Sanction for Violation of the Prohibition of Contracting in Foreign Currency

With the amendment made in the Communiqué on the Decision No. 32 on the Protection of the Value of Turkish Currency (Communiqué No: 2008-32/34) published in the Official Gazette dated 19 April 2022 and numbered 31814 (Communiqué No: 2022-32/66), the phrase “However, it is obligatory to fulfill and accept the contractual payment obligations in Turkish currency.” has been added to the end of the ninth paragraph of Article 8 of the said Communiqué.

According to this amendment, “It is possible for residents of Turkey to determine the price and other payment obligations arising from securities sales contracts other than vehicle sales contracts to be concluded between themselves in foreign currency or indexed to foreign currency; however, it is obligatory to fulfill and accept the contractual payment obligations in Turkish currency”.

Within the scope of the first paragraph of Article 3 of the Law No. 1567 on the Protection of the Value of Turkish Currency, an administrative fine will be applied with the scope of reproportion to those who violate this obligation.

Accordingly, separately for each party of the contract, which may be found to be in violation of the TL payment obligation.

– From approximately 31,656 TL up to 264,172 TL due to acts committed in 2023,

– Due to the acts to be committed in 2024, an administrative fine from approximately 50,162 TL of up to 418,607 TL may be imposed.

The Public Prosecutor is authorized to decide on the administrative fine to be imposed, and in case of recurrence of the violation, the specified penalties can be applied twice.

Within the scope of the first paragraph of Article 3 of the Law No. 1567 on the Protection of the Value of Turkish Currency, an administrative fine will be applied with the scope of reproportion to those who violate this obligation.

Kind regards.

SEYHAN LAW FIRM

Atty. Bülent SEYHAN

Establishment of Companies by Foreign Business People in Turkey

Turkey follows an open investment policy that allows foreigners to establish companies in the country. However, there are legal regulations that must be followed during the establishment phase. Depending on the type of company, the documents to be complied by foreign investors may vary according to their main functions, capital requirements, tax and legal regulations.

In this article, the permission of foreigners to establish a company in Turkey, the legal legislation they will comply with, the application stages and the necessary documents, the articles that will encourage foreigners to establish a company in Turkey and the advantages of doing business in Turkey for foreign investors will be discussed.

Application Stages and Documents

In order for a foreigner to open a company in Turkey, he/she must decide on the type of company at the first stage. It is generally recommended that the company be a joint stock or limited liability company.

In the next stage after the type of company, it will be important to decide on the title of the company. The title of the company must include the fields of activity of the company.For example  ECA AUTOMOTIVE, TOURISM, INDUSTRY, CONSTRUCTION (type of company) Company.

After this stage is passed, it is necessary to obtain a potential tax number for the company partners. This tax number can be obtained from the internet or from tax offices. However, what is important at this point is the need for an address statement.

After the potential tax number, the “articles of association” of the company must be prepared. This is very important as it will be the constitution of the company. It is recommended to prepare it in the presence of a lawyer and financial advisor.

 After this stage, transactions should be followed at the trade registry office in the provinces, and if exports or imports are to be made afterwards, transactions should be made in this regard as well. These transactions can be followed and completed in many cities, especially in Istanbul-Ankara-Izmir-Antalya, through Seyhan Law Office.

It is mandatory that commercial books are kept by a financial advisor after your company is established.

Incentives

Free Zone- Another way for foreigners to establish a company in Turkey is to invest in free zones created specifically for them. These regions provide many tax advantages for foreigners with lower tax rates, tax exemption, facilitated customs procedures, free foreign exchange transactions and tax exemption for domestic labor compared to other regions of Turkey. Izmir, Turkey’s oldest free zone, can be given as an example.

Easy company formation- Establishing a company in Turkey can be completed in a few days. You do not need to come to the country to establish a company in Turkey. You can solve all your company establishment processes in Turkey through Seyhan Law Firm.

An Attractive Investment Environment-Turkey’s economy is growing rapidly and offers an attractive environment to the world’s leading investors. Turkey, which has a strategic location between Europe, Asia and the Middle East, is an ideal place to do business. Turkey also offers a large domestic market and many opportunities to do business in the Middle East and Asia. The young population makes the country an attractive labor market.

Conclusion and Suggestions

Turkey has a great potential for foreign investors. The Turkish government continues to work to improve the investment climate. This will reduce the barriers for foreign investment to come to Turkey and create a more attractive environment for investment. Turkey attracts attention with its unique geographical location, high-quality workforce, advantageous investment environment and strong economy.

Partnering with local businesses to strengthen your company in Turkey, conducting market research by ensuring the active participation of people with experience in the Turkish market, and being familiar with customer needs, competitive factors, and other business activity-related components are the right steps to put you ahead of other companies.

INVESTING IN THE TURKISH STOCK MARKET AND TAXATION OF EARNINGS ON THE STOCK MARKET FOR NON-RESIDENT FOREIGNERS

The Turkish stock market is the market where many financial instruments are traded, including stocks, bonds, funds, futures contracts, and commodities. The Turkish stock market is at an important point among the world stock exchanges with its high liquidity and attractive investment opportunities.

Stock market indices in Borsa İstanbul are calculated by following the prices of stocks traded on the stock market in a certain range. Some of the indices traded in Turkey are BIST 100, BIST 50, BIST 30, BIST Bank, BIST Industrial and BIST Technology indices. The Turkish stock market is also noteworthy for the fact that companies in Borsa Istanbul are consistently profitable (due to fluctuations in exchange rates) while being quite affordable in USD terms. Considering the opinions about the Turkish Stock Exchange, mostly experts state that the rise may continue.( August 2023)

Advantages of Investing in the Turkish Stock Exchange

-High returns – Turkey’s growing economy offers opportunities for foreign investors.

-Attractive stocks- some Turkish companies traded on the stock exchange can be a lucrative investment for foreign investors.

-Capital increase

-Portfolio diversification

-The Turkish stock market offers a high return potential. In addition, investing in Turkish companies serves as a bridge between Europe, Asia and the Middle East.

Borsa Istanbul (BIST) became the best investment tool in Turkey with a return of105% in 2022.

What Should Be Considered When Investing in the Turkish Stock Exchange?

As with any stock market, the Turkish Stock Exchange is affected by global economic conditions. For this reason, global economic conditions should be followed when investing in BIST. So you can make your investment at the right time.

Stock market indices should be monitored. Tracking the performance of the exchange helps the investor make decisions. Tracking the performance of the exchange helps the investor to make decisions. Stock market indices reflect the overall performance of the stock market.

Company shares should be investigated. Before investing, it is important to conduct thorough research on Turkish companies. Gaining insight into company management, financial performance, and futures helps investors minimize their risk.

Taxation of Non-Resident Foreign Investors on the Turkish Stock Exchange

If a foreign person is not settled in Turkey, he/she is considered a limited taxpayer according to Article 6 of the Income Tax Law. Accordingly, taxation procedures will be carried out in a way that covers limited taxpayers. Article 6 of the Income Tax Law states that limited taxpayers are “taxed only on the earnings and revenues they earn in Turkey.” In Article 7 of the same law, the counting of securities as earnings or income in Turkey is subject to the condition that “the capital is invested in Turkey”.The earnings of the limited taxpayer investing in the stock market in Turkey will be taxed. Taxation of transactions made on the stock exchange is done on the spot therefor it is the final tax. When you trade on the exchange, the amount credited to your account is taxed income. In this information note, in the taxation of a foreigner who is not considered to be settled in Turkey while trading on the stock exchange, first the earnings obtained from the purchase and sale of shares will be evaluated, and then the earnings obtained with dividends will be evaluated:

1-Earnings from the Purchase and Sale of Shares Traded on BIST

Regarding the taxation of the earnings from the trading of shares on the stock exchange for limited taxpayers, it is necessary to first look at whether the share is an “investment partnership” share. If the share is not an investment trust share, the withholding tax rate has been determined as 0% according to the provisional article 67 of the Income Tax Law. If the share belongs to an investment trust, the holding period of the share is considered first. Withholding tax is not applied if the share has not been sold for more than 1 year. However, if the investment trust share is held for less than 1 year, 10% withholding tax is applied.

