commercial broadcasts. The provision explicitly dictates that such entities are obliged to broadcast license if they fall under the definition of media service operators; or transmission authorization certificate if they fall under the definition of platform operators. The initial text of Article 29/A (prior to modifications) consisted of four paragraphs. However, the latest published version includes an additional paragraph, which is the main change that is made on the amendment before it became effective. This additional paragraph (paragraph four) clarifies the concerns on the scope of this regulation and states that, notwithstanding, duties and authorizations of ICTA, individual communication cannot be considered within the scope of Article 29/A and platforms that are not dedicated to transmitting radio, television and on-demand broadcast services through internet medium and real persons and legal entities who only provide hosting services to radio, television and on-demand broadcast services shall not be considered as platform operators within the scope of this article. The last and fifth paragraph of Article 29/A provides that RTUK and ICTA shall jointly issue a regulation that determines the procedures and principles regarding presentation of radio, television and on-demand broadcasting services through internet, transmission of such services, broadcast license for the media service providers through internet, broadcasting transmission authorization for platform operators, monitoring of broadcasts and implementation of Article 29/A. IV. Conclusion The latest changes on the amendment certainly brought some degree of clarity to the scope of this provision and RTUK's authority over internet medium. Still, as the implementation and interpretation of this new article is yet unknown, all broadcasters and platforms whose services could fall under the scope of Article 29/A will need to assess whether this provision will be applicable to them, whether they would need to obtain a license from RTUK and adjust the contents of their broadcasts in line with the RT Law to avoid potential restrictions on or penalties related to their services in Turkey. Authors: Gönenç Gürkaynak, Esq., İlay Yılmaz and Burak Yeşilaltay, ELIG, Attorneys-at-Law                                                                (First published in Mondaq on March 28, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019
TMT ( Technology, Media & Telecoms)

Turkey Regulates Broadcasting Services Provided Through the Internet

I. Introduction   Turkey recently enacted an amendment to the Turkish radio and television legislation that will regulate radio, television and on-demand broadcasts provided through internet and have these services and their providers (media service providers and platform operators – please see their definitions under II) under the supervision and authority of the Radio and Television Supreme Council (“RTUK”). The amendment entered into force on March 28, 2018. Providers of radio, television and on-demand services through internet and platform operators transmitting these broadcasts will need to obtain a license from the RTUK as of this date. The amendment does not only relate to local broadcasters in Turkey, but also concerns and covers foreign media service providers and platform operators targeting audience in Turkey, regardless of whether they provide their service and broadcasts in Turkish language.   This amendment was included in “the Draft Law Amending the Tax Law, Certain Laws and Certain Decrees”, which was enacted on March 21, 2018 with the law number 7103 (“Law No. 7103”) and published in the Official Gazette of March 28, 2018 and entered into force on the publication date. The amendment proposes addition of a new article (Article 29/A) to the Law No. 6112 on the Establishment and Broadcasting Services of Radio and Television Enterprises (“RT Law”) with the title “Broadcasting services through internet”.   This amendment had wide media coverage and created a serious public discussion throughout its legislative process. The initial text of this amendment was quite controversial and raised concerns as to whether RTUK will be vested with an authority to regulate, monitor and supervise all contents in the internet medium and to impose restrictions on social media websites, video sharing platforms and other websites. By virtue of these discussions, the text of this amendment was subject to certain modifications before its enactment, in a way to make its scope clearer. II. Legislation Prior to the Amendment   RT Law was previously not applicable to and RTUK did not have authority over broadcasts through internet. The scope of the RT Law covered the services that are provided by conventional broadcast entities operating under a license obtained from the RTUK who broadcast directly to customers, such as radio programs or television channels operating under an authorization obtained from RTUK.   RT Law defines media service providers under Article 3 as legal entities that have the editorial responsibility to choose content for radio, television and on-demand-broadcast services and who choose the way to regulate and broadcast these services. As per RT Law, media service providers are obliged to obtain broadcast license from RTUK to broadcast through means of terrestrial, satellite and cable transmissions. RT Law also defines platform operators as enterprises which transform multiple media services or multiple signals into one and provide their transmission, through satellite, cable and similar networks either in an encoded and/or decoded form that is accessible directly by viewers. As both definitions did not refer to broadcasts through internet and only refer to means of terrestrial, satellite or cable transmission, RTUK did not have authority over broadcasts through internet under the legislation.   However, now that the new amendment (Article 29/A) entered into force, RT Law is applicable to certain broadcasts through the internet.   