Erdem & Erdem Law Office

In its judgement of 11 June 2024, published in the Official Gazette dated 3 October 2023 and numbered 32681, the Constitutional Court ('CC') ruled, within the scope of individual application no. 2019/7376, that the applicant's right to a fair trial was violated owing to the evidential misassessment in reinstatement proceedings. [i] The factual background of the application examined in this article comprises a mutual termination agreement entered into between the employee and the employer. Mutual termination agreements, frequently applied pursuant to the Labour Law No. 4857, often raise questions concerning whether the employee's will was vitiated. In such disputes, the manner in which evidence is assessed has critical importance for the right to a fair trial. In this context, the CC's judgement is noteworthy. This article summarises the individual application subject to the CC's judgement and the judicial process, followed by an analysis of the CC's reasoning. Factual Background The applicant, Yılmaz Korkmaz, was employed as a commercial affairs officer at Türk Telekom A.Ş. Following the termination of his employment through a mutual termination agreement on 2 August 2017, he claimed that his will had been vitiated, that he had been pressured into signing the agreement with the threat of receiving no payments if he refused, and that the agreement was consequently invalid. He subsequently instituted reinstatement proceedings. The proceedings were conducted before the Ankara 32nd Labour Court. During the proceedings, the Applicant requested the hearing of witnesses, whose testimonies supported his claims of being subjected to pressure during the termination process and being warned that he would not receive his entitlements unless he signed the mutual termination agreement. On 8 March 2018, the first instance court ruled in favour of the Applicant, holding that the termination of the employment contract was invalid and ordering the Applicant's reinstatement. The court emphasised that in cases of termination through mutual agreement, the principle of interpretation in favour of the employee should prevail and the specific circumstances of the case must be carefully evaluated. The employer, Türk Telekom A.Ş., appealed the judgement. They argued that the first instance court had failed to conduct a sufficient inquiry and had incorrectly founded its judgement solely on the applicant's allegations and witness testimonies. The Ankara Regional Court of Appeal, 6th Civil Chamber ('Court of Appeal'), reversed the judgement, holding that there was no concrete evidence, other than the Applicant's abstract allegations, to support the claim that his will was vitiated. It further emphasised that the termination offer had been initiated by the applicant, who had retired shortly thereafter, and that the claims of duress were unsubstantiated. Additionally, the Court of Appeal noted that the applicant had received compensation exceeding severance and unused leave entitlements, including an additional four months' salary, which constituted sufficient benefit and a valid mutual termination. Following this final judgement, the Applicant brought the case before the Constitutional Court, alleging that the Court of Appeal had failed to consider the witness testimonies on file and that the finding of insufficient evidence was founded upon an incomplete examination, thereby violating his right to a fair trial.   Evaluation by the Constitutional Court The Constitutional Court emphasised that the right to a fair trial, protected pursuant to Article 36 of the Constitution, seeks to ensure procedural fairness rather than material justice. Whilst the assessment of evidence by lower courts generally falls outside the CC's jurisdiction pursuant to Article 148 of the Constitution, an intervention may be warranted in cases of manifest arbitrariness or serious error in discretion. The CC reiterated that its review focuses not on how the evidence was assessed but on whether such assessment was arbitrary or devoid of reasonable basis to the extent that it undermines the fairness of the proceedings. Consequently, the CC does not review the outcome of the trial but whether the constitutional guarantees concerning the trial process were respected. In the present case, the Constitutional Court found that the applicant had duly requested the hearing of witnesses, whose testimonies supported his claims. Nevertheless, the Court of Appeal had disregarded these statements entirely, proceeding as if no witnesses had been heard. However, the witness statements had in fact been included in the file through the first instance court's request for testimony. The CC determined that ignoring this crucial fact rendered the procedural safeguards of the right to a fair trial ineffective. Accordingly, the CC held that the Applicant's right to a fair trial had been violated and ordered a retrial to remedy the consequences of the violation. The court to which the case would be referred must re-evaluate the matter in a manner that eliminates the deficiency that constituted the ground for the violation. Conclusion In light of the above, the Constitutional Court concluded that the failure to consider witness evidence amounted to a violation of the right to a fair trial, despite the existence of a mutual termination agreement that appeared to fulfil formal conditions. This case illustrates the critical importance of a complete and proper evaluation of evidence in ensuring procedural justice.   This article was authored by Erdem & Erdem Senior Associate Ece Özsü Alpagut [i] Constitutional Court of Türkiye. (2023, October 3). Decision no. 2019/7376. Official Gazette, No. 32681. https://kararlarbilgibankasi.anayasa.gov.tr/BB/2019/7376

The recognition, enforcement, and setting aside of foreign court judgements and arbitral awards in Türkiye constitute processes in which the public policy doctrine emerges as one of the most critical criteria for judicial review, both in theory and in practice. Court of Cassation judgements determine the trajectory of case law concerning the scope and application of the public policy concept. In this article, the practical implications and developments are explained through Court of Cassation judgements rendered in recent years.[1] Mere Inconsistency Between a Foreign Arbitral Award and a Criminal Court Judgement Does Not, In Itself, Constitute a Ground for Refusing Recognition In its judgement of 8 November 2023, the General Assembly of the Court of Cassation ('the General Assembly') reviewed the application for enforcement and recognition of foreign arbitral awards rendered under the International Chamber of Commerce Arbitration Rules. The arbitral proceedings in question were conducted in two stages, and ultimately two arbitral awards were rendered, dated 13 December 2012 and 19 June 2013, respectively. In the recognition proceedings, separate allegations of public policy violation were raised in relation to each arbitral award. The first instance court held that the arbitral award dated 13 December 2012 conflicted with a final judgement rendered by the Turkish criminal courts; and in respect of the arbitral award dated 19 June 2013, it found that, whilst the valuation report underlying the award had been prepared by the claimant and its initial submission had been rejected, it was subsequently submitted to the case file pursuant to the arbitral tribunal's order and confidentiality determination, in a manner excluding commercial secrets; the identity of the report's authors was kept confidential; and the report was evaluated without being disclosed to the respondent. Based upon these grounds, the court concluded that the principles of equality of arms, the right to present evidence, and the publicity of proceedings had been violated, and accordingly dismissed the enforcement applications concerning both arbitral awards on the basis of public policy. The case was brought before the Court of Cassation, which held that there was no inconsistency between the arbitral award dated 13 December 2012 and the criminal court judgement, considering the reasoning of the acquittal, as the criminal court had concluded that there was insufficient, conclusive, and convincing evidence to support a conviction and that the elements of the alleged offence had not been established. As for the arbitral award dated 19 June 2013, the Court of Cassation found that the non-valuation-related parts of the report had been excluded and that no concrete evidence had been presented to prove that the respondent's lack of access to the report constituted a procedural irregularity under the applicable arbitral rules; accordingly, it concluded that there had been no public policy violation and reversed the first instance judgement. Following the reversal, the respondent filed an application for revision of the judgement, and upon reviewing this application, the Court of Cassation found that the partial submission of the report in contravention of the procedural rules agreed upon by the parties, the concealment of the identities of its authors, the lack of disclosure of the valuation models and methodologies applied, the absence of any opportunity for cross-examination of those individuals, and the fact that these limitations were not founded upon any legally valid or reasonable justification, amounted to a violation of the right to defence and constituted a violation of public policy. However, the Court of Cassation also held that the first instance court had erred procedurally and legally by rendering a single judgement rather than separate rulings with respect to each arbitral award, and accordingly reversed the judgement on grounds differing from its initial reasoning. Upon this second reversal based on different grounds, the first instance court resisted its previous judgement, and this judgement was appealed, bringing the matter before the General Assembly.   With regard to the arbitral award dated 19 June 2013, the General Assembly noted that this award had been excluded from the scope of review and held that the claimant had no legitimate interest in appealing this part of the judgement, thereby dismissing the appeal. As for the arbitral award dated 13 December 2012, the Court of Cassation ruled that the acquittal judgement rendered by the criminal court concerning the same factual circumstances did not constitute a ground to refuse the enforcement and recognition of the arbitral award, since the criminal court merely stated that the acts in question did not constitute a criminal offence, but did not make a clear and definitive assessment as to whether those acts were unlawful. Moreover, the arbitral award was rendered on the basis of an infringement of contractual obligations between the parties, which is distinct from criminal liability; consequently, there was no direct inconsistency between the arbitral award and the criminal court's judgement. The General Assembly concluded that the first instance court's judgement dismissing the enforcement and recognition of the arbitral award dated 13 December 2012 was incorrect, and reversed the lower court's ruling in respect of that award. It also found that the court's failure to render separate rulings for each arbitral award constituted a procedural   error   .[2] Enforcement of a Foreign Bankruptcy Judgment Rendered Against a Non-Merchant Individual is Against Public Policy   In its judgement of 9 May 2023, the Court of Cassation assessed the public policy implications of an application for enforcement and recognition of a foreign court judgement concerning bankruptcy law. In the present case, enforcement and recognition in Türkiye was sought for a bankruptcy judgement rendered by a Dutch court against the claimant. However, the first instance court dismissed the application on the grounds that the claimant was not a merchant under Turkish law. Referring to Article 43 of the Enforcement and Bankruptcy Law ('EBL'), the court held that only persons who are merchants or are subject to bankruptcy under special laws may be declared bankrupt in Türkiye, and that this limitation pertains to public policy. The Regional Court of Appeal also dismissed the appeal on the merits, emphasising that the foreign judgement was manifestly contrary to Turkish public policy owing to the claimant's non-merchant status. The Court of Cassation upheld the lower court's judgement, finding the reasoning lawful and procedurally correct. Consequently, the Court concluded that, for the enforcement of foreign bankruptcy judgements, it is lawful to consider whether the individual qualifies as a merchant under Turkish law and to evaluate the limitation set forth in Article 43 of the EBL within the scope of public policy.