2-Dividend Income from Shares Traded on BIST

Companies whose shares are traded on the Borsa Istanbul may distribute dividends to their shareholders in line with the decisions taken at their general assembly. First of all, it should be noted that dividends are taxed before they are deposited into the accounts, they do not need to be declared. When companies traded on the Borsa Istanbul distribute dividends, the taxes on dividends are as follows: 0% if the share is an investment trust company share. If the share is not an investment trust company share, a 10% withholding tax is applied.

Seyhan Law Office

Note: What is written in this article is not investment advice.

Preparation of International Conventions

Contracts established by mutual declarations of will of the parties in accordance with each other, that is, by necessity and acceptance, become an international contract if they have an international element. The international element may arise in the debt relationship in which the dispute arises, if one or both of the parties are foreigners or if the place where the contract is made or the place of execution or the subject of the contract is born in a foreign country or the law applicable to the debt relationship is a foreign law. According to new opinions and practices in this field, contracts that do not have an element of foreignness in terms of their personal or geographical elements or that do not have contact with more than one legal system are also international in nature to the extent that they concern international trade or investment. Ultimately, whether each contract has an international character or not will be evaluated separately and objectively by the judge according to the criteria of person, place and time. The judge shall act in accordance with the rules of state law (lex fori), of which they are a member, in determining the foreign contact.

The choice of law in international contracts should be clearly regulated in a way that does not allow interpretation and hesitation. When making a choice of law, a compatibility must be ensured between the provisions of the contract and the law chosen to apply to the contract. Contracts other than those stipulated by the law to be made in a special form or official form are not subject to any form requirement. However, the main elements of the contract should be regulated in detail. Because the preparation of international conventions in writing and in detail will also minimize the problems of conflict of laws. Because resorting to national legal systems in matters not regulated in the contract will cause a real conflict of laws in cases where the material legal systems to be taken as a basis in the solution of the dispute issue have different regulations. In this respect, the name of the contract is very important, because in case of a dispute, those provisions will be applied. If it cannot be determined, “protocol” should be written.

During the regulation of international contracts, the parties must mutually use the articles in a common sense in the language in which the contract is written. Otherwise, a conflict of language and interpretation will arise.Therefore, in the beginning part of the contract, the parties should list what the terms used in the contract mean in the contract article. ,

The competent authority for the resolution of disputes that may arise in international contracts can also be determined by the parties. The contracting parties may authorize a state court by including a jurisdiction agreement, or they may conclude an arbitration agreement.

WTO TRADE FACILITATION AGREEMENT

WTO TRADE FACILITATION AGREEMENT

  1. Introduction and Final Status of the Agreement

The facilitation of trade is broadly defined as the simplification and harmonization of all processes and procedures to which the product is subject to, including elimination of formalities, from its production until it reaches the end user. The concept of trade facilitation also invokes strengthening of the foreign trade and logistical infrastructure through automation and information technologies.

Facilitation of Trade turned into an agenda of the World Trade Organization (WTO) as a part of the Doha Development Negotiations, after 9,5 years long of difficult negotiations, these negotiations took place at the 9. Balkan Conference which occured at 3-6 december 2013 at the Bali and resulted in the Adaptation of the Trade Facilitation agreement by the member states. At the WTO General Council meeting held on 27 November 2014, it was decided to add the Agreement to the WTO Establishment Agreement as a trade in goods agreement.

For the agreement to enter into force, it must be ratified by 2/3 of WTO member countries. The internal approval process for the Agreement in Turkey has been completed and the official “Acceptance Certificate” stating that the Agreement has been approved by our country has been submitted to the WTO Director General on March 16, 2016. With the ratification of the Agreement by Rwanda, Oman, Chad and Jordan on 22 February 2017, 112 ratifications were reached and the Agreement entered into force.

  • General Content of the Agreement

Trade Facilitation Agreement, in general;

  • GATT Article V (Transit Release),
  • GATT Article VIII (Trade-Related Fees and Formalities),
  • GATT Article X (Transparency and Uniformity of Trade Legislation and Practices),

it includes provisions written for the purpose of explaining and developing the provisions of the customs authorities and the development of cooperation between customs administrations and special and favorable treatment provisions.

            The agreement basically consists of three parts:

  1. Trade Facilitation Obligations, Inter-Customs Cooperation
  2. Special and Favorable Treatment
  3. Corporate and Final Provisions

      The first part includes substantive provisions that members are expected to implement in order to facilitate trade, while the second part includes flexibility on how developing and least developed member countries will implement and implement the Agreement. Corporate and final provisions include horizontal implementation issues such as Trade Facilitation Committee, National Trade Facilitation Committees, general exceptions to the Agreement.

During both the negotiations and the preparations for the entry into force of the said Agreement, our country actively participated and a serious contribution was made to the creation of the text of the Agreement, especially the transit liberalization provisions that are critical for us.

In the agreement;

  • Developing the Publishing Obligation of Trade Legislation and Publishing from the Internet,
  • Establishment of Notification Points Regarding Trade Legislation and Practices,
  • Binding Preliminary Decision Mechanism,
  • Development of Transit Freedom,

there are paragraphs prepared by our country on the issues. Transit Freedom stands out among the mentioned issues.

  • Transit Release

It is known that individuals who provide the transportation services in Turkey are exposed to various restrictive and discriminatory practices such as fees that are not proportional to the service and mandatory mode determinations, especially the quota problem, in transit to reach the target markets. In this context, the provisions of the Agreement under the heading of transit freedom are of particular importance for the Republic of Turkey.

With a provision prepared by our country, it has been recorded that quota and similar voluntary restrictions will not be applied in transit.  Although it is not expected that the said provision will abolish the quota application on transit traffic as soon as the Agreement enters into force, it is considered that the provision strengthens Turkey’s stance and seriously erodes the legal basis of the quota application.

Fees charged for “permitting transit” are prohibited, except in proportion to the service provided by Turkey’s proposal on transit fees, which is finally included in the text of the Agreement. With the provision, in cases where the quota applied by some EU member states is exhausted, the unlawfulness of the practice of selling passports with money in terms of WTO rules is confirmed. 

With the provision on penalties in transit, which is prepared by Turkey and finally ensured to be included in the text of the Agreement, the penalties on transit traffic are disciplined for the first time with a WTO agreement, and the penalties are ensured to be objective and proportionate to the misdemeanor.

Additionally, with the provision regarding the regulations on transit, which is prepared by our country and ensured to be included in the final agreement text, it is ensured that all kinds of regulations related to transit traffic do not restrict traffic more than necessary and do not create an implicit restriction on traffic. With the aforementioned provision, the transit freedom provisions stipulated by Article V of GATT are strengthened and the theses of our country are given ground in any dispute that may arise in the WTO on transit freedom.

