TURKEY

Core Area Summary of PFI Guide recommendations

1 / Best Practice Rating Assessment

1- Policy

Framework

Existence of a policy framework for public private partnerships

("PPPs").and existence of specific concession law or of a comprehensive

set of laws regulating concessions and allowing a workable PPP regime.

12/21

0,57 Medium Compliance

2 Institutional Framework Existence of an institutional framework for public private partnerships

("PPPs"). and clear separation from Public Procurement

5/9

0,56 Medium Compliance

3-Definitions and Scope of the

Concession Law

Existence of a clear definition of the boundaries and scope of application

of the concession legal framework (definition of "concession", sectors

concerned, competent authorities, eligible concessionaires) limiting the

risk of a challenge to the validity of concession contracts irrespective of

the name given to the act.

14/24

0,58 Medium Compliance

4-Selection of the

Concessionaire

Mandatory application of a fair and transparent selection process.

Limited exceptions allowing direct negotiations, competitive rules for

unsolicited proposals and the possibility to challenge illegal awards.

18/45

0,4 Low Compliance

5-Project Agreement Flexibility with respect to the content of the provisions of the concession

agreements which should allow a proper allocation of risks without

unnecessary or unrealistic/not bankable/compulsory

requirements/interferences from the contracting authority (obligations,

tariff, termination, compensation).

10/27

0,37 Low Compliance

6-Security and Support Issues Availability of reliable security instruments on the assets and cash-flow

of the concessionaire in favor of lenders including "step in" rights and

possibility of government financial support or guarantee of the

contracting authority’s proper fulfillment of its obligations.

6/18

0,33 Low Compliance

7-Settlement of Disputes and

Applicable Laws

Possibility to obtain proper sanction for breach under the applicable law

through international arbitration and enforcement of arbitral awards.

14/15

0,93 Very High Compliance

OVERALL RATING 53/% Medium Compliance

OVERALL ASSESSMENT OF THE QUALITY OF CONCESSION LEGISLATION:

1 UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects, 2001 (hereinafter the "PFI Guide")

Checklist TURKEY

Local Expert: Gide Loyrette Nouel Danışmanlık Hizmetleri Avukatlık Ortaklığı

2.

Pursuant to Article 47 of the Constitution, concessions are awarded to the extent granting of such specific concession is regulated by

law. There is no general framework for PPP/ Concessions in Turkey but Concession are commonly used for a long time with

different legal basis and Turkey has been one of the first pilot country to develop BOT project before the legality of the

international arbitration provision under administrative contract have been successfully challenged before the Constitutional Court.

Concessions are awarded on the basis of sector specific laws. For example, Transfer of Operation Rights of Airports and Ports are

governed by Law No 5335 and Law No 5335 refers to Privatization Law for the selection procedures of the concessionaire for the

Transfer of Operation Rights of Airports and Ports. Concessions related to construction, maintenance and operation of Highways

are governed by “Law No 3465 regarding the Construction, Maintenance and Operation of Highways by entities other than Turkish

General Directorate of Highways”. Other project are governed by the BOT law which is no longer used while other projects are

govern by BO Law and a new PPP law is under preparation.

Obviously all such difference create a complex PPP legal framework with always the historical background of Administrative law

and the overwhelming concern of protection of public interest and public wealth which make difficult the adoption and

development of new type of project finance instruments more oriented toward bankability of the project and the lenders protection.

More flexibility in Concession contract negotiations as well as availability of more security instruments to the benefit of the lenders

are crucial to future development of PPP as the validity of the International arbitration provisions are no longer an obstacle.

3.

Key for assessment of Each Question

Yes Yes, with reservations No, with limited compliance / redeeming features No

N/A Not applicable

Key for Assessment of Each Core Area and for Overall Assessment

> 90% Very High Compliance

≥ 70%-89% High Compliance

50%-69% Medium Compliance

30%-49% Low Compliance

< 30% Very low Compliance

4.

1. POLICY FRAMEWORK

QUESTION

ANSWER

ARTICLE

COMMENTARY

1. Is there a general/national policy framework

(explicit or implicit) for PPPs in infrastructure

or public services?

PPPs are understood in this context as different forms

of cooperation between public authorities and the

world of business which aim to ensure the

funding, construction, renovation, management

or maintenance of infrastructure or the provision

of a public service.

There is not a general policy framework for PPPs.

Instead, there are number of Laws and Regulations

governing PPPs in different sectors.

Note that there is a draft law constituting a general

policy framework for PPPs (“Draft PPP Law”). It is

expected that the Parliament will vote for the Draft PPP

Law at the second quarter of 2009. The evaluation in

this document do not take account of the Draft PPP

Law which is not yet in force.

2. If the answer to 1 is yes, is PPPs policy

framework distinct from that for privatization?

Even though there is no general PPP framework, we

have answered this question based on the existing

framework.

In principle, the current framework is distinct from the

privatization framework (which is the Privatization

Law).

Having said that, Article 15 of the Privatization Law

entitles the Privatization Agency to transfer the

operating rights of certain public agencies in

accordance with the Privatization Law. In this respect,

the Law No 5335 amending certain Laws refers to

Privatization Law for the principles applicable to the

selection procedures applicable to the Lease and/or

5.