[3] An Award Rendered in the Presence of a Duly Notified but Absent Arbitrator Does Not Constitute a Ground for Refusal of Recognition In its judgement of 12 September 2023, the Court of Cassation examined whether the three-member arbitral tribunal had acted in accordance with procedural requirements when rendering its award. In the present case, one of the three arbitrators appointed by the parties failed to attend the deliberations owing to health and work-related reasons, despite having been duly notified of the meeting date; nevertheless, the remaining two arbitrators proceeded to issue the award. The first instance court held that the award rendered by two arbitrators was invalid pursuant to Article 295/2 of the Code of Civil Procedure ('CCP'). The court further noted, consistent with Court of Cassation precedents, that an award rendered by two arbitrators without the participation of the third in the deliberations of a three-member tribunal is deemed invalid. Accordingly, even though this procedural irregularity had not been raised by the parties, the court found that it had to be taken into consideration ex officio under the setting aside grounds set out in Article 439 of the CCP, and concluded that the award was contrary to public policy pursuant to Article 439/2(g).   However, the Court of Cassation did not uphold this approach and stated in its judgement that, pursuant to Article 295(2) of the CCP, an award rendered by the two arbitrators with concurring votes remains valid even if the third arbitrator who was duly invited to the deliberation did not attend, and that such a circumstance does not constitute a public policy violation. This judgement indicates that procedural irregularities arising during the arbitral proceedings should not automatically be regarded as violation of public policy.[4] The Application of Compound Interest in an Arbitral Award Does Not Constitute a Public Policy Violation   In its judgement of 16 June 2022, the Court of Cassation reviewed an application for recognition in Türkiye of a foreign arbitral award rendered in London. The respondent argued that there was no valid arbitration clause between the parties, that the appointment of the arbitrator was procedurally flawed, and that the compound interest awarded by the arbitrator was contrary to public policy. The first instance court held that the arbitration clause, which was formed through references made to the charter party, was valid under the New York Convention, and that the application of compound interest alone did not amount to a public policy violation, thereby granting recognition. The Regional Court of Appeal upheld the judgement, and the Court of Cassation, upon appeal, found the lower court judgements to be in accordance with the law. The judgement provides a detailed assessment of the validity of arbitration clauses incorporated by reference, the exceptions applicable to procedural defects in the arbitrator appointment process, and the limits of public policy objections to compound interest. It affirms that references to the main contract may suffice to establish arbitration intent and that the principle of revision au fond should be preserved in the context of compound interest evaluations.[5] Whether a Penalty Clause Is Excessive Cannot Be Reviewed Under Public Policy Grounds   In its judgement of 20 June 2022, the Court of Cassation reviewed an application to set aside an arbitral award rendered by the Istanbul Arbitration Centre. The dispute concerned a contractual penalty stipulated in a settlement protocol executed between the parties, arising from an infringement of the non-solicitation obligation. The claimants sought to set aside the award on the grounds that the penalty clause was excessive, no expert examination had been conducted, witness statements had not been considered, and the non-solicitation obligation violated competition law, thereby constituting an infringement of public policy. However, the Court of Cassation upheld the judgement of the Regional Court of Appeal, which had found that the arbitration clause had been validly concluded between the parties, the arbitrator had acted within the scope of the clause and had not exceeded their authority, the proceedings were conducted in accordance with the expedited arbitration rules of the Istanbul Arbitration Centre as agreed by the parties, and that the principles of party equality and the right to be heard had been respected. The appellate court had further held that the absence of an expert report fell within the discretion of the arbitrator and that the non-solicitation obligation based on a non-compete clause did not violate public policy. The Court emphasised, in particular, that whether a contractual penalty is excessive cannot be examined through the lens of public policy, as such an assessment would amount to a review of the merits. It was also stated that the non-solicitation obligation was limited in duration, constituted a matter of private law, and did not infringe upon the freedom to work. Finally, the Court concluded that the exclusive jurisdiction of the Competition Authority does not preclude arbitration in private law disputes. In doing so, the Court reaffirmed the limits of public policy objections in relation to penalty clauses and reiterated the principle that the merits of arbitral awards may not be examined by the courts.[6]   Law No. 805 Does Not Constitute a Ground for Refusal of Enforcement in Contracts Concluded Between Foreign Parties In its judgement of 12 December 2023, the 6th Civil Chamber of the Court of Cassation reviewed objections raised against the recognition of an arbitral award. The respondent argued that the contract, being drafted in a foreign language, violated Law No. 805; that the mandatory pre-arbitration conciliation procedure had not been conducted; that the facility subject to the contract posed risks to public health; and that the right to a fair trial and the right of defence had been infringed. On these grounds, the respondent asserted that the arbitral award was contrary to public policy, both procedurally (violation of fair trial guarantees, limitation of the right to defence, failure to comply with pre-arbitration conciliation obligations) and substantively (existence of a facility allegedly posing risks to public and occupational health and safety). The first instance court granted recognition, holding that the contract had been concluded between foreign companies and did not constitute an infringement of public policy. The court further noted that the allegations concerning public health risks fell within the scope of a review of the merits, and such matters could not serve as grounds for refusing enforcement. The Regional Court of Appeal upheld the judgement, emphasising that Law No. 805 is only applicable where both parties to the contract are Turkish nationals, and consequently the use of a foreign language in the contract and proceedings did not infringe public policy. The court also found that the parties had the opportunity to present their claims and defences, including counterclaims, during the arbitration proceedings, and that the principles of equality of arms and the right to a fair trial had not been violated. The Court of Cassation affirmed the judgement, finding the lower courts' reasoning accurate and lawful. It held that the right of defence had not been restricted, no public policy violation had occurred, and the arbitral award had been rendered in accordance with both procedure and law. The Court of Cassation particularly underlined that the submission of evidence, the opportunity to file counterclaims, and the exercise of procedural rights within the arbitration process precluded allegations of unfair trial. It concluded that objections concerning public health and environmental safety were related to the merits of the arbitral award and thus could not be evaluated within the scope of public policy violation.[7] Conflicting Arbitral Awards Rendered in Relation to the Same Dispute Constitute a Violation of Public Policy In its judgement of 15 June 2022, the Court of Cassation reviewed an application to set aside arbitral awards rendered under the Rules of the Istanbul Chamber of Commerce Arbitration Centre. The parties were involved in two separate arbitration proceedings arising from the same contract but in different capacities: in Case No. 2019/7, the claimant was the party transferring the portfolio, whilst in Case No. 2019/9, the claimant was the transferee company. Each case was adjudicated by a different sole arbitrator, and conflicting assessments were made as to whether the contractual obligations of the same company had been duly performed. The Regional Court of Appeal dismissed the applications to set aside on the grounds that there was no complete identity of parties and claims in the two arbitral proceedings, that the arbitrators had discretion in evaluating the evidence, and that the divergence between the awards did not constitute a ground for setting aside. However, the Court of Cassation held that, whilst courts are precluded from examining the merits of arbitral awards, conflicting awards based on the same factual circumstances may result in contradictory outcomes, which undermine the principles of legal certainty, transparency, and consistency, thereby constituting a public policy violation. According to the Court, whilst the award in Case No. 2019/7 found that the claimant had failed to fully perform its obligations, the award in Case No. 2019/9 concluded that the same party was not entitled to restitution of the contract price because it had fulfilled its obligations. Owing to this inconsistency, the Court found that the lower courts should have enquired into whether the award in Case No. 2019/7 had become final and should have assessed the potential res judicata effect. Rendering a judgement without conducting such an enquiry was found to be procedurally improper and contrary to public policy. Consequently, the Court of Cassation reversed the judgement, finding that the inconsistency between the arbitral awards concerning the same set of facts constituted a violation of public policy.[8]   Conclusion In recent years, the Court of Cassation has adopted a narrow interpretation of the public policy concept and has refrained from engaging in a review on the merits in setting aside and recognition proceedings brought against arbitral awards. The overall approach of the Court of Cassation is aligned with an arbitration-friendly stance. This reflects a positive judicial attitude towards the development of arbitration in Türkiye. Authored by Mehveş Erdem Kamiloğlu, Erdem & Erdem Managing Associate. [1] Kamiloğlu, Mehveş Erdem. 2021. "Public Policy as Grounds for Refusal of Recognition." Erdem & Erdem. Access Date: June 1, 2025 (https://www.erdem-erdem.av.tr/en/insights/public-policy-as-grounds-for-refusal-of-recognition). [2] General Assembly of the Court of Cassation dated 08.11.2023, Case No: 2022/660, Decision No: 2023/1066. [3] Court of Cassation 6th Civil Chamber dated 09.05.2023, Case No: 2023/1965, Decision No: 2023/1732. [4] Court of Cassation 6th Civil Chamber dated 12.12.2023, Case No: 2023/2416, Decision No: 2023/2676. [5] Court of Cassation, 11th Civil Chamber dated 16.06.2022, Case No: 2020/7985, Decision No: 2022/4932. [6] Court of Cassation 11th Civil Chamber dated 20.06.2022, Case No: 2021/3492, Decision No: 2022/5025. [7] Court of Cassation 6th Civil Chamber dated 12.12.2023, Case No: 2023/3007, Decision No: 2023/4212. [8] Court of Cassation 11th Civil Chamber dated 15.06.2022, Case No: 2022/2105, Decision No: 2022/4906.