  • Expected Economic Benefit from the Agreement

In the studies carried out by the World Trade Organization, the following determinations have been made regarding the economic benefit that will arise with the full implementation of the Trade Facilitation Agreement:

  • The agreement is expected to reduce trade costs by between 9.6% and 23.1% depending on the level of development of the countries. It is predicted that the highest rate will be seen in LDCs.
  • The agreement is expected to reduce the average export period by approximately 2 days and the average import period by 1.5 days.
  • The total exports of developing countries are expected to increase between $170 and $730 billion annually.
  • Exports on a global scale are expected to increase by between $750 Billion and $1 Trillion.
  • Agreement clauses

            Turkey has a good position among similar countries in the world in terms of customs and foreign trade infrastructure, and in this respect, it implements the obligations in the Trade Facilitation Agreement to a great extent or is in a position to implement the Agreement as soon as it enters into force. In this respect, the implementation of the Agreement will not impose an additional administrative burden on our country. On the other hand, the content of the Trade Facilitation Agreement and the information on the implementation capacity of our country are summarized below:

            Article 1: Publication and Transparency

The      article requires members to publish all procedures and regulations related to trade, including import, export and transit procedures, tariff rates applied, and fees and charges. The article also stipulates that the basic procedures for export and import by the member states shall be published on the internet and a notification point shall be established to answer questions related to trade.

            Apart from the establishment of a national notification point, It already meets all the obligations in Article.

            Article 2: Pre-Publishing and Consultation

The      article stipulates that the members shall publish the new or amended legislation related to trade in advance of a certain period of time, except for legislation that may be inconvenient to publish in advance, such as tariff changes. With another provision in the article, it is envisaged that the members will allow the opinions of the relevant interest groups on the new and amended legislation related to trade to be taken.

Since   both provisions are not fully binding, they are enforceable by our country.

            Article 3: Preliminary Decision Mechanism

The      article stipulates the “binding preliminary decision” mechanism of the members, which provides significant predictability to the trader. While it is mandatory to classify the tariff and make a preliminary decision on the origin, it is up to the member states to make a preliminary decision on elements such as customs value, exemptions and tariff quotas.

            Turkey has been implementing the preliminary decision mechanism in tariffs and origin for a long time. There are also studies in other areas to make preliminary decisions. There is no problem in the implementation of the article.

            Article 4: Appeal/Objection Procedures

The      article stipulates that merchants should be granted the right of administrative and judicial objection in an impartial and transparent manner regarding the decisions and transactions of the authorities related to trade.

Since both administrative and judicial objections to the decisions and procedures of all administrative authorities are open in the legislation of Turkey the obligation in this provision therefore met by Ankara.

            Article 5: Measures Strengthening Neutrality/Non-Discrimination

The      article aims to discipline systems such as the “rapid alert system” implemented by the European Union in agricultural products and to prevent these systems from being used as an obstacle to trade. There are also provisions in the Article regarding the removal of goods and testing procedures.

            In our country, there is no early warning system for agricultural products. Other provisions are compatible with Turkey’s practices.

            Article 6: Fees and Charges

The article aims at integrating thefees and charges withtrade.It is envisaged that the fees and charges will be proportional to the service provided. The practices of our country – with the exception of the fees received by the exporter associations as a certain proportion of the export amount – are in accordance with the said provision.

            Article 7: Delivery and Clearance of Goods

            7. The article is a comprehensive and that includes many measures aimed at the Trade Facilitation, especially in customs applications. The applications in the sub-paragraphs of the article are summarized below:

            Pre-Arrival Transaction is a provision stipulating the possibility of completing customs procedures before the goods actually arrive at the customs office. This has been the practice in Turkey.

            Electronic Payment stipulates that taxes, fees and charges arising from import and export transactions are allowed to be paid electronically. Although the article is not fully binding, it is applied in our country.

            The provision for the separation of the delivery and customs clearance of the goods stipulates the delivery of the goods to the importer in return for a certain guarantee, although not all customs procedures are completed. There is no reservation regarding the provision applied in the customs of Turkey

            Risk Management stipulates that controls at customs shall be carried out in accordance with the principles of risk management. In Turkey, there is an advanced application in this direction and there is a “General Directorate of Risk Management” within the Ministry of Customs and Trade.

            Post-Inspection refers to the inspection of foreign trade companies by expert staff through documents and books as an alternative to inspections and audits at customs. Post-inspection application, which is an increasingly preferred inspection system in the world, is practiced in Turkey as well.

            Measuring and Publishing Average Delivery Times envisages the publication of average delivery times in order to increase transparency and predictability for traders. It is an application carried out by the Ministry of Customs and Trade in Turkey.

            The application of the Authorized Economic Operator stipulates that certain privileges and facilities are provided to companies that have certain financial conditions and have a superior record in customs procedures with the customs office. In Turkey, in accordance with the European Union, the Authorized Economic Operator application was first implemented in 2013.

The provision on        Expedited Shipment provides for the provision of various facilities and advantages in customs procedures to goods transported by fast cargo carriers with certain standards by the member states.

The provision of         Perishable Products provides for various advantages such as faster passage through customs and on-site customs clearance due to the special nature of agricultural products and other products falling within the definition of perishable products.

Although efforts have been made to ensure that perishable goods are processed as quickly as possible in the customs of Turkey, especially since provisions such as on-site customs clearance are not applied at this stage, the said provision has been the only provision requested for the implementation of the transition period by the Republic of Turkey.

            Article 8: Cooperation between Border Authorities

The      article requires members to have uniform practices at customs points within the borders of the Republic of Turkey. It also provides, although not fully binding, for the co-operation of neighboring border authorities with procedures such as harmonization of working hours, common controls or common procedures and formalities. There is no problem for our country in the implementation of the said provision.

            Article 9: Processing of Imported Goods Under Customs Control (Internal Transit)

The      article provides that members are to allow the carrying out of customs procedures at customs points within the territory of the country and at destinations within the country, also referred to as internal transit.

            Article 10: Formalities Related to Import, Export and Transit

            10. The article is a comprehensive article containing many provisions in line with the reduction of formalities related to import, export and transit:

With the provision      of Formalities and Documentation Obligations, it is envisaged that formalities and requested documents will be gradually reduced and will not be retained if less restrictive alternatives to trade arise.

The                  Acceptance of Copies provision stipulates that copies of trade-related documents should be accepted and that the document should not be requested again from the relevant person when the original is at the institution. It is compatible with the practice of our country.

            The Use of International Standards requires members to base themselves as much as possible on international standards in the preparation of procedures with trade.

            The Single Window provision is a non-binding provision that stipulates that members gradually implement a single window system. In our country, there are ongoing efforts to implement a single window system.

            The provision on Pre-Shipment Inspection prohibits the application of mandatory pre-shipment inspection on tariff classification and customs value. There is no pre-shipment inspection application in our country.

The provision on        Customs Brokers abolishes the mandatory customs brokerage practice of members. There is no compulsory use of customs consultancy in our country.

The provision on        Common Customs Procedures and Uniform Documentation Obligations requires members to apply uniform formalities and document obligations at all customs gates throughout their territory. It targets more federated countries.

            The Rejected Goods provision provides for the return to the exporter of goods rejected at customs for any reason. It is compatible with the practices in Turkey.

The provision titled    Temporary Import, Inward/Outward Processing includes disciplines related to temporary import, inward and outward processing regimes of members. Our country’s practices are in accordance with the said provisions.

            Article 11: Freedom of Transit

The transit freedom clause, which is given the most importance Turkey within the          entire Agreement and in which serious effort is spent in writing, also includes comprehensive provisions. These provisions include the provision for disciplining regulations on transit traffic, the provision for removing voluntary restrictions on transit, the provision for disciplining fees and guarantees received through transit, the provision for the implementation of convoys in transit and the provision for non-discrimination. Turkey has made an intense effort to ensure that the transit freedom provision is strongly included in the text.