III. Changes Introduced by the Amendment   According to first paragraph of Article 29/A of RT Law, which has been introduced by the recent amendment, even if the services are provided through internet, media service providers willing to broadcast their radio, television and on-demand broadcast services through internet are obliged to obtain a broadcasting license from RTUK and platform operators willing to transmit these broadcasts are obliged to obtain broadcast transmission authorization from RTUK. The article also states that media service providers which have temporary broadcast right and/or broadcast license from RTUK (e.g. radio and television channels operating under a license and/or right issued by RTUK) may broadcast through Internet and in accordance with the RT Law and the Law No. 5651 on Regulation of Broadcasts via Internet and Prevention of Crimes Committed through Such Broadcasts (“Law No. 5651”). In other words, RTUK is now authorized to monitor such broadcasts and their contents, and decide on measures such as banning broadcasts or imposing monetary fines that are determined within the scope of RT Law.   The reasoning of the foregoing as explained in negotiation process of the amendment indicates that “Due to technological developments in information technologies sector and the widespread use of broadband internet services, radio and television broadcasts started to gravitate to the internet. Special contents to be broadcasted through internet are also being produced frequently. Media service providers making licensed broadcasting through terrestrial, satellite and cable means started to broadcasting through internet at the same time. Additionally, many institutions that do not have a license obtained from RTUK began to broadcasting their radio and television contents through internet without permission.”. Taking into account the reasoning and the letter of the law together, the main purpose behind this article appears to be to regulate institutions that are broadcasting through both conventional means and internet such Fox TV, CNN Turk or the institutions broadcasting radio and television contents through internet such as BluTV.   The second paragraph of Article 29/A states that, in the event that RTUK determines that broadcasting services of real persons or legal entities who do not have temporary broadcast right and/or broadcast license or whose broadcasting license has been cancelled are transmitted through internet, criminal judgeships of peace may render a decision for removal and/or access ban of contents upon RTUK’s request. While the initially proposed version of second paragraph stated that criminal judgeships of peace decisions shall be sent to Access Providers Union for execution, the final and published version of Article 29/A refers to Information and Communication Technologies Authority (“ICTA”) instead of Access Providers Union. Criminal judgeship of peace judge shall render its decision within twenty four hours at the latest, without hearing. However, it is still possible to appeal such decisions within the scope of provisions of the Turkish Code of Criminal Procedure. The article also refers to third and fifth paragraphs of Article 8/A of the Law No. 5651 which requires access ban decisions to be rendered regarding specific URL addresses and sets forth monetary fines for those who do not comply with access ban decisions, respectively.   The newly introduced Article 29/A further states that even if the content or hosting provider is in a foreign country, the foregoing principles and restrictions also apply to transmission of broadcasting services of platform operators or of media service providers that are under the jurisdiction of another country if RTUK determines these broadcasts to be in violation of RT Law, international treaties which the Republic of Turkey is a party to and RTUK’s assigned position; and in terms of broadcasting institutions which broadcast in Turkish through internet targeting Turkey or in another language but targeting Turkey and including commercial broadcasts. The provision explicitly dictates that such entities are obliged to broadcast license if they fall under the definition of media service operators; or transmission authorization certificate if they fall under the definition of platform operators.   The initial text of Article 29/A (prior to modifications) consisted of four paragraphs. However, the latest published version includes an additional paragraph, which is the main change that is made on the amendment before it became effective. This additional paragraph (paragraph four) clarifies the concerns on the scope of this regulation and states that, notwithstanding, duties and authorizations of ICTA, individual communication cannot be considered within the scope of Article 29/A and platforms that are not dedicated to transmitting radio, television and on-demand broadcast services through internet medium and real persons and legal entities who only provide hosting services to radio, television and on-demand broadcast services shall not be considered as platform operators within the scope of this article. The last and fifth paragraph of Article 29/A provides that RTUK and ICTA shall jointly issue a regulation that determines the procedures and principles regarding presentation of radio, television and on-demand broadcasting services through internet, transmission of such services, broadcast license for the media service providers through internet, broadcasting transmission authorization for platform operators, monitoring of broadcasts and implementation of Article 29/A. IV. Conclusion   The latest changes on the amendment certainly brought some degree of clarity to the scope of this provision and RTUK’s authority over internet medium. Still, as the implementation and interpretation of this new article is yet unknown, all broadcasters and platforms whose services could fall under the scope of Article 29/A will need to assess whether this provision will be applicable to them, whether they would need to obtain a license from RTUK and adjust the contents of their broadcasts in line with the RT Law to avoid potential restrictions on or penalties related to their services in Turkey.   Authors: Gönenç Gürkaynak, Esq., İlay Yılmaz and Burak Yeşilaltay, ELIG, Attorneys-at-Law   (First published in Mondaq on March 28, 2018)
ELIG Gürkaynak Attorneys-at-Law - October 28 2019