Share capital augmentation in privately held joint stock companies constitutes a significant transaction enabling the company to expand and satisfy its financing requirements by strengthening its equity structure. Share capital augmentation denotes an increase in the amount of the company's ordinary/registered capital and is effected with the approval of a sufficient majority of shareholders. This process is governed by the provisions[i] of the Turkish Commercial Code ('TCC') and is subject to specific rules and conditions for non-public (i.e., privately held) joint stock companies. This article examines the methods, legal conditions, and processes of share capital augmentation in privately held joint stock companies according to the capital systems applied. Additionally, the protection and limitation of shareholders' pre-emptive rights (right to acquire new shares) in capital augmentations will be analysed. Methods of Capital Increase Share Capital Augmentation from External Sources (Increase by Capital Subscription): This is effected by obtaining new capital subscriptions in cash or in kind from outside the company or from existing shareholders. In other words, shareholders or new investors willing to contribute capital augment the capital by contributing additional funds or assets (capital in kind) to the company. This method of share capital augmentation is termed capital augmentation through subscription commitments and the company is provided with external resources. Share Capital Augmentation from Internal Resources (Bonus Issue): This is effected by converting the funds accumulated in the equity items of the company and permitted by the legislation to be added to the capital (such as retained earnings, share premium or reserves) into capital. In this case, the company issues new shares, but shareholders receive these shares gratuitously in proportion to their existing shareholdings. Internal capital augmentation does not provide fresh cash inflow to the company, but increases the company's capital by transferring equity items to capital. In the case of share capital augmentation from external sources (obtaining new subscription commitments), the TCC stipulates certain prerequisites. These requirements protect shareholders by seeking to ensure that the company's available capital is fully utilised and that available internal resources are utilised first and foremost. The two fundamental conditions set forth in the TCC are as follows: Payment of Existing Capital Subscriptions: In order to effect an augmentation through a new subscription commitment, the company must have fully paid for the previously subscribed capital shares. The Code provides that exceptions will be made for minor underpayments. Indeed, Article 456/2 of the TCC stipulates that the non-payment of amounts that may be deemed insignificant in proportion to the capital shall not constitute an obstacle to the capital augmentation. This provision has been introduced by the new law in order to eliminate the academic debate during the previous law period. Absence of Internal Resources to be Added to the Capital: Prior to an external capital augmentation, the company must not have internal resources (such as undistributed profits, funds, or reserves) on the balance sheet that can be added to the capital. By introducing this condition, the TCC seeks to prevent the company from demanding new cash from shareholders when there is an opportunity to augment capital from the company's own resources. In this way, it aims to protect shareholders who are not in sound financial condition and to prevent unnecessary external capital calls when there are existing resources within the company. The exception to Article 462 of the TCC, where this rule was drafted, is the unanimous vote of the shareholders for a capital augmentation through subscription, even if the company has internal resources on the balance sheet that can be added to the capital, as regulated by the Circulars of the Ministry of Trade. Once the above conditions are satisfied, the capital augmentation must be duly effected. The capital augmentation process differs according to the capital system adopted by the company (ordinary capital system or registered capital system). Below, the capital augmentation processes in privately held joint stock companies under these two systems are examined under separate headings.   Capital Increase Under The Ordinary Capital System The ordinary capital system denotes a system in which the company has a fixed amount of capital set in its articles of association and each capital augmentation requires an amendment to the articles of association. Most privately held joint stock companies, unless they have transitioned to the registered capital system, are governed by the ordinary capital system. In this system, capital augmentations are effected through a general assembly resolution and by amending the capital article in the articles of association. Consequently, the capital augmentation decision constitutes legally an amendment to the articles of association. The steps of the capital increase process in the ordinary capital system can be briefly summarized as follows: General Assembly Resolution: The board of directors of the company prepares a declaration concerning the capital augmentation and submits it for the approval of the shareholders. The general assembly must adopt a resolution in accordance with the quorum requirements of the TCC and the articles of association. Unless a higher quorum is stipulated in the articles of association, the capital augmentation resolution may be adopted by a majority of the votes present at the general assembly where at least half of the company's capital is represented, as in the case of other amendments to the articles of association. This constitutes the minimum requirement of the law; the articles of association may set higher quorums. With the capital augmentation resolution adopted at the general assembly, the capital article of the articles of association is amended to indicate the new capital amount. Subscription of New Shares: In order for a capital augmentation to be valid, all of the shares representing the augmented capital must be subscribed by the shareholders or new investors. In the share capital system, this subscription is either made directly in the amended articles of association approved by the general assembly or through a separate subscription commitment letter. Pursuant to the TCC, this subscription commitment must be unconditional, i.e., the share subscription cannot be made subject to any conditions. The capital augmentation cannot be completed until all new shares have been subscribed. Payment and Registration: In cash capital augmentations, pursuant to Articles 344 and 481 of the TCC, at least one-quarter of the augmented capital must be paid into the company account before registration, and the remaining portion must be paid within 24 months. Pursuant to the relevant legislation, the payment schedule of the new share prices may be regulated in the articles of association of the company, or may be determined by the general assembly or the board of directors. After the capital augmentation resolution is adopted, this resolution must be registered with the trade registry. The TCC limits the announcement and registration of the capital augmentation resolution to a specified period of time. Accordingly, the capital augmentation resolution of the general assembly must be registered with the trade registry within three months from the date of adoption. Otherwise, the resolution and the authorisation obtained from the relevant authorities (e.g., the Ministry), if any, shall become null and void. With the registration, the legal validity of the capital augmentation is established; registration has a constitutive effect. Ministry Permission (if required): Pursuant to the regulations issued pursuant to Article 333 of the TCC, the permission of the Ministry of Trade is required for the incorporation of some joint stock companies or amendments to the articles of association. If the company that is going to augment its capital is subject to this authorisation obligation (for example, companies operating in certain specialised sectors), the permission of the Ministry must also be obtained in advance for the capital augmentation. Whilst this step is not applicable for all companies, it constitutes a legal obligation for the sectors and situations specified in the relevant communiqués. Pre-emptive rights of existing shareholders are preserved in the ordinary capital system. Each shareholder has the right to purchase the new shares to be issued in the capital augmentation in proportion to its share in the existing capital. This right ensures that the shareholders' proportions are preserved as a result of the capital augmentation and thus prevents unanticipated changes in the distribution of control in the company.[ii] As a general rule, the pre-emptive right may not be restricted or abolished; however, this right may be restricted or abolished in the presence of just cause and with an enhanced quorum. Pursuant to Article 461 of the TCC, if the general assembly wishes to completely or partially abolish the pre-emptive rights whilst adopting a capital augmentation resolution, the affirmative vote of the shareholders representing at least 60% of the share capital is required for this purpose. The articles of association cannot authorise restriction of the pre-emptive right in advance; the law stipulates that this right may only be restricted within the scope of a specific capital augmentation resolution and by an enhanced majority. Furthermore, the pre-emptive right may only be restricted or revoked if there are just causes. The Law lists situations such as public offerings, business or subsidiary acquisitions within the scope of merger/division transactions, and enabling company employees to become shareholders of the company as examples of just cause. It is not legally possible to restrict the pre-emptive right without satisfying these conditions. If the general assembly decides to restrict pre-emptive rights, the board of directors is obliged to prepare a detailed report explaining the reasons for this restriction and to have it registered and announced in the trade registry. This mechanism was introduced to prevent the abuse of shareholders' rights.   Capital Increase Under The Registered Capital System The registered capital system is a capital system that entitles the board of directors to unilaterally augment the capital of a joint stock company up to a predetermined registered capital ceiling set by the articles of association. This system is widely utilised in joint stock companies that are publicly traded and may also be adopted by privately held joint stock companies that satisfy certain conditions. The principal advantage of the registered capital system is that it provides flexibility and speed in capital augmentation processes. Without waiting for the general assembly to convene each time, the board of directors may resolve to augment the capital at any time, provided that the company remains within the predetermined capital ceiling. This enables the company to react swiftly to market conditions or financing needs. There are specific conditions required by law for privately held joint stock companies to apply the registered capital system. Firstly, pursuant to Article 332 of the TCC and the amendment made in 2024, the initial capital of a privately held joint stock company wishing to adopt the registered capital system must be at least TRY 500,000. This amount may be increased by the decision of the Council of Ministers (currently the President of the Republic). A company that satisfies this condition may transition to this system by adding provisions concerning the registered capital system to its articles of association and registering it with the trade registry. The company's registered capital ceiling shall be clearly stated in the articles of association. The registered capital ceiling denotes the maximum permitted capital amount of the company, and the board of directors may augment the capital provided that it does not exceed this ceiling. The procedure for capital increases under the registered capital system includes the following: Authority and Resolution of the Board of Directors: In a company that has adopted the registered capital system, the board of directors is authorised to augment the capital up to the registered capital ceiling set by the general assembly. The board of directors may resolve to augment the capital at the time and in the amount it deems necessary. However, in order to adopt this resolution, the articles of association of the company must expressly grant this authority to the board of directors. The authorisation of the board of directors to augment the capital in this manner may be granted for a maximum period of five years; at the end of five years, the general assembly must extend the period (re-authorisation by amendment to the articles of association) in order for the authorisation to continue. A change in the board of directors does not remove the authorisation to augment registered capital; new administrations may also exercise this authorisation until the expiration of the term. Limit on Authorised Capital Ceiling: Whilst the TCC does not directly set an upper limit for the registered capital ceiling, the relevant Communiqué (Communiqué dated 19 October 2012) issued for privately held joint stock companies has established a limit on this issue. According to the Communiqué, the upper limit for registered capital may be at most five times the initial capital of the company. If the ceiling is to be increased in the periods following the transition to the registered capital system, the new ceiling may be set at a maximum of five times the current issued capital at the time of the general assembly meeting where the augmentation will be approved. This regulation seeks to prevent arbitrary increases by setting the registered capital ceiling excessively high and ensures that the company grows by remaining within a reasonable upper limit. Scope of the Board of Directors' Resolution: When resolving upon a capital augmentation, the board of directors determines the nominal value, number, type (such as registered or bearer shares), premium, or privileged status of the new shares to be issued. In addition, the resolution shall specify the duration and manner of exercise of pre-emptive rights. If the board of directors is going to limit or remove pre-emptive rights or issue shares at a price above the market value (premium), there must be an explicit authorisation provision in the articles of association for the board of directors to adopt these measures. In other words, if the articles of