            Article 12: Inter-Customs Cooperation

A         long and comprehensive article, 12. With the article, information and document sharing is moved to a multilateral level in order to prevent tax loss and smuggling between customs administrations, which are currently carried out with bilateral cooperation agreements. The article in question lays down the principles of this cooperation.

            Article 13-22: Special and Beneficial Treatment

It includes flexibility on how developing and least-developed member countries will implement and enforce the Agreement.

Article 23-24: Corporate and Final Provisions

The Trade Facilitation Committee includes horizontal implementation issues such as the National Trade Facilitation Committees, general exceptions to the Agreement and the referral to the Dispute Settlement Mechanism.

Benefits of Removing Barriers to International Trade and Investment in OECD Countries and Liberalizing Markets of Goods

Benefits of Removing Barriers to International Trade and Investment in OECD Countries and Liberalizing Markets of Goods

Hatice Kökden (*)

The liberalization of goods’ markets, the liberalization of international trade and the removal of barriers to international investment are among the key factors in terms of increasing economic efficiency and thus raising the standard of living in OECD countries, as well as in the rest of the world. Although OECD countries are generally better off in these aspects than other parts of the world, significant differences in these parameters between these countries and especially the US and the EU support the argument that large trade and income gains can be achieved if these differences are eliminated. Based on this argument, with a project carried out in two stages within the OECD, a project consisting of two stages, attempted to estimate the gains for the member-states from liberalization and removal of barriers in the international investments and trade.

The first stage attempted to estimate the effects of liberalization applied to the international trade and investments by the EU and the US. The second stage attempted to forecast the impact of these liberalization efforts if all of the OECD members applied these liberalization measures.

The report is based on a set of data sets evaluating the situation of OECD member countries in terms of goods’ market regulations, foreign trade and international investments. Of these, PMR (Indicators of Product Market Regulation) was created in 2003 with a survey study to measure the state of regulation in product markets in all OECD member countries. In this context, the extent to which product markets are subject to regulation, the level of public control, the obstacles to entrepreneurship, and the obstacles to investment and trade have been examined and the situation of the countries has been determined in these respects. The data that form the basis of the section on barriers to international investments are the results of a 2001 study on restrictions on foreign investments in member countries. These restrictions are mainly restrictions on the ownership of a companies by the foreigners, employment of the foreign personel as well as operational independence. Regarding foreign trade, bilateral tariff rates applied in OECD member countries were used on the basis of the most favored nation (MFN) with average trade weighted in 2003.

The main method followed by the study is to estimate the earnings to be obtained in terms of national income and foreign trade when the parameters of the “reference” country are approached in the three elements listed above (regulation of the product market, liberalization of foreign capital and foreign trade) by comparing each country or group of countries with the “reference” country at its best in these three elements. In the study, it was assumed that removing barriers to foreign trade and investment was implemented globally. Therefore, the impact of liberalization in both cases is spreading all over the world. On the other hand, it is assumed that reforms in the goods’ market will strengthen competition and countries will benefit from both reforms in the domestic goods’ market and reforms in the countries they trade with.

In the study, the analysis of the effect of reforms on foreign trade and production is made based on the results of some previous regression analysis carried out by the OECD on the determinants of economic growth, foreign trade and the drivers of direct foreign capital, as well as the results of the general equilibrium analysis of the GTAP (Global Trade Analysis Project).

The study primarily analyzes the level of integration among OECD member states. In this context, it has been observed that foreign trade between OECD member countries has increased at a higher rate than economic growth in the last two decades, however, this increase consists mostly of the commodity trade rather than service trade; similarly, international investments have increased rapidly, however, this increase is due to the change of ownership through company mergers and privatization rather than new investments; in contrast to international trade, foreign direct investments are concentrated in the service sector rather than the goods-producing sector; the activities of foreign companies’ affiliated companies in the domestic markets have increased in parallel with the increasing trends of foreign direct investments, however, the impact of foreign companies’ affiliated companies on the employment of the manufacturing industry and services sector has been limited; recent foreign trade, foreign investments and the increase in the activities of affiliated companies have increased the interdependence of OECD economies; multilateral investment and trade agreements continue to form an obstacle to the integration of trade and investments between national economies, while reducing the official barriers to those. These obstacles may be obstacles that directly affect integration such as tariffs, non-tariff barriers, obstacles to foreign ownership of the company, as well as indirect obstacles such as internal regulations that may affect the production costs of the exporter and thus the competitiveness of the international markets, or regulations that increase costs in the service sectors subject to trade that use domestic and foreign inputs in production.

After analyzing the level of integration among OECD members, barriers to competition in domestic markets were addressed through the aforementioned PMR indicators. In this context, OECD member countries were divided into three groups in terms of 2003 PMR indicators:

• In most English-speaking countries and Nordic countries, regulatory barriers to competition were found to be relatively low.

• It has been observed that these obstacles are relatively high in low-income member countries such as Mexico and Turkey, as well as in Eastern European countries such as Poland, Hungary and the Czech Republic and Southern European countries.

• Other European countries and OECD member countries in Asia were found to have moderate policies in terms of restrictive elements of competition.

When evaluated in terms of restrictions on foreign capital investments as of 2001, the study has found that the number of economic restrictions is generally lower in the EU and USA. The low restrictions on foreign capital in European countries are mostly attributed to the absence of such restrictions within the EU framework. Iceland, Mexico, Turkey and Canada are among the countries with the highest foreign capital constraints, while Japan, Korea and Australia are beyond the OECD average in this respect.

In terms of tariff barriers to foreign trade as of 2003, it has been observed that bilateral tariff rates have decreased significantly throughout the OECD with regional free trade agreements and multilateral trade liberalization. However, it has been observed that customs tariffs are relatively high among OECD members such as Mexico, Poland, Korea, Turkey and Hungary. In terms of non-tariff barriers, it is seen that obstacles such as quantity and price control measures have been largely eliminated by multilateral trade negotiations in the recent period. The remaining cross-border and non-tariff barriers were excluded from the analysis, taking into account the limited data availability as well as the trustworthiness of this data. When the regulations at the sectoral level and the obstacles applied at the border are examined, it is seen that the obstacles to international integration are mainly concentrated in certain sectors. While the manufacturing industry sector presents an image free of such obstacles, it has also been observed that such obstacles are concentrated in the services and agricultural sectors It has been determined that the sectors with the highest regulation among the service sectors are the railway transportation, natural gas and postal services sectors. Although the telecommunications sector and the transport sector are seen as relatively low-regulated sectors across the OECD, there are still differences between the countries. While the transport sector is subject to higher regulation in Greece, Italy and the Czech Republic, the telecommunications sector is heavily regulated in Turkey and Iceland. After this stage, the project moved on to the stage of determination of the differences between the countries referenced above according to the best practice criteria. The OECD countries subject to the least restrictions and regulation in these areas have been identified as “reference” countries. The determination of “reference” on product market regulation for the domestic market has been through two sub-components. In order to determine the control of the public over economic life, the size and area of public economic enterprises and the control of the public over the work of the private sector were examined, and Australia was selected as the least restrictive and least intrusive “reference” country in both areas. In terms of barriers to entrepreneurship, no OECD country has been a “reference” in all of these barriers. While Denmark and Ireland were the countries with the lowest administrative burdens on start-ups, Canada was found to be in the best situation in terms of administrative transparency. Ireland and England, on the other hand, were determined as the countries with the lowest barriers to the competitive market. The sectors in which reforms should be concentrated differ from country to country. In general, countries whose goods’ markets are heavily regulated need to apply reforms in sectors other than manufacturing. On the other hand, in terms of restrictions on foreign capital, “best practice” countries are determined separately for all sectors. In terms of customs tariffs, a level where “customs tariffs are close to or are 0” has been taken as the “reference” situation.