association do not authorise the board of directors to restrict the pre-emptive rights or issue privileged shares, the board of directors cannot adopt resolutions on these matters. In the registered capital system, the newly issued shares are also subscribed by the shareholders or investors through a subscription undertaking, which must also be unconditional. Status of Pre-emptive Rights: In the registered capital system, the fundamental principles concerning the pre-emptive right in the ordinary capital system also apply. Existing shareholders have the right to acquire new shares in proportion to their existing holdings. If the board intends to restrict this right, the articles must authorise it, and there must be legitimate grounds. The board must prepare a detailed report explaining the justification, and this report must be registered and published in the trade registry. Particularly in privately held companies, such balancing provisions are of considerable importance to protect the interests of minority shareholders. Registration and Publication of the Resolution: The capital augmentation resolution of the board of directors must be registered with the trade registry, just as the general assembly resolution must be. In the registered capital system, the registration of the board of directors' resolution must be effected within three months; otherwise, the board of directors' resolution may become null and void (similar time limitations apply since it is deemed to be a general assembly resolution). In order for the board of directors' capital augmentation resolution to have legal effect, it must be announced in the trade registry gazette, thereby informing creditors and shareholders. Board of Directors' Declaration: One of the significant innovations introduced by the TCC is the obligation of the board of directors' declaration in capital augmentations. After the capital augmentation is completed, the board must issue a written declaration confirming that the transaction was carried out in compliance with legal procedures and that all required permits and approvals were obtained. If capital was contributed in kind or in cash, the declaration must affirm its proper execution. Where pre-emptive rights are restricted, the beneficiaries of the unsubscribed shares and the rationale for the allocation must be disclosed. It constitutes a legal obligation for the transparency and accountability of the transaction to ensure that the board of directors' declaration is complete and truthful; otherwise, legal liability may arise. Whilst the resolutions of the board of directors adopted in the registered capital system are not deemed to be general assembly resolutions owing to their nature, they have a similar legal effect. Consequently, shareholders or stakeholders may object or bring an action for annulment against the capital augmentation resolution of the board of directors in the manner prescribed by law.[iii] Pursuant to Article 445 et seq. of the TCC, the provisions stipulated for the annulment of general assembly resolutions shall also apply by analogy to the resolutions of the board of directors on registered capital augmentation. In this context, shareholders who oppose the capital augmentation resolution may bring an action for annulment through commercial proceedings within one month from the date of the resolution. In order to ensure the protection of the shareholders, even in the registered capital system, the legislator has maintained judicial review against the resolutions of the board of directors. However, the conditions for bringing an annulment action and the limitation period are strictly applied; if the action is not brought within one month, the resolution becomes final.   Pre-emptive Right and its Protection The pre-emptive right (right to acquire new shares) in capital augmentations is a legally guaranteed right granted to existing shareholders in order to protect their shareholding in the company's capital. In privately held joint stock companies, pre-emptive rights are critical for the majority and minority shareholders to maintain their relative balance of power over the company. The TCC regulates the pre-emptive right as a fundamental principle and introduces detailed provisions concerning the exercise of this right. The principal rule is that the pre-emptive right may not be abolished or completely restricted by a general assembly resolution or by the articles of association. This right cannot be disabled by a general provision in the articles of association of the company; however, it may be restricted by an exceptional and one-off resolution depending on the characteristics of the capital augmentation. In both the ordinary capital system and the registered capital system, there must be a justified reason for the restriction of the pre-emptive right and the enhanced quorum stipulated by law must be satisfied. In capital augmentations effected by the general assembly, the pre-emptive right may be restricted or abolished with at least 60% of the capital, provided that just causes are presented. This threshold is intended as a mechanism to protect minority shareholders; it is not possible to set a quorum lower than 60% in the articles of association. Restriction of pre-emptive rights without just cause is strictly prohibited. The concept of just cause is listed in Article 461 of the TCC in an illustrative manner. For instance, the public offering of the company's shares (public offering), issuance of shares in exchange for the acquisition of another company or enterprise, or enabling the company's employees to become shareholders of the company are recognised as just cause. In the registered capital system, whilst the resolution to restrict pre-emptive rights is actually adopted by the board of directors, the authority of the board of directors in this regard only arises if it is explicitly regulated in the articles of association. If the board of directors wishes to restrict pre-emptive rights, it must document the situation by preparing a report stating its reasons and register this report with the trade registry. In practice, this report prepared by the board of directors is usually included as an annex to the capital augmentation resolution and explains to the shareholders in detail why the right to purchase new shares is restricted. This obligation to act in accordance with the principles of transparency, honesty, and equal treatment is intended to protect the rights of shareholders in both systems and is particularly important in terms of informing shareholders in private companies. In conclusion, the pre-emptive right constitutes an indispensable shareholder priority right in joint stock companies. The exercise, limitation, or removal of this right during the capital augmentation process is regulated in detail by law and subject to specific conditions. This legal framework on pre-emptive rights in private companies ensures that the balance of power within the company is maintained and trust amongst shareholders is preserved.   Conclusion Share capital augmentation is a frequently utilised method in privately held joint stock companies in line with the company's growth strategies and financing requirements. As analysed in this article, capital augmentations are subject to different procedures under the ordinary capital system and the registered capital system. In the ordinary capital system, the requirement of approval of the capital augmentation by the general assembly and amendment of the articles of association provides democratic participation in the process, but may also result in a certain degree of delay. In the registered capital system, on the other hand, capital augmentations can be effected more flexibly and swiftly owing to the authority granted to the board of directors within specified limits. Companies may choose one of these two systems depending on their size and capital needs, or may benefit from the advantages of the registered capital system to the extent permitted by law. In both systems, the mandatory provisions of the TCC ensure that the capital augmentation is carried out in a sound manner. In particular, the conditions that the existing capital must be paid up and internal resources must be utilised first, which are required in capital augmentations from external sources, are of considerable importance in terms of financial discipline and protection of shareholders' rights. Additionally, the regulations on the protection of pre-emptive rights ensure a fair transaction by preventing the dilution of the existing shareholders' shareholding in the company against their will in capital augmentations. Consequently, when the capital augmentation process in privately held joint stock companies is carried out within the framework of the rules stipulated by the legislator, it serves both to strengthen the capital structure of the company and to protect the rights of shareholders. When implemented correctly and in compliance with legal obligations, capital augmentations constitute an effective tool for companies to achieve their long-term growth objectives.   This article was authored by Erdem & Erdem Partner, Head of Corporate and M&A, Tuna Çolgar. [i] Turkish Commercial Code No. 6102 and Related Legislation Provisions. [ii] Tekinalp, Ünal, The New Law of Capital Companies, 4th updated edition, 2013, p. 214 [iii] Karahan, Sami, Company Law, 2012, relevant sections.

Introduction The load increase/reduction instructions issued by the Türkiye Elektrik İletim Anonim Şirketi ('TEİAŞ') and market participants' obligations concerning real-time balancing typically become a point of interest following power outages, malfunctions, and/or administrative investigations. Indeed, in mid-August, various media outlets reported that the Energy Market Regulatory Authority ('EMRA') had requested information from 66 electricity generation companies concerning the reasons for non-compliance with load reduction and/or load increase instructions issued between 2020 and 2024. In light of this new development in the electricity market, the legal framework of the real-time balancing mechanism in the electricity market will be examined in this article. General Overview of the Balancing Mechanism Owing to the characteristics of electricity and the grid, production and consumption of electricity must always remain in constant balance. If this balance cannot be maintained, outages and malfunctions may occur. For this reason, there are regulatory instruments designed to ensure this balance. The nature of these mechanisms differs as real time approaches. Indeed, pursuant to Article 5 of the Electricity Market Balancing and Settlement Regulation ('BSR'), published in the Official Gazette dated 14 April 2009 and numbered 27200, the balancing mechanism comprises the following: (i) the forward electricity market; (ii) the day-ahead market, which complements bilateral agreements; (iii) the intraday market; and (iv) real-time balancing. The stages preceding real-time balancing permit market participants to balance their own production and consumption. Real-time balancing, which is the subject of this article, comprises activities carried out by TEİAȘ to maintain the balance between supply and demand of active electricity energy in real time. Real Time Balancing Mechanism The activities to be carried out within the scope of real-time balancing are defined in the Electricity Grid Regulation ('Grid Regulation'), published in the Official Gazette dated 28 May 2014 and numbered 29013 (Repeated). The fundamentals of real-time balancing are regulated pursuant to Article 112 of the Grid Regulation. According to the second paragraph of this provision, real-time balancing activities are carried out through: (i) primary frequency control service and secondary frequency control service; (ii) load increase and load reduction operations within the scope of the balancing power market; and (iii) emergency measures.[1] Whilst not listed in Article 112 of the Grid Regulation, the newly introduced limited frequency sensitivity mode service may also be considered within the scope of real-time balancing. Participation in some of these activities is optional, whilst in others it is mandatory. Primary Frequency Control and Secondary Frequency Control Primary frequency control and secondary frequency control are ancillary services defined in the Grid Regulation.[2] It should be noted that primary and secondary control services are not mandatory services. Whilst the provision of these services was mandatory for certain plants, this was changed with the Electricity Market Ancillary Services Regulation ('Ancillary Services Regulation') published in the Official Gazette dated 26 November 2017 and numbered 30252. The Ancillary Services Regulation provides that primary and secondary frequency control services will be provided by legal entities that have executed the standard market participation agreements prepared by TEİAŞ.[3] If market participants enter into such an ancillary service agreement, they become obliged to provide the service in accordance with the provisions of that agreement.[4] Primary frequency control is the process of bringing the system frequency to a new balance point by automatically increasing or decreasing the active output power of the ancillary service unit in response to a drop or rise in system frequency.[5] Secondary frequency control refers to the activity of bringing the system frequency to its required value by increasing or decreasing the active power output through signals automatically sent by the National Load Dispatch Center ('NLDC').[6] Primary and secondary frequency control are complementary activities. In summary, when there is a mismatch between production and consumption in the electricity grid, the deviation in grid frequency is balanced by primary frequency control, whilst secondary frequency control seeks to restore the system frequency to its nominal value (50 Hz). The legal entities that are to be engaged for the primary and secondary frequency control services are selected through the procurement processes defined in Articles 13 and 21 of the Ancillary Services Regulation. Such legal entities provide the service by keeping available the frequency control reserve they are obliged to maintain during the relevant period and by delivering primary/secondary frequency control responses consistent with the provisions of the Grid Regulation. The legal entities providing the service in this manner are paid a capacity fee determined in accordance with the provisions of the Ancillary Services Regulation. Pursuant to Article 13 for primary frequency control and Article 21 for secondary frequency control of the Ancillary Services Regulation, if it is determined that the legal entities undertaking to provide these services fail to do so, no capacity fee shall be paid, and the non-performance penalties established in Article 30 for primary frequency control and Article 31 for secondary frequency control shall be applied. Limited Frequency Sensitivity Mode With an amendment made to the Ancillary Services Regulation on 17 December 2024, the limited frequency sensitivity mode has been introduced into the legislation as a new ancillary service. Pursuant to Article 8/8 of the Ancillary Services Regulation, electricity generation facilities that obtained an electricity generation licence after 1 January 2025 are required to undergo a limited frequency sensitivity mode test. Those who are obliged to participate in the limited frequency sensitivity mode service must enter into an ancillary service agreement with TEİAŞ in this regard. According to Article 31/A of the Ancillary Services Regulation, the principles of this service will be established in the ancillary service agreement to be prepared by TEİAŞ. Pursuant to Provisional Article 9, TEİAȘ will prepare this ancillary service agreement and submit it to the Energy Market Regulatory Authority (EPDK) by 1 December 2025. Load Increase and Load Reduction Instructions within the Scope of the Balancing Power Market The balancing power market is a wholesale electricity market operated by TEİAŞ. The purpose of the activities in this market is to balance electricity supply and demand in real time.[7] Market participants that satisfy the conditions to qualify as a balancing unit and have at least one settlement-based supply/draw unit are required to participate in the balancing power market.[8] Consequently, legal entities holding licensed electricity generation facilities are obliged to participate in the balancing power market.[9] Following the completion of the day-ahead market, the bidding process of market participants within the scope of the balancing power market commences. In these bids, market participants must offer all of the capacities of the relevant balancing units that can technically be realised.[10] In other words, electricity generation facilities must offer all their available capacity, excluding that allocated to the day-ahead market, bilateral agreements, primary frequency control, and secondary frequency control, as load increase capacity in the balancing power market. Market participants are obliged to comply with the instructions given to them by the NLDC within the scope of real-time balancing. If the instruction cannot be fulfilled owing to technical issues, they are obliged to inform the NLDC and/or the Regional Load Dispatch Center ('RLDC').[11] If the instructions are not carried out, the fees to be calculated pursuant to the relevant articles of the BSR will be charged to the market participant who fails to comply with the instruction.[12] If market participants fail to fulfil the instructions sent to them without a valid and acceptable reason, TEİAŞ will issue a written warning requiring the violations to be rectified. If the violations persist, TEIAȘ prepares a report and notifies EMRA. If a violation is determined in the review conducted by EMRA, the sanctions established in Article 16 of the Electricity Market Law No. 6446 ('Law') shall apply. Emergency Precautions Emergency measures are methods applied when the frequency of the electricity grid reaches levels that may create critical or unstable operating conditions,[13] or when excessive voltage drops occur outside the voltage limits specified in the Grid Regulation. According to the Grid Regulation, these methods comprise the following: issuing emergency notifications to electricity producers; providing instant demand control service within the scope of the Ancillary Services Regulation; automatically cutting demand through low-frequency relays; and implementing outages/curtailments by TEİAŞ.[14] The parties subject to emergency measures are defined as TEİAȘ, distribution companies, eligible consumers, legal entities holding generation licences, and owners of unlicensed generation facilities connected at the transmission level.[15] The emergency instructions to be sent by NLDC or RLDC are not required to comply with the offers submitted in the balancing power market.[16] This is because emergency instructions are issued not as part of a commercial activity, but to ensure system security. Users who receive emergency instructions are required to comply with them. If they are unable to do so, they must promptly notify the NLDC and/or RLDC of their situation. Another emergency measure is instant demand control. The addressees of this measure are consumption facilities that provide instant demand control service pursuant to the Ancillary Services Regulation. When this service is required, TEIAS may cut the electricity consumption of these facilities through instant demand control relays.[17] If the system frequency continues to fall, TEIAS may mandatorily cut electricity demand through low-frequency relays.[18] Ultimately, in order to prevent system collapse, compulsory curtailments, whether planned or unplanned, may be applied. Conclusion The real-time balancing mechanism in the electricity market is of critical importance for ensuring system security and maintaining the supply-demand balance. The investigation initiated by EMRA concerning the 2020-2024 period has drawn attention to the legal consequences of non-compliance with these obligations. Indeed, failure to comply with the instructions issued by TEİAŞ within the framework of real-time balancing activities may lead to both technical and legal consequences. It is of vital importance for market participants to fulfil these obligations in order to safeguard electricity supply security, ensure the efficient functioning of the market, and mitigate the risk of being subject to sanctions This article was authored by Erdem & Erdem Senior Associate Rüştü Mert Kaşka [1] Although Article 112 of the Grid Regulation also refers to the standby reserve service, this service was removed from the scope of the Grid Regulation and the BSR by the amendment published in the Official Gazette dated 26.11.2017 and numbered 30252. [2] Grid Regulation Article 104. [3] Ancillary Services Regulation art. 16/1 and art. 24/1. [4] In art. 7/2 of the Ancillary Services Regulation, it is articulated that the obligation to provide ancillary services could be regulated in a different regulatory instrument. However, as for primary frequency control and secondary frequency control, no such regulation exists. [5] Ancillary Services Regulation art. 4/1-mm. [6] Ancillary Services Regulation art. 4/1-üü. [7] BRS art. 4/1-ş. [8] BRS art. 19/1. [9] Electricity storage facilities with certain characteristics may also qualify as balancing units, provided that a request is made by the market participant in whose name they are registered and such request is approved by TEİAŞ. (BSR art. 22/2-a) [10] BSR art. 67/1-c [11] BSR art. 71/A. [12] BSR art. 102/A and BSR 105/a. [13] Described under Grid Regulation art. 63/1. [14] Grid Regulation art. 63. [15] For considerations regarding unlicensed (license-exempt) generation facilities see: Rüştü Mert Kaşka, Important Amendments Concerning Unlicensed Electricity Generation Plants (https://www.erdem-erdem.av.tr/en/insights/important-amendments-concerning-unlicensed-electricity-generation-plants, Access Date: 04.09.2025) [16] BSR art. 75, Grid Regulation art. 65. [17] Grid Regulation art. 66. [18] Grid Regulation art. 67.

Introduction The European Data Protection Board ('EDPB') published Opinion 28/2024[1] examining principal data protection issues arising from the processing of personal data within artificial intelligence ('AI') model environments. This Opinion was formulated in response to a request from the Irish Supervisory Authority pursuant to Article 64(2) of the GDPR,[2] acknowledging the extensive deployment[3] of AI technologies and the intricate challenges they present to data protection legislation. Background The EDPB's Opinion was prompted by increasing demand for a harmonised approach to the application of GDPR provisions to AI models throughout the European Economic Area. Organisations increasingly depend upon AI for varied purposes, including enhancing customer services and identifying fraudulent activities. However, the integration of personal data into AI model development and deployment gives rise to significant legal and ethical concerns. The principal questions examined in the Opinion comprise: The circumstances under which an AI model may be deemed anonymous. The suitability of legitimate interest as a lawful basis for data processing during AI development phases. The suitability of legitimate interest as a lawful basis for data processing during AI deployment phases. The consequences of utilising unlawfully processed personal data during AI model development for subsequent AI model operations. The Opinion seeks to provide guidance to supervisory authorities on consistent GDPR enforcement whilst addressing systemic and emerging issues arising from AI technologies. Scope of the Opinion Anonymisation of AI Models: Establishing when AI models trained on personal data may be deemed anonymous. Legitimate Interest: Evaluating how controllers may rely upon legitimate interest as a lawful basis during AI model development and deployment. Impact of Unlawful Processing: Assessing the ramifications of utilising unlawfully processed personal data during the development phase for subsequent AI model operations. The EDPB emphasises that its guidance does not constitute an exhaustive solution but rather provides a framework enabling supervisory authorities to evaluate AI-related data protection concerns on a case-by-case basis. Main Findings of the Opinion Anonymisation of AI Models: The EDPB emphasises in the Opinion that AI models trained on personal data cannot be universally deemed anonymous. This determination depends upon whether personal data can be directly or indirectly inferred from the model. Supervisory authorities must evaluate AI model anonymity through case-by-case analysis. The Opinion provides a non-exhaustive list of methods that may be employed by controllers claiming anonymity, including: model design demonstrating prevention or limitation of personal data collection and use for model training; reduction of data identifiability; prevention of extraction; and resistance to attacks (e.g., membership inference and model inversion). Anonymity requires that both direct extraction of personal data and unintentional disclosure through queries be negligible under reasonable circumstances. Legitimate Interest as a Lawful Basis: The Opinion emphasises that legitimate interest pursuant to Article 6(1)(f) of the GDPR cannot serve as the default lawful basis for personal data processing in AI model training.[4] It further notes that the GDPR establishes no hierarchy amongst the different lawful bases for processing. Controllers must justify the appropriate lawful basis by demonstrating compliance with the three-step test:[5] Identifying the legitimate interest pursued by the controller or a third party. For this purpose, the interest must cumulatively be: (i) lawful; (ii) clearly and specifically articulated; and (iii) real and present. Assessing the necessity of processing for the stated interest by satisfying the 'necessity test'. Ensuring that the legitimate interest is not overridden by data subjects' fundamental rights and freedoms by satisfying the 'balancing test'. Given the complexity of AI models, the reasonable expectations of data subjects regarding processing activities are relevant to the balancing test. The Opinion includes a non-exhaustive list of mitigating measures during the AI development and deployment phases that could limit the impact of data processing whilst ensuring compliance with transparency and data minimisation principles. For instance, excluding from publications data content concerning vulnerable individuals, and refraining from collecting data from websites that object to web scraping may constitute forms of mitigation measures.[6] Unlawful Processing of Personal Data: The Opinion identifies three scenarios concerning unlawful processing during AI model development: Scenario 1: Where personal data is retained in the model and used by the same controller during deployment, the impact on lawfulness depends upon the purpose of the subsequent processing. Scenario 2: Where personal data is retained in the model and used by another controller through the deployment of the model, the recipient must verify the lawfulness of the data used in development as part of its accountability obligations to ensure lawful processing and compliance with Articles 5(1)(a) and 6 of the GDPR. In this regard, the EDPB recommends that controllers pay attention to the source of the data and any apparent factors indicating that the initial processing was found unlawful by a supervisory authority or court decision determining infringement of the GDPR by the AI model. Scenario 3: Where personal data is unlawfully processed to develop an AI model and anonymised before deployment by the same or another controller, subsequent operations may not fall within the scope of the GDPR unless personal data is reintroduced. However, where further personal data is collected during the post-anonymisation deployment phase, the GDPR would apply. Consequently, the lawfulness of processing at the deployment phase may be affected by unlawful initial processing, unless the model has been anonymised. Conclusion Opinion 28/2024 underscores the EDPB's commitment to addressing the challenges presented by diverse AI technologies whilst safeguarding data subjects' rights. By emphasising a case-by-case approach, the Opinion equips supervisory authorities and data protection officers with tools to assess compliance and promote ethical, secure, and responsible innovation. [1] EDPB, Opinion 28/2024 on certain data protection aspects related to the processing of personal data in the context of AI models, 17.12.2024, Access Date: 06.01.2025, For Access: https://www.edpb.europa.eu/system/files/2024-12/edpb_opinion_202428_ai-models_en.pdf [2] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) OJ L 119, 4.5.2016, s. 1–88. [3] EU AI Act Article 3 defines deployer as follows: "a natural or legal person, public authority, agency or other body using an AI system under its authority except where the AI system is used in the course of a personal non-professional activity”. Deployment involves the process by which an AI system is put into use by a deployer within their area of authority. This encompasses the integration and application of the AI system in real-world settings to achieve its intended objectives. [4]    CMS Law-Now, 20.12.2024, Access Date: 06.01.2025, For Access: https://cms-lawnow.com/en/ealerts/2024/12/edpb-opinion-28-2024-key-takeaways-on-processing-personal-data-in-the-context-of-ai-models?format=pdf&v=13 [5] For further information on three-step test please see: EDPB Guidelines 1/2024 on processing of personal data based on Article 6(1)(f) GDPR, 08.10.2024, Access Date: 06.01.2025, For Access: https://www.edpb.europa.eu/system/files/2024-10/edpb_guidelines_202401_legitimateinterest_en.pdf. [6]    Rosie Nance, Marcus Evans, Francesco Gelmetti, The EDPB Opinion on training AI models using personal data and recent Garante fine – lawful deployment of LLMs, Access Date: 06.01.2025, For Access: https://www.dataprotectionreport.com/2025/01/the-edpb-opinion-on-training-ai-models-using-personal-data-and-recent-garante-fine-lawful-deployment-of-llms/#page=1 This article was authored by Erdem & Erdem Senior Associate Tilbe Birengel