After determining the countries considered as “reference” in the study, it was assumed that the countries implemented a reform program to close the difference with the reference country in each area. It is thought that by subjecting the goods markets to regulatory reform, countries will contribute to the competition in their domestic markets; increasing competition can provide both one-time and continuous increases in multi-factor productivity (MFP); with the liberalization of foreign trade and foreign investments, resources will flow freely and according to the efficiency criterion between countries; and with the expansion of the addressed markets, companies can benefit from economies of scale by increasing the scale of production. Three different approaches have been used to estimate the economic benefits of countries implementing reforms in the three areas listed above.

1. Estimating the impact of reforms on total foreign trade and accordingly on per capita national income by using the results of the econometric analyzes previously made by the OECD with panel data on the determinants of economic growth and foreign trade,

2. Estimating the impact of reforms on production through productivity increase by using the econometric techniques developed by the OECD on the relationship between product market regulations and productivity,

3. Estimating the impact on foreign trade and production by running the GTAP general equilibrium model under two scenarios. In the first scenario, the static effect of reducing customs tariffs on production and foreign trade was estimated, and then productivity increases obtained from the second approach were added to this scenario.

Phase I

In the first phase of the study, the effects of the greater integration of the EU and US economies, the removal of barriers to the goods market entry, foreign investments and foreign trade in these countries both on these two units and on third countries are analyzed. In this context, first of all, the difference between the USA and the EU in terms of goods market regulation is evaluated and the techniques listed above are applied under the assumption that this difference will be closed and customs and investment barriers will be removed both against each other and against third countries. According to the first stage results of the analysis, as a result of the reforms implemented by the EU and the US in three areas, the potential of the EU to increase its exports to the OECD by 30% and the US to increase its exports to the OECD by 20% was observed as well. A significant part of the total impact on exports is due to the decrease in regulation in domestic markets.

Table 1Increase in Export Levels of Panel Data Regressions and Reforms to be Implemented in the EU and the USA (%)

Reduction of Mutual Customs TariffsReduction of the Capital RestrictionsDecrease in RegulationsThe total impact of reforms
Organization for Economic Co-operation and Development4.42.425,630,7
USA3.51,017.522,0
Japan10.73.16,220.0
EU-15 (excluding intra-EU trade)1,42.425,629.4
Germany1.62.425.429.3
France− 1.22.328,532.0
    The UK2,12, 823.728.6
Türkiye12,92,26.821.9

The fact that the EU and the US reduce customs tariffs to third countries as well as to each other, remove restrictions on foreign capital and reduce regulatory rules in domestic product markets positively affects the other economies of the OECD as well as these two economies. In this context, it is predicted that the reform program implemented by the EU and the US and the liberalization of foreign trade and foreign capital will increase Turkey’s exports by more than 20%. On the other hand, it is noteworthy that similar reforms will create increases in the level of per capita national income. In this way, it is estimated that there will be a 3.1 percent increase in national income in the USA and 3.5 percent in the EU. For Turkey, reforms in the EU and the US could lead to a 1.6 percent increase in per capita income.

Table.2. Increase in Per Capita National Income Levels of Panel Data Regressions and Reforms to be Implemented in the EU and the USA (%)

Reduction of Mutual Customs TariffsReduction of the Capital RestrictionsDecrease in RegulationsThe total impact of reforms
Organization for Economic Co-operation and Development0,60,31.82.8
The United States0,90,41.73.1
Japan0,80,20,91.7
EU-15 (excluding intra-EU trade)0,30,32.83.5
Germany0,30,33.03.6
France0,20,43.44,0
    The UK0,40,22.43.0
Türkiye0.50,10,91.6

On the other hand, the results of the analysis of the reforms to reduce the regulation of the goods’ market in the EU and the USA, the productivity increase that can be created in these countries and its effect on national income are given below. According to these results, the productivity increase that can be created in the EU, especially through the reduction of the public sector, and the corresponding increase in production are significant. Among the EU members, France is one of the countries most affected by the reforms. In the USA, this effect lags far behind the EU, as the weight of the public sector in the economy is far behind the EU average.

Table 3. Impact of EU and US Product Market Reforms on Multi-Factor Efficiency and Per Capita National Income (%)

Effect of Reduction of Public OwnershipEffect of Reducing Entry BarriersCombined Effect on Multi-Factor EfficiencyImpact on Production
USA0.50,30,81.1
EU-151.80,32,12.9
Germany1.90 – 32,23.1
France2.40,22.63.7
  The UK1,00,3 1.31.9

The results of the analysis made with the GTAP model to measure the effect of reforms in the EU and the USA are given below. The GTAP model predicts the impact of reforms on production in the United States and lower than panel data regression estimates.

Table 4.Estimated Effects of EU and US Reforms with GTAP Model (%)

 Impact on Export VolumeImpact on real GDP
Organization for Economic Co-operation and Development2,90,9
USA5.30,8
Japan3.00.0
EU-152,22,1
Germany1.72.3
France2,02,7
 The UK3.11.5
Türkiye0.70.0

Phase II

As stated before, in the second stage of the study, the analysis made in the first stage was extended to all OECD member countries; it was assumed that product market reforms were implemented by all OECD member countries, and restrictions on foreign capital and foreign trade were lifted both among member countries and against third party states.

According to the results of the regression analysis made using this panel data, it has been revealed that the implementation of a reform program including the product market, foreign trade and foreign investments will increase the volume of gross external trade by 40% in all of the OECD countries; the most important part of this growth will be due to the reduction of goods’ market controls and regulations. This effect occurs through the reduction of the regulations applied in the domestic goods’ market, increasing the competitiveness of the exporting company and improving the conditions of access to the exports. While the countries that benefit the most from this reform package are the countries that regulate the most in domestic production markets at the beginning, countries such as Australia, where regulation is low, mostly benefit from the improvement in their commercial partners. The increase in trade from the removal of tariff barriers and the liberalization of foreign investments lagged behind the benefit of reducing regulations by 12 percent across the OECD. It is estimated that there will be an increase of around 40 percent in foreign capital stock across the OECD in this process; Korea, Turkey, Poland, Mexico and New Zealand are among the countries that will contribute the most to the foreign capital increase. The increase in foreign trade created by these reforms will also be reflected in the level of national income per capita. The increase in income to be provided within this framework was found to be above 4 percent for the USA, the EU and Japan, while it was estimated to be 4.8 percent for Turkey. For Turkey, 3.1 percentage points of this impact is due to regulatory reforms.

Table 5.National Income Increases Per Capita Through Trade Growth Created by Reforms (%)

Regulatory ReformLiberalization of Foreign CapitalReduction of Mutual Customs TariffsAll Policies
Organization for Economic Cooperation and Development3.10.70,94,7
The United States2.60.71.34,7
Japan2.40.71.34.4
EU-153.20.50,44.2
Germany3.20,50.54.2
France3.70,60,44,7
    The UK3.10.50.54,1
Türkiye3.10.71,04.8

Using the second approach, considering the effect of the productivity increase created by the reforms on the per capita national income, it is estimated that the regulatory reforms in the domestic markets will increase the multi-factor efficiency by 2 percent throughout the OECD, and this benefit will be mostly observed in Poland, Hungary and Turkey. This group will be followed by the EU countries (Italy, Greece, France, Spain and Portugal) whose domestic markets are the most regulated.