Introduction In Türkiye, it has recently become increasingly common, particularly in retail stores, to send verification codes to data subjects via SMS during the provision of goods and services and to process personal data in this manner. In the complaints submitted to the Personal Data Protection Board ('Board'), it has been observed that, during transactions such as making a payment, opening a record, creating a membership, or preparing a quotation, individuals' contact information is requested, then a verification code is sent via SMS, and the individual is asked to convey this code to the staff member or enter it into the system on the grounds that it is mandatory for completing the payment transaction, issuing the invoice, delivering the invoice to the contact address, or updating the information. However, complaints have intensified that commercial electronic messages are subsequently sent to the data subjects following these transactions. Upon the widespread use of these practices, which give rise to different legal consequences through a single transaction, the Board made substantial assessments on the matter in its Principle Decision dated 10 June 2025 and numbered 2025/1072, which was published in the Official Gazette dated 26 June 2025 and numbered 32938 ('Principle Decision').[1] In this article, the boundaries of the practice will be examined in light of the assessments contained in the said Principle Decision; additionally, how to design notice and explicit consent processes in compliance with Law No. 6698 on the Protection of Personal Data ('KVKK') will be addressed. Assessment of the Principle Decision The Board first emphasised that presenting verification codes sent via SMS as if they were an indispensable element of a purchase may lead to misleading the data subjects. In this context, attention was drawn to the necessity of providing data subjects with clear and comprehensible information concerning the purpose and use of the code and what consequences this will have in terms of personal data. The Decision also stated that combining different processing activities such as acceptance of a membership agreement, granting permission for the processing of personal data, or obtaining consent for the sending of commercial electronic messages under a single transaction is unlawful. It was stated that, for processing activities requiring explicit consent (for instance, the sending of commercial electronic messages), separate options must be presented to data subjects, and consent must be obtained independently for each transaction. The Board pointed out that in personal data processing activities founded upon explicit consent, it is obligatory that the consent obtained satisfies the validity conditions stipulated in the KVKK, and in this context, making consent for the sending of commercial electronic messages a precondition for the provision of a product or service is not permissible. Finally, the Board stated that in the event of acting in contravention of these obligations, administrative sanctions would be imposed on data controllers pursuant to Article 18 of the KVKK. With the Board's evaluations, it has been clearly established that this SMS system, frequently resorted to recently by stores and similar service providers, constitutes an unlawful practice in terms of the KVKK. In this respect, the Principle Decision not only resolved existing complaints but also confirmed the impropriety of this increasingly widespread practice in the sector and shed light on how new systems to be designed in the future should be structured. Information Obligation and Explicit Consent Practices Procedures and Principles of the Information Obligation Within the scope of the KVKK, providing notice to data subjects during the processing of personal data (in other words, informing individuals) is one of the most fundamental conditions of a lawful personal data processing activity. The information obligation requires informing data subjects about: (i) the identity of the data controller; (ii) the purposes for which personal data will be processed; (iii) to whom and for what purposes the obtained personal data may be transferred; (iv) the method and lawful ground for collecting data; and (v) the rights of the data subject listed in Article 11[2] of the KVKK. In the information to be presented to individuals (in information notices), the purpose of data processing must be specific, explicit, and legitimate, and general, ambiguous, or misleading statements must not be included. At this point, providing incomplete, incorrect, or misleading information will result in a contravention of the information obligation, which is one of the erroneous practices emphasised in the Principle Decision. The Communiqué on the Principles and Procedures to be Followed in Fulfilling the Obligation to Inform[3] ('Communiqué') also explicitly lists certain conditions concerning how this obligation should be fulfilled. Accordingly, in every case where personal data are processed, whether founded upon the explicit consent of the data subject or on other processing conditions in the KVKK (without requiring explicit consent), individuals must be appropriately informed, and the fulfilment of the notice obligation must be provable by the data controller. Consequently, fulfilling the information obligation in a manner that can be evidenced in physical or digital form (such as delivering a copy of the information notice to the data subject, or directing them via a link to comprehensive information texts) will provide ease of proof for data controllers in a potential audit. The Guide on Information[4] published by the Personal Data Protection Authority ('Authority') concerning how to fulfil the notice obligation in compliance with the KVKK is also instructive for data controllers. In the Guide, the issues to be considered in fulfilling the information obligation are explained with concrete and practice-oriented examples, and both good practices and erroneous practices deemed unlawful are included. Validity Conditions of Explicit Consent and the Problem of Multiple Approvals with a Single Transaction Within the scope of Article 5 (conditions for processing personal data) and Article 6 (conditions for processing special categories of personal data) of the KVKK, explicit consent is one of the exceptional grounds for the processing of personal data, and it is valid only if it is specific to a particular subject, founded upon information, and given of the data subject's free will. Whether a data processing activity should be carried out on the basis of explicit consent or on other processing conditions listed in Articles 5 and 6 of the KVKK (for instance, performance of a contract, necessity for compliance with a legal obligation) is determined in each concrete case according to the purpose, scope, and nature of the personal data processing activity. The sending of commercial electronic messages, which is the subject of the Principle Decision, is a consent-based activity and can only be lawful with the explicit consent freely given by the data subject. When all these points are evaluated together, explicit consent must include the 'positive declaration of intent' of the person giving consent. Without prejudice to other regulations in the legislation, there is no requirement for explicit consent to be obtained in writing, but as with the information obligation, explicit consent must be obtained in a manner that is provable by the data controller, whether electronically, physically, or through call centres and similar channels. The issue of making explicit consent a precondition for the provision of a service has been particularly emphasised by the Board and the Authority since the entry into force of the KVKK. This error, which is frequently encountered in practice, prevents consent from being founded upon free will and eliminates its validity. Because a data subject who is compelled to give consent to benefit from a service does not actually have a genuine choice; this vitiates the consent given and renders it legally invalid. Conversely, in its decisions on the subject,[5] the Board has drawn attention to the fact that obtaining explicit consent where other personal data processing conditions exist means misleading and misdirecting the data subject and consequently constitutes an abuse of right by the data controller. Additionally, general consents that are not limited to a specific subject and not restricted to the relevant transaction are deemed 'blanket consents' and are considered legally invalid. For instance, declarations of consent such as 'all kinds of commercial transactions, all kinds of banking transactions and all kinds of data processing activities' that do not point to a specific subject and data processing activity are deemed blanket consents and considered invalid. Consequently, obtaining explicit consent for multiple personal data processing activities through a single transaction or action will undermine the validity of the consent. Consents obtained with a single declaration have been specifically addressed in many Board decisions as not being compatible with the principles and rules of the KVKK.[6] Nevertheless, the Principle Decision points out that combining different types of transactions, such as acceptance of a membership agreement, granting approval for the processing of personal data, and consenting to the sending of commercial electronic messages under a single transaction does not grant the data subject a genuine right of choice and eliminates the independence of the consent. Such practices not only undermine the validity conditions of explicit consent but also contravene the fundamental principles stipulated by the KVKK, such as transparency and the requirement that data processing be limited to specific, explicit, and legitimate purposes. Conclusion The validity conditions of information obligation and explicit consent practices have in fact been clearly regulated since the entry into force of the KVKK, both in the legislation itself and in secondary regulations such as the Communiqué and the Authority's guides, and have been explained with concrete examples. Nevertheless, particularly in stores, some practices developed to facilitate certain operational processes during the provision of goods and services, whilst providing practical benefits, do not comply with the principles and rules stipulated by the KVKK. The Principle Decision has once again clearly emphasised the unlawfulness of such facilitating practices and has sent an important message to data controllers to review their systems. From now on, it has become an obligation for all data controllers, particularly retail stores, to design their information and explicit consent practices in full compliance with the KVKK. To eliminate the risk of invalidity of consents concerning the sending of commercial electronic messages, it is of considerable importance to transition to systems consistent with the KVKK and secondary legislation provisions. However, the sending of commercial electronic messages is not solely a compliance issue pursuant to the KVKK; at the same time, the provisions of the Regulation on Commercial Communication and Commercial Electronic Messages[7] must also be taken into account. Data controllers must also fulfil the requirements of this Regulation in all commercial communications carried out for the purpose of promoting and marketing goods and services or publicising their businesses, must register with the message management system where necessary, and must carefully observe the validity conditions for the messages. This article was authored by Erdem & Erdem Managing Associate Sevgi Ünsal Özden [1] Personal Data Protection Board Principle Decision dated 10.06.2025 and numbered 2025/1072, Official Gazette dated 26.06.2025 and numbered 32938, https://resmigazete.gov.tr/eskiler/2025/06/20250626-7.pdf, (Access Date: 25.08.2025). [2] Under Article 11 of the KVKK, data subjects have the right to learn whether their personal data are being processed, to request information if their data have been processed, to learn the purpose of processing and whether it is being used in accordance with this purpose, to know the recipients to whom data are transferred domestically or abroad, to request the correction of incomplete or inaccurate data or the deletion or destruction of such data within the scope of Article 7 of the Law. They also have the right to request that these be notified to third parties, to object to any result arising to their detriment from analysis of data processed solely through automated systems, and to request compensation for damages arising from unlawful processing. [3] Communiqué on the Principles and Procedures to be Followed in Fulfilling the Obligation to Inform, Official Gazette dated 10.03.2018 and numbered 30356, https://resmigazete.gov.tr/eskiler/2018/03/20180310-5.htm, (Access Date: 25.08.2025). [4] Guide on the Fulfillment of the Obligation to Inform, Personal Data Protection Authority, March 2025, https://kvkk.gov.tr/Icerik/5395/Aydinlatma-Yukumlulugunun-Yerine-Getirilmesi-Rehberi-Kurum-Internet-Sayfasinda-Yayinlanmistir-, (Access Date: 25.08.2025). [5]   Personal Data Protection Board Decision dated 15.06.2023 and numbered 2023/1041, https://kvkk.gov.tr/Icerik/7768/2023-1041, and Decision dated 02.05.2023 and numbered 2023/692, https://kvkk.gov.tr/Icerik/7691/2023-692  (Access Date: 27.08.2025). [6]   Personal Data Protection Board Decision dated 20.05.2020 and numbered 2020/404, https://www.kvkk.gov.tr/Icerik/6913/2020-404, and Decision dated 27.02.2020 and numbered 2020/173, https://www.kvkk.gov.tr/Icerik/6739/2020-173 (Access Date: 27.08.2025). [7] Regulation on Commercial Communication and Commercial Electronic Messages, Official Gazette dated 15.07.2015 and numbered 29417, https://www.mevzuat.gov.tr/mevzuat?MevzuatNo=20914&MevzuatTur=7&MevzuatTertip=5 , (Access Date: 27.08.2025).

Introduction Competition authorities worldwide have increasingly focused on labour market infringements under competition law, issuing new regulations and guidance in recent years. Notable examples include the U.S. Department of Justice and Federal Trade Commission’s joint guidance, the Japanese Fair Trade Commission’s Report of the Study Group on Human Resource and Competition Policy, the UK Competition and Markets Authority’s Guidance for Employers on Avoiding Anti-Competitive Behaviour, and the Canadian Competition Bureau’s Enforcement Guidelines on Wage-Fixing and Non-Solicitation Agreements. Similarly, the Turkish Competition Board (‘Board’) has intensified its scrutiny on labour market practices and commenced issuing significant decisions. Most recently, the Guidelines on Competition Infringements in Labour Markets (‘Guidelines’) were published on the Turkish Competition Authority’s (‘Authority’) website on 3 December 2024. These Guidelines provide a structured framework for assessing competition in labour markets and address principal concerns raised by stakeholders. One of the principal topics concerning competition in labour markets may be regarded as non-solicitation agreements, which typically arise when competitors agree not to hire or solicit each other’s employees. Such agreements are considered to carry the risk of hindering competition in the relevant labour markets. In light of the foregoing, the European Commission (‘EC’) rendered its first decision in which it found a cartel in the labour market, which is expected to be the foundational one of many more to follow.[1] In this article, we provide a summary of the EC’s decision and examine contemporary developments in the Turkish landscape of competition in labour markets with a focus on non-solicitation agreements. 1. EC's Delivery Hero - Glovo Decision On 2 June 2025, the EC imposed an aggregate fine of EUR 329 million on Delivery Hero SE and Glovoapp23 SA for participating in a cartel that distorted competition in the online food delivery market throughout the European Economic Area. The infringement, which lasted from July 2018 to July 2022, comprised: A mutual agreement not to solicit each other’s employees; The exchange of commercially sensitive information; and The allocation of geographical markets. The EC found that these practices constituted a single and continuous infringement pursuant to Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the European Economic Area Agreement. This case is particularly noteworthy as it marks the EC’s first labour market cartel finding and the first sanction involving anti-competitive conduct facilitated through a minority shareholding. Delivery Hero’s gradual acquisition of shares in Glovo enabled access to sensitive information and strategic influence, replacing competition with collusion. Whilst minority shareholdings are not inherently anti-competitive, this case highlights the risks associated with such an ownership. The investigation was initiated following market monitoring, whistleblower reports, and unannounced inspections in 2022 and 2023. The fines were calculated pursuant to the EC’s 2006 Guidelines, considering the duration, scope, and intensity of the infringement. Both companies received a 10% reduction pursuant to the 2008 Settlement Notice for acknowledging their participation and liability. This determination underlines the EC’s commitment to preserving competition in digital markets and ensuring fair labour conditions, whilst also demonstrating the effectiveness of its settlement and leniency programmes. 2. Turkish Competition Authority’'s Enforcement in No-Poach Agreement The Authority commenced addressing anti-competitive labour market practices, including non-solicitation agreements, in the early 2020s, earlier than many of its global counterparts. Several principal decisions and the issuance of the 2024 Guidelines reflect the Authority’s evolving approach to the matter. a. Private Schools in Kocaeli Decision In a case involving private schools in Kocaeli[2], the Board found that schools had jointly determined tuition and meal fees and entered into non-solicitation agreements to prevent employee transfers. Coordination occurred through WhatsApp groups and meetings, with schools agreeing not to hire each other’s teachers and to jointly determine salaries. The Board concluded that these practices constituted wage-fixing and non-solicitation agreements in contravention of Article 4 of Law No. 4054 on Protection of Competition (‘Law No. 4054’). On-site inspections revealed systematic efforts to restrict teacher mobility, including documented refusals to hire teachers at the request of other schools. These actions were praised within the group, indicating a coordinated and sustained effort. The Board emphasised that such conduct restricts labour market competition and deprives employees of better job opportunities and fair compensation. Some of the implicated institutions admitted to the allegations and settled the case with a discounted administrative monetary fine, whilst others were fully fined as a result of the investigation. b. Private Hospitals Decision In another case, the Board investigated private hospitals[3] in Bursa for gentlemen’s agreements and coordinated wage-setting practices. Hospitals agreed not to hire each other’s personnel and jointly determined salary increase ranges. The Board found that these practices infringed Article 4 of Law No. 4054 by object, irrespective of their actual impact. The conduct was classified as a cartel, and substantial administrative fines were imposed. c. Guidelines on Competition Infringements in Labor Markets As noted above, the Guidelines represent a step forward in an effort to clarify the legal framework for assessing non-solicitation and wage-fixing agreements. Key points include: Definition: Non-solicitation agreements are defined as arrangements, direct or indirect, whereby undertakings agree not to solicit or hire each other’s employees. Scope: These agreements may apply to both current and former employees. Practices requiring mutual approval for employee transfers also fall within this scope. Legal Basis: Such agreements are assessed pursuant to Article 4 of Law No. 4054 as market allocation restrictions and are treated as cartels. Third Parties: The Guidelines emphasize that these agreements do not need to be direct; coordination through third parties may also constitute an infringement, and such third parties may be held liable depending on the circumstances. 3. Conclusion The increasing focus of competition authorities on labour market practices reflects a growing recognition that anti-competitive conduct in employment relationships can distort not only product markets but also the fundamental rights of workers to seek better opportunities and fair compensation. The EC’s Delivery Hero/Glovo determination and the Board’s recent enforcement actions demonstrate a clear shift towards treating non-solicitation and wage-fixing agreements with the same severity as traditional cartels. The Authority’s proactive stance exhibited by its early investigations and the issuance of comprehensive Guidelines positions it amongst the frontrunners in addressing labour market competition concerns, including non-solicitation agreements. By clarifying the legal framework and signalling a zero-tolerance approach to anti-competitive coordination, the Authority clearly indicated that its response to such practices will be strict. Going forward, undertakings must ensure that their human resources practices comply with competition law, particularly in relation to hiring, wage-setting, and employee mobility. Internal compliance programmes should be updated to reflect the evolving legislation and enforcement landscape, and companies should remain vigilant against informal or indirect arrangements that may restrict competition in labour markets. This article was authored by Erdem & Erdem Managing Associate Anıl Acar [1] European Commission. (2025, June 2). Antitrust: Commission sends statement of objections to company XYZ for abuse of dominant position [Press release]. https://ec.europa.eu/commission/presscorner/detail/en/ip_25_1356 [2] Board decision dated 03.10.2024 and numbered 24-40/948-407. [3] Board decision dated 24.02.2022 and numbered 22-10/152-62.

We are proud to announce that Erdem & Erdem has advised İş Private Equity on the launch of Enlila, a biotechnology venture established to advance the innovative research led by Prof. Gökhan Hotamışlıgil at Harvard University. Enlila is dedicated to transforming scientific discoveries into therapeutic solutions for unmet medical needs, including obesity and age-related diseases. This initiative reflects Türkiye’s strong potential in the field of health technologies and underscores our commitment to creating long-term value through science, innovation, and entrepreneurship. We are proud to support İş Private Equity in this Türkiye-based initiative, which brings to life a treatment with global application potential. We congratulate all stakeholders involved!

We are pleased to announce that Anıl Acar has joined Erdem & Erdem as a Managing Associate in our Competition and Compliance Department. Anıl Acar commenced his legal career in 2014 and, over the course of a decade, has worked at leading law firms in Türkiye, gaining extensive expertise in competition law, mergers and acquisitions, and various other areas of law. Leveraging this experience, he has provided strategic legal counsel to numerous multinational clients. Anıl Acar possesses in-depth knowledge in the areas of competition law, M&A transactions, contracts law, and personal data protection. He has successfully managed over 30 merger control filings before the Turkish Competition Authority and has played an active role in the Turkish aspects of high-value cross-border transactions across a wide range of sectors, including food and beverages, automotive, chemicals, energy, pharmaceuticals, technology, and aviation. Acar holds an LL.B. from Yeditepe University Faculty of Law and spent a year at the University of Vienna for his postgraduate studies in European and International Business Law. He is fluent in English and has been recognized as a “Rising Star Partner” by IFLR1000. We believe that Anıl Acar will be a valuable addition to the Erdem & Erdem team, and we are delighted to share this exciting development with you.