Table 6. Impact of the Product Market Reforms on Multi-Factor Efficiency and Per Capita National Income (%)

Effect of Reduction of Public OwnershipEffect of Reducing Entry BarriersCombined Effect on Multi-Factor EfficiencyImpact on Production
Organization for Economic Co-operation and Development1.50,31.92.7
The United States0,80,31.11.6
Japan1.10,31.52,1
EU-151.70,32,02.9
Germany1.70,42,02.9
France2,00,42.43.4
    The UK1.30,21,42,1
Türkiye2,10,62.83.9

The extent to which the multi-factor productivity increase will affect the production increase will vary depending on whether the use of labor and capital inputs increases with productivity increases. Under the assumption that there is no increase in these two factors of production, the increase in production will be equivalent to a multi-factor increase in productivity. However, since the increase in multi-factor efficiency will also increase the profitability of investments, the use of the capital factor generally leads to an increase. The results of the first approach were also tested with the GTAP model, which is the third approach, by applying similar tariff discounts, the effect of these discounts on production was examined and it was observed that these results were lower than the results of the regressions performed with panel data. The GTAP model has not predicted any impact for many countries.

Table 7. The Effect of Tariff Discounts on Exports and National Income Per Capita with GTAP Model (%)

 Impact on Export VolumeImpact on real GDP
Organization for Economic Co-operation and Development4,10,2
The United States5.70.0
Japan4.80.7
EU-152,00,1
Germany1.60.0
France1.60,1
 The UK3.10.0
Türkiye3.40,4

It is stated that one reason for the small effect estimated with the GTAP Model is that the benefit estimated with this technique can only capture the static results of the distributional efficiency. Given the current low level of tariffs across the OECD, the overall impact may be small, as dynamic effects do not take effect. From the table above, it is seen that the increase in exports in the GTAP model does not automatically lead to an increase in the Gross Domestic Product. In the EU, it is observed that a lower export increase than the US translates into a higher GDP increase than the US. This phenomenon is attributed to the fact that the way of using resources in the EU is less optimal than in the USA, so it has a greater potential to increase distributional efficiency than in the USA.

The study performed a final control exercise regarding the estimation of the benefits of reducing barriers in the domestic product markets, adapting the predictions for the increases in multi-factor efficiency provided in the previous section to the GTAP model and running the model under the “decrease in tariffs” scenario. According to these results, GDP growth occurs in parallel with productivity increases in all of the OECD countries.

Table 8. The Effect of Tariff Discounts on Exports and National Income Per Capita with GTAP Model (%)

 Impact on Export VolumeImpact on real GDP
Organization for Economic Co-operation and Development5.31.9
The United States8,21.1
Japan3.02,2
EU-152.72.3
Germany2.32,1
France2.52.6
 The UK3.91.1
Türkiye4.43.3

RESULT

This study, which aims to measure the benefits of liberalizing domestic product markets and reducing barriers to foreign trade and foreign capital, reveals that comprehensive reform packages on these issues can significantly increase foreign trade and production among the OECD members. In the first phase of the study, the assumption is that the EU and the USA will go the route of further economic integration, in this case, it is observed that our country will benefit from both the removal of obstacles to foreign capital and foreign trade imposed on it and the reforms applied to the goods’ markets in the USA to contribute to the productivity and production of these countries. In the second stage, in addition to foreign trade and foreign capital liberalization, OECD member countries other than the EU and the USA were assumed to reform their product markets. Thus, in addition to the first stage effects, our country benefits from the return of the reforms it will implement and the impact of the internal reforms of its OECD member trade partners outside the EU and the US. Depending on the technique applied, it is estimated that Turkey will benefit from the integration of the USA and the EU in the range of 0-1.6 percent in terms of per capita national income; by implementing an OECD-wide reform program, including itself, and from the greater integration of OECD economies in the range of 0.4-3.9 percent. The lower limit of the range consists of estimates of the GTAP model and this model, which is mentioned above, does not reflect dynamic effects. Therefore, it is a more likely that the return that can be achieved around the upper limits of the ranges given above.

However, as clearly stated in the study, it would be useful to approach these results based on econometric analysis with caution. In this regard, the study advises to consider the following issues in particular: Firstly, since econometric analyses are based on historical experience and the marginal return on new reforms is likely to be below that of the old reforms, the impact of liberalization in these analyses may have been predicted above what could actually happen. Basically the reforms this time around will bring less growth than they did when economic liberalism was a novel thing. Secondly, member states may have undergone a serious reform process since the date of collection of the data input for this study, so the reform package assumed in the study may have been assumed to be very large since it could actually be implemented. In contrast, since the effectiveness resulting from efficiency gains is not included in the GTAP model, it is possible for the GTAP model to underestimate the consequences of reforms that may actually occur. In addition, there may be some productivity gains in the reform process that will be brought about by the acceleration of innovation and that cannot be achieved with the models implemented. Finally, by reforming the labor market and financial markets, the benefits that can be derived from the reform of the product market can be increased immesuarably. With this study, it has been revealed that our country will be one of the countries that will benefit the most from the OECD-wide liberalization in the fields of product markets, foreign trade and foreign capital. Due to the fact that the data set used is based on surveys conducted in 2001 and 2003, it is seen that this study cannot take into account the recent liberalization of product markets, foreign capital legislation and the decrease in public control over the economy in parallel with the acceleration of privatization in Turkey. Considering the aforementioned developments, it can be concluded that we have started to observe the benefit predicted by this study in the high growth performance of Turkey over the last four years, which, in addition to the correct macroeconomic policies, is a function of the liberalization of product markets and the significant removal of foreign capital restrictions.

Source:

OECD (2005) “The Benefits of Liberalizing Product Markets an Reducing Barriers to International Trade and Investment: The case of the United States and the European Union”, OECD Economics Department Working Paper No:432

OECD (2005) “The Benefits of Liberalizing Product Markets an Reducing Barriers to International Trade and Investment in the OECD”, OECD Economics Department Working Paper No:463

(*) Economic Consultant, Permanent Representation of the OECD

Translated by: Doruk Arslan

The international lawyers’ team can help you with all of the issues that you might be facing in Turkey, including cases of arbitration and starting a company in Turkey.

The Case of Paternity in Turkey

The Case of Paternity in Turkey

Parenting is a very important issue. Many questions arise here, such as who can file a claim for paternity and when, against whom a claim for paternity can be filed, in which cases there is no need to file a claim for paternity, who owns custody of a child born out of wedlock, who owns the costs of the claim, what is the peculiarity of the alimony request requested in the claim for paternity, how a child born out of wedlock can be the heir of the father, what will be the surname of a child born out of wedlock, how and where the examination for claims for paternity is carried out, where the competent court is located…

Now let’s look at these questions one by one. 1. Who can file a claim for paternity, and for what period?

The mother of a child born out of wedlock may file a paternity claim. An unmarried mother can file a lawsuit before birth or within a year from the date of birth of an illegitimate child. If the paternity case is filed by the mother, the period of 1 year begins from the date of birth of the child.

A child born out of wedlock may file a lawsuit. The child can file a claim for paternity independently within 1 year from the date of majority.

Who can be sued for paternity?

It may be open against the unmarried father, and if the unmarried father has died, it may be open against the heirs of the unmarried father.

If you are trying to find an answer to the question, who owns the power of attorney of the illegitimate child, what is the peculiarity of the alimony request requested in the paternity case, and who owns the costs of the case?

The answer is that custody of a child born out of wedlock belongs to the mother.

An application for alimony – filed in a paternity case – is a “PART” of the paternity case.

The judge may decide that the necessary expenses should be paid by one or both parties. If the expenses are not paid within the specified period, it may be decided that they will be covered from the state treasury, which will be taken from the offender in the future.

How can an illegitimate child become an heir?

The existence of blood relationship is not enough to be considered an heir. This blood relationship must be “legally” recognized. He will be entitled to inheritance after the trial.

Those whose claim for paternity is rejected cannot claim the inheretence.

If a lawsuit is filed on behalf of a child, who will be appointed to protect the interests of this child? How long is the period for filing a claim for paternity, what is the peculiarity of this period. From what date and for what period can the appointed person file a claim for the paternity?

There is a time limit of one year for filing a paternity claim. Exceptional case: In the case of paternity, in the past of the specified 1-year period of reduction of rights, it is possible to file a repeated claim, despite the 1-year period, if the defendant misled the applicant, for example, by promising to marry, and thus dismissed the filing of the claim within 1 year.

In regard to the question of where and how was the paternity examination conducted, the examination must show that the person is a father 100% Noy only that but blood samples alone are not enough to achieve a healthy and accurate result.

If it is determined that the tests are required then those might be conducted at the medical faculties of the Universities, the claimant and the “father” are ought to be sent together to conduct the necessary tests.

The competent courts are the family courts. When the court determines paternity, it also decides on child support.

Lawyers in the Law Office will help you with all your questions.

ARBITRATION AGREEMENT IN TURKISH LAW

ARBITRATION AGREEMENT IN TURKISH LAW

            Arbitration is an alternative method of dispute resolution in which the parties resolve their disputes through arbitrators. The arbitration proceeds faster and is more reliable In addition, the will of the parties has a higher priority

In order to resort to the arbitration method of solving issues, the parties may enter into an arbitration agreement.

In Turkish law, the arbitration agreement is governed by Article 412 of the Civil Procedure Code:

“An arbitration agreement is an agreement between the parties to submit all or part of a dispute that regarding a contractual or non-contractual legal relationship to an arbitrator or arbitral tribunal.”

Article 4 of the International Arbitration Act No. 7098 also defines what an arbitration agreement is

An arbitration agreement is an agreement between the parties to resolve all or some of the disputes arising out of or in connection with an existing legal relationship, whether arising out of the agreement or not, through arbitration. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

Under Turkish law, arbitration contracts must be created in writing. E-mail, correspondence and other written means are considered valid. The arbitration agreement may be drafted separately or the arbitration agreement may be appear as part of the main agreement. In fact, this moment is clearly stated in the New York Convention:

New York Convention 2/2

 “2. The term  “agreement in writing ” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

The most important issue concerning arbitration agreements is the will of the parties. The will of the parties must be clear and unequivocal. In this framework, the Supreme Court of the Republic of Turkey decided as follows:

“A statement of intent regarding the resolution of a dispute by an arbitrator or arbitral tribunal in an arbitration agreement or arbitration clause is a basic element of an arbitration agreement. (…) In order for an arbitration clause or agreement to be valid, the parties must clearly and accurately state in the arbitration agreement or clause in which they disclose their arbitration will in a manner that is not inconsistent and confusing. In order for an arbitration clause or arbitration agreement to be considered valid in the case law of our Chamber and the local Court of Cassation, it is recognized that records that eliminate or weaken the final will that the dispute be resolved by the arbitrator nullify the arbitration agreement or the terms of the arbitration agreement. ” HD., 22.06.2020 T., 2019/3450 E., 2020/1932 F

The arbitral tribunal and the courts cannot be dealing with the same case simultaneously. The authorised courts shall be declared null and void.

Another important issue concerning the arbitration agreements is that the person who will sign the arbitration must necessarily have the legal authority to do so. The reason for this is that the arbitration agreement is signed with special authority. This is regulated by Article 74 of the Civil Procedure Code of the Republic of Turkey:

Article 74 of the Code of Civil Procedure states: “If no clear authority is given, a lawyer … may not conclude arbitration agreements…”.

Some topics are not subject to arbitration in Turkish law. When drafting an arbitration agreement, it is necessary to pay attention to this moment. This issue is regulated by Article 408 of the Civil Procedure Code:

“Disputes arising out of real property rights or which are not subject to the will of both parties shall not be subject to arbitration.”

For example, a dispute involving a house in Turkey or an incident that is the subject of criminal cases cannot be the subject of an arbitration agreement. On the other hand, arbitration may be preferable in disputes (compensation, etc.) arising from contracts for the construction of a condominium, but not related to the transfer of property.

For a valid arbitration agreement in Turkish Law, it is necessary to carefully organize the above processes and, if possible, use ready-made arbitration clauses.

Lawyer Haldun Barish

AN EXAMPLE OF DUE DILIGENCE OF A COMPANY PARTNER: A CASE OF CANCELLATION OF THE TRANSFER OF THE TRADEMARK

AN EXAMPLE OF DUE DILIGENCE OF A COMPANY PARTNER: A CASE OF CANCELLATION OF THE TRANSFER OF THE TRADEMARK

Attorney HALDUN BARIŞ

In 2021, with the investigation initiated against the general manager of our client company for “trademark infringement“, we learned that one of the partners of the company transferred the trademark used by the client company to his own company several years ago. We on our part, filed a lawsuit regarding the “cancellation of the trademark transfer“. In this concrete case, one of the company’s partners, through the former manager, who he authorized and cooperated with by granting him the power of attorney, transferred the company’s trademark to his own personal company for a symbolic fee. Years later, he sent a warning to the company asking that the trademark should not be used and immediately filed a complaint and led to the initiation of criminal proceedings against our client.

During the prosecution phase, the case of “cancellation of the trademark transfer”, which we filed in the Sivas Civil Court of First Instance, was made a pending case. In the lawsuit we filed in Sivas Civil Court of First Instance, our main arguments were that the transfer of the company partner was made with malice, that a significant value of the company could not be transferred without the approval of the partners, and that the transfer contradicted the due diligence rule of the company partner and the attorney. In addition to various high judicial decisions on the subject, we also added the following European Court On Human Rights’ decision regarding our petition:

“In the concrete case, European Court on Human Rights based its determination that Mr R acted maliciously when making the application on the documents submitted by the LLR-G5 company. As it is understood from these documents, although Mr. R is the company manager, he has registered the core element of the company’s trade mark in his own name without informing and consulting the company itself. Mr. R has knowingly placed his personal interest above the interest of the company and knows that he can seriously harm the company by preventing the company from operating using this tademark. Although the “intention” evaluation at the time of the application is a subjective concept, it is possible to reach a conclusion as a result of the evaluation of the objective conditions of the situation. Accordingly, all tangible conditions such as (i) the concrete actions of the applicant by virtue of his/her position, (ii) the level of awareness of the previous use of the trade mark in question, (iii) the contractual, pre-contractual and post-contractual relationship with the applicant for invalidity, (iv)mutual rights and obligations, (v) the obligation of loyalty and honesty by virtue of his/her current or previous duty within the company, and (vi) the conflicting table of interests as regards to the tademark are taken into account. “(https://curia.europa.eu/juris/document/document.jsf?) (European Court of Human Rights decision dated 16 JUNE 2015 T306/13)

The case was finalized in our favor. I submit to the benefit of our colleagues that the reasoning part of the decision made by the local court is very important:

Based on the reasons of “taking action without taking the decisions required to be taken by the competent bodies of the plaintiff company and misuse of the power of attorney”, The 2. Notary of Sivas province requested the cancellation of the trademark transfer with registration number 2012 … with the invalidity of the trademark transfer agreement made with the transaction dated March 2, 2020 and the defendant’s attorney claimed that the transfer transaction was in accordance with the procedure.