  Erdem & Erdem is pleased to announce that Melissa Balıkçı Sezen, who has been working as a Senior Associate in our Corporate Affairs Department, has been appointed as Managing Associate as of January 1, 2025. Melissa Balıkçı Sezen Melissa Balıkçı Sezen has been providing consultancy services to national and international clients in corporate law, contract law, and commercial law for nearly 10 years. She specializes in international mergers and acquisitions as well as share transfer transactions and has significant expertise in the preparation and negotiation of EPC contracts for energy projects, including FIDIC contracts. Melissa Balıkçı Sezen also possesses substantial expertise in international commercial arbitration and represents her clients in arbitration proceedings conducted under ICC, LCIA, ISTAC, ITOTAM, and UNCITRAL rules. In addition, she has served as a tribunal secretary, further demonstrating her proficiency in this field. With her in-depth knowledge and experience in drafting and negotiating commercial contracts, Melissa Balıkçı Sezen provides comprehensive support to her clients.

Our client, CoreX Resources B.V. (CoreX), successfully completed the process of acquiring the majority shares of Compagnie Minière Du Bafing SA (CMB), a company established in Côte d'Ivoire, by the end of 2024. Erdem & Erdem Law Office provided legal assistance to CoreX in various aspects of the transaction, including the negotiation and drafting of the share transfer agreement and related contracts (offtake agreement, receivables assignment agreements, and shareholders' agreements), structuring the project financing, and negotiating the loan agreements. CMB is an Ivorian nickel company, operating the largest DSO (Direct Shipping Ore) nickel project on the African continent. CMB currently operates the open pit mines of Foungbesso and Moyango. These are some of the richest nickel laterite deposits in the world, (around 47 million WMT). Along with CoreX in CMB the State of Côte d'Ivoire and the state mining entity SODEMI, are holding equity interest of respectively 10% and 5%. CoreX operates across ten diverse sectors, including metals and mining, ports and terminals, green energy, shipping and logistics, infrastructure and construction, oil and gas, chemicals, international trading, financial investments, and venture capital. With a presence in 55 countries spanning five continents, the company employs over 20,000 professionals worldwide. As Erdem & Erdem, we take pride in contributing to our client's growth strategies aimed at expanding international operations and providing legal counsel throughout this process.  

Neapco Turkey Otomotiv Anonim Şirketi (Neapco) has successfully completed the share acquisition process to obtain full ownership of Hedrive Otomotiv Teknoloji Sistemleri Sanayi ve Ticaret Limited Şirketi, a company operating in Türkiye. The closing transaction and share transfer under the agreement were finalized on January 16, 2025. Within the scope of this transaction, Erdem & Erdem Law Office provided comprehensive legal assistance to Neapco, including conducting the legal due diligence process, drafting and negotiating the share purchase agreement, and carrying out the necessary registration procedures before the trade registry. This acquisition holds strategic significance for Neapco in expanding its operations both in Türkiye and international markets. As Erdem & Erdem, we take pride in contributing to our client's growth strategies and providing legal counsel throughout this process.  

ESG (Environmental, Social and Governance) is undoubtedly one of the most important issues of recent times and a trend gaining momentum in the face of concrete global challenges.It will certainly drive regulatory developments and corporate governance activities in the future.[i] ESG, which refers to “environmental, social and governance” has come to play a vital role in corporate governance in recent years. ESG practices have led companies to act responsibly and ethically while conducting their activities and making decisions. In a sense, the perception of ethics has created a framework in which stakeholders such as consumers, investors and employees can monitor and audit if an undertaking is “doing the right thing even when no one is looking”. It also contributed to translating individual ethical values into companies’ business ethics policies. In the words of BlackRock Chairman and CEO Larry Finn: “Society demands that both public and private companies serve a social purpose. To be successful over time, every company must not only be financially successful, but also be able to demonstrate how it makes a positive contribution to society. Companies must benefit all stakeholders, including shareholders, employees, customers and the communities in which they operate.” [ii] As a matter of fact, companies that adopt ESG practices recognize that the structure in which they operate has the power to influence society and the environment and, in a sense, present a declaration of will to use this power and influence positively. These factors, which bring together themes such as sustainable use of resources, combating climate change, reducing carbon footprint, giving back to the community, and focusing on protecting consumers and employees, along with transparent, accountable, and ethical leadership, are a way of integrating the ethical-based will of the relevant company to give back through declaring that “environmental, social and corporate governance elements are essential elements for them”.[iii] Thus, it is evident that some important ethical questions such as the following need to be answered when determining a company’s ESG direction.[iv]   Environmental ·       What are the company’s practices regarding climate change? ·       What is the waste and recycling policy? Social ·       If the company is winding up, at what stage should employees be informed? ·       Can an employee known to need a job be offered a lower salary? ·       At what point shall our defective/lost products considered to be withdrawn? ·       How much of the budget should the company allocate to social responsibility projects? Governance ·       What is the Board of Directors’ perspective on ethical culture? ·       What is the attitude of senior management and the Board of Directors towards accountability? ·       What is the company’s policy on whistleblower employees who report irregularities? It is clear that ESG practices provide other advantages for a company besides following ethical values. These advantages can be can be summarised as follows:[v] Identifying and minimizing environmental and social risks, Ensuring positive impacts on society and the environment through ESG investments, Opportunities for employees to take part in practices that contribute to the environment and society in the companies they work for, Attracting the investment appetite of investors interested in sustainable investments, Gaining the trust of stakeholders such as customers, employees and investors, Ensuring that the company is successful and sustainable by adopting sustainability and ethical values and Reputation management. ESG issues, are inherently related to reputation, and observations about a company’s ESG actions or inactions are frequently published. In this respect, companies that fail to respond to public demands to give back to the environment and society and to conduct business in line with ethical principles may have to face critical tests in terms of corporate reputation.[vi] On the other hand, it is known that companies that adopt ethics-based ESG practices gain financial and economic benefits and contributions in addition to the aforementioned advantages. It is a well-known fact that companies with high sustainability scores, have higher organizational performance and deliver superior results compared to those without ESG-based investments.[vii] In addition, in the “TEİD Report on the Impact of ESG and Business Ethics on Reputation”, in which 145 representatives from 44 different sectors participated, it was observed that the majority of the participants think that there is a close relationship between business ethics, ESG and reputation, and that performance in ESG and business ethics will affect their future position both in terms of reputation and financially.[viii] To conclude, it is evident that ESG, ethics and reputation go hand in hand and have the potential to significantly impact companies’ reputation and financial results in today’s world. To answer the needs of stakeholders’ will to monitor whether a company gives back to the community or not, these concepts will no Author: Merve Bakırcı Footnotes [i] Zalles Barrero, Diana / Dolan, Cristina: “Transparency in ESG and the Circular Economy: Capturing Opportunities Through Data” 1st Edition, Business Expert Press, New York 2021, p. 69. [ii] Fink, Larry: “2018 Letter To CEOs: A Sense of Purpose”, Blackrock, https://www.blackrock.com/corporate/investor-relations/2018-larry-fink-ceo-letter. [iii] Skeet, Ann: "What do ESG and Ethics Have in Common?", Marrkula Center for Applied Ethics, 4 February 2022, https://www.scu.edu/ethics/esg/what-do-esg-and-ethics-have-in-common/. [iv] Armstrong, Anona: “Ethics and ESG”, University of Wollongong Australia, AABFJ | Volume 14, No.3, 2020. [v] Emerick, Dean / Keskin, Huzur: “What is ESG? Exploring Sustainability Strategies”, ESG the Report, 8 January 2024, https://esgthereport.com/esg-nedir-surdurulebilirlik-stratejilerini-kesfetmek/. [vi] Bergman, Mark S. / Deckelbaum, Ariel J. / Karp, Brad S.: “Introduction to ESG”, Harvard Law School Forum on Corporate Governance, 1 August 2020, https://corpgov.law.harvard.edu/2020/08/01/introduction-to-esg/ . [vii] Clark, Gordon L. / Feiner, Andreas / Viehs, Michael: “From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Out Performance”, University of Oxford Press, 5 March 2015, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2508281. [viii] TEİD Ethics and Reputation Society: “TEİD, The Impact of ESG and Business Ethics on Reputation Report 2022”, December 2022, https://www.teid.org/wp-content/uploads/2023/01/TEID-ESG-ve-Is-Etiginin-Itibara-Etkisi-Arastirma-Raporu.pdf.

Erdem & Erdem is proud to announce that Merve Bakırcı, who has been working as a Senior Associate in the Competition and Compliance Department,and Mehveş Erdem Kamiloğlu and Duygu Öner Ayçiçek, who have been working as Senior Associates in the Dispute Resolution Department, have been appointed as Managing Associates as of 1 July 2024. Merve Bakırcı Merve Bakırcı who advises companies on Turkish and European Commission competition legislation for almost 10 years, carries out full compliance processes of companies within the framework of competition law compliance programs. She represents companies at every stage of preliminary investigations and investigations before the Competition Authority. She specializes in ethical compliance, anti-corruption and international economic sanctions regimes. She advises on preperation and implementation of relevant policies and procedures, determination of international sanction risks and compliance with anti-corruption regulations. Mehveş Erdem Kamiloğlu Mehveş Erdem Kamiloğlu, who has 10 years of experience in her field, represents domestic and foreign clients in arbitration cases arising from commercial disputes before various arbitration institutions and courts and coordinates litigation proceedings in various countries. She acts as arbitrator in arbitration proceedings. She advises on regulatory field by providing consultancy in regulatory strategy and conducting risk assessments. Duygu Öner Ayçiçek Duygu Öner Ayçiçek has been advising on disputes arising from international trade, transportation law, corporate law, and administrative law and representing domestic and international clients before courts for more than 10 years. She acts as counsel for the parties in arbitration proceedings before national and international arbitration institutions. She is experienced in the recognition and enforcement of foreign court and arbitral awards in Turkiye. We congratulate Merve Bakırcı, Mehveş Erdem Kamiloğlu and Duygu Öner Ayçiçek on their promotion and commend their contributions to the strength of Erdem & Erdem team. We wish them continued success in their new roles.