Evidently, according to the provisions of the Turkish Code of Obligations regulating the representation and power of attorney, the power of attorney agreement is largely based on the mutual trust of the parties. Most of the attorney’s responsiblities arise from this element of trust, his obligation to act in accordance with the interest and will of the attorney. In the Turkish Code of Obligations numbered 6098 (TBK), the duty of loyalty and due diligence is accepted as the principal debt of the attorney, and in Article 506, it is stated that “The attorney shall perform the attorney’s responsibilities in person

Ankara Bar Association, Seyhan Law Office, 14.06.2023

. However, in cases where the attorney is authorized to do so or when there’s no other choice or the practice makes it possible, the attorney may pass the job to someone else. The attorney is obliged to carry out the his duties with loyalty and due diligence, taking into account the legitimate interests of the client.

In determining the responsibility of the attorney arising from the due diligence factor, the behavior of a prudent attorney who works in a similar field is taken as a basis. “

On the other hand, if the person who makes the contract with the proxy has good intentions within the context of Article 3 of the Turkish Civil Code No. 4721 (TMK), that is, if he does not know that the proxy is abusing his power or if he does not have the opportunity to know despite the care expected from him, his contract with the proxy is valid and binding. Even if the proxy misuses his/her power of attorney, this issue remains an internal problem between the proxy and the client and cannot be effective on the rights earned by the proxy and client. However, if the third party has an interest in the attorney and cooperates with the attorney, or if the attorney is malicious and knows or needs to know that the attorney has abused his/her power of attorney, the fact that the attorney is not deemed to be bound by the contract should be considered as a natural result of the rule of honesty written in Article 2 of the Turkish Civil Code. Since the aforementioned article of the law is mandatory, it must be taken into consideration by the judge (ex officio). On the contrary, encouraging bad intent would at least be to turn a blind eye on it. However, in all contemporary legal systems, malice has not been defended and has always been condemned. As a matter of fact, lots of scientific opinions as well as practices in this regards have developed and gained certainty. (District Court of Ankara 7. Civil Chamber no. 2018/966E-2020/698 K)

When the information in the above-mentioned regional court decision and the scope of the file are evaluated together, it is seen that the trademark “…” with the trademark number 2012 …. registered on 06/08/2013, which is the subject of the lawsuit, was transferred to the defendant company, where the plaintiff company’s official was his/her own official, for a very small and unacceptable fee of 250.00 TL, that the said transaction was clearly an abuse of power of attorney, that the defendant company had a malicious intent is crystal clear, It was decided to cancel the transfer process subject to the lawsuit by considering that it will not bind the plaintiff company in accordance with the article 2. of the Turkish Civil Code “

SİVAS 3. CIVIL COURT OF FIRST INSTANCE (IN THE CAPACITY OF INTELLECTUAL AND INDUSTRIAL RIGHTS CIVIL COURT) E. 2021/505 K. 2023/379

On the other hand, I believe it would be useful to share here the high judicial decisions we have submitted to the file in order to set a precedent for the case:

“because the trademark subject to the lawsuit includes the trade name of the plaintiff company and is vital for the company to continue its existence, and the decision regarding the acceptance of the lawsuit on the grounds that the transfer of the said trademark of the plaintiff to the defendant company by İlhan, who is the manager in both companies, cannot be considered compatible with the obligation of loyalty and due diligence, the cancellation of the transaction regarding the transfer of the trademark”Eser İnşaat ve Ticaret A.Ş. + Figure”, and the cancellation of the registration of the transfer in Turkish Patent Institute were approved by our chamber upon the appeal of the defendant’s attorney.” Supreme Court of Appeals 11. CIVIL DEPARTMENT E. 2010/9098 K. 2010/10255 T. 14.10.2010;

“If there is no article in the articles of association of the company stating that trademark transfer works will be dealt with and if the said trademark is important for the company’s activity, it is accepted that the transfer of the trademark can be made by the decision of the board of partners” Court of Cassation 11. HD dated 13.02.2006, 2005/1362 E. and 2006/1253

According to the provisions of the law and the articles of association of the company, as a rule, it is necessary to accept that the director authorized to represent the company may dispose of a company’s assets. However, if it is determined that this asset is the only asset owned by the company and is of vital importance for the company to continue its existence, a decision must be taken from the board of shareholders in order for the said commitment to transfer to be valid. In fact, although the issue explained has been accepted by the court, there has not been sufficient research and examination to make a judgment within this framework. Because, as it is understood from the letter sent by Turkish Patent Institute that the plaintiff company has another trademark registered in the same classes other than the trademark subject to the lawsuit, there has not been a suitable examination as to whether the trademark in question is of vital importance for the plaintiff company to continue its existence. ” Supreme Court of Appeals 11. HD E. 2013/1107 K. 2014/7690 T. 18.4.2014

Fictitious marriage in Turkey

Fictitious marriage in Turkey

Marriage to a Turk for the sake of Turkish citizenship

Marriage with the aim of obtaining a right to work in Turkey

Marriage in Turkey for the purpose of obtaining a residence permit

Fictitious marriage in Turkey

Fictitious marriage occurs when people marry in order to obtain benefits such as a simplified way to the residence permit, work permit, as well as other benefits obtained during the marriage between a foreigner and a Turkish citizen. Since there are no fictitious marriages in the Turkish legislation the number of reasons for the annulment of a contract are limited, therefore a marriage agreement is also rarely cancelled or declared void.

From the point of view of the law regarding the citizenship, according to article 16. In cases where the marriage is accepted as real, i.e. not fictitious, the application for citizenship is transferred to the commission and the consulate or a higher institution, the consulate and the commission are thus entitled to investigate the fictitiousness of the marriage in for an interview with the applicants for citizenship and Turkish citizens who have married.

The decisions of the Supreme Court repeatedly state that the government officials are unable to investigate whether or not the marriage is fictitious. Of course, governing institutions cannot annul marriages. It should also be added that if it is objectively proved that the intent behind the marriage was malicous, for example for the purposes of obtaining citizenship, then government institutions will have the right to annul the marriage. In this context, the responsible government body has the right to investigate the fictitiousness of marriage and has the right to refues the citizenship. From the point of view of the law on foreigners, during the consideration of an application for a residence permit through family ties, there is a clear list of actions if it is proved that a fictitious marriage took place. In this context, according to Articles 35/3-c and 37, if the investigation reveals that the marriage is fictitious, it is clearly written what legal actions will be taken. Unlike a similar situation in the work permit, in this case, the state can investigate whether the marriage is fictitious. According to the International Labor Law, foreigners who are married to a Turkish citizen need only prove that the applicant for the work permit lives with a Turkish citizen with whom he or she is married in order to obtain the work permit. If there is a wish that marriages may be rejected or annulled on account of being fictitious, a regulation must be adopted which clearly and precisely allows the officials to annul the marriage. The marriage will be annulled if it is proved to be fictitious from the point of view of Turkish Law on Citizenship and Foreigners. In such situations, a man usually says that he will achieve a solution in the woman’s favor by receiving a the right to represent her from her. In such cases, if you see a sign of ill-will in such situations, immediately cancel the right and report to the bank or the relevant authorities…

Ultimately, if the aim is to prevent sham marriages aimed at benefiting from marriage to a Turkish citizen, then the boundaries of the state investigation should be clearly indicated in accordance with human rights and with objectivity. Also, it is clearly stated that the state has the right to refuse an application for citizenship, in case of significant evidence of fictitious marriage. In this case, you can contact our office consisting of Russian-speaking lawyers in Turkey, Istanbul, Ankara and Antalya by e-mail info@seyhanhukuk.com or by phone +90 312 427 21 13.