Transfer of Operating rights of Airports. In addition,

the tenders for the Transfer of Operating Rights of Ports

(which are operated by the Turkish Railroads

Directorate under the Ministry of Transportation) were

conducted by the Privatization Agency and in

accordance with the selection framework of the

Privatization Law.

3. If the answer to 1. is yes, is such policy

framework supported by:

3.1. certain policy framework documents?

3.2. certain institutions (a "task force" or other

institution specialized in the promotion and

development of PPPs)?

For information, are there:

reference to PPPs in the Constitution?

sector-specific policy frameworks dealing with

PPPs?

municipal policy frameworks dealing with

PPPs?

If the Country's legal or institutional framework

contains undesirable restrictions on PPPs in

infrastructure or public services, please mention these.

YES

YES

NO

NO

Even though there is no general legal framework, we

have answered this question based on the existing

framework but numerous reference to PPP in the

Constitution and in numerous laws.

Articles 47,125 and 155 of the Constitution refers to

PPP’s.

Municipality Laws refer to PPPs. They are however

very brief and general references.

6.

QUESTION

ANSWER

ARTICLE

COMMENTARY

7.

4. Does the country have a concessions or a PPPs

law (the "Law") or if the answer is no, do the

Constitution or other general laws (ex: the Civil

Code, sectorial law) recognize the basic

principles of concessions and regulate the

granting of concessions in such a way that

concessions are legally possible in the country?

[For the purpose of this questionnaire, the set of rules

applicable to concessions in the absence of a specific

concession law will also be referred to as the Law]

Legislations regulating the granting of concessions and

constituting a Concessions/ PPP framework for Turkey

are as follows;

Law No.3996 regarding the realization

of certain infrastructure and public services with the

BOT model. (“BOT Law”). BOT Model is currently

not used in Turkey. The legislation is still in effect

since there are ongoing projects under the BOT Model.

Law No.4283 on erection and operation

of thermal power plants with the BO model. (“BO

Law”). Note that Ministry of Energy is currently not

using the BO Model for the erection of Thermal Power

Plants in Turkey. The current policy of the Ministry of

Energy is to have plants that are fully privately

financed.

The Privatization Law No.4046.

Law No.3096 for the generation,

transmission, distribution and sale of Electricity by

private undertakings. This legislation is currently not

used in Turkey. The legislation is still in effect since

there are ongoing projects under the legislation..

Law No.3465 on building, maintenance

and operation of the Highways. (“Highways Law”)

Law No.5396 regarding Build Lease of

Healthcare Institutions.

Law No. 5335 amending certain Laws

including provisions related to the lease and/or transfer

of operating rights of Airports and privatization

(including transfer of operation rights) of assets owned

by Turkish Railroads (including ports).

Law No.4051 regarding the application

8.

of International Arbitration on Concession Agreements.

Law No.576 related to the concessions

(This is a narrow framework dating from before the

Republic of Turkey but still in effect).

Legislations referring to concessions/PPP’s are as

follows;

The Law on Telegram and Telephone

numbered 406 and The Law on Radio numbered 2813.

International Arbitration Law No.4686.

State Council Law No.2575.

Administrative Procedural Law

No.2577.

Municipality Laws No.5216 and

No.5393.

Special Provincial Administration Law

No.5302.

In addition, Articles 47, 125 and 155 of the Constitution

refers to concession agreements.

For the purpose of this questionnaire, we will be

referring to the above Laws and their related

Regulations as the Laws and Regulations.

9.

5. If the country has a Public Procurement Law, is

it clear to what extent the Public Procurement

Law applies or not to the granting of

concessions?

For information:

is the application of the Public Procurement

Law specifically excluded?

does it apply for certain types of concessions

only?

is it applicable to the selection of the

concessionaire?

is it applicable to all or some sub-contracts to

be entered into by the concessionaire?

YES/NO

YES

YES

NO

Turkey has two public procurement laws:

(i) Law No. 4734 on Public Procurement (PPL),

(ii) Law No.2886 on State Procurement (SPL).

PPL and SPL together are the Public Procurement

Laws. In principal, Public procurement Laws do not

directly apply to granting of concessions even though

they do not specifically exclude the Public Procurement

Laws. Note however the following:

(1) BOT Law and BO Law specifically exclude the

application of SPL (PPL was not enacted at the time of

their issuance). BL Law for Healthcare Institutions

specifically excludes the application of SPL and PPL.

Draft PPP Law specifically excludes the application of

PPL.

(2) Municipality Laws permit the municipalities to

grant concession for certain public services but does not

regulate the procedures regarding the granting of the

concession. It is not cleat which law applies to the

selection procedures. In practice, Municipalities apply

SPL.

(3) BL Regulation for Healthcare Institutions and

Highways Law refer to provisions of PPL for

determining the parties who cannot apply for a

concession.

(4) BL Regulation for Healthcare Institutions indicates

10.

that the principles of SPL and PPL will be followed for

issues not regulated by such Regulation. This reference

seems interesting considering that BL Law specifically

excludes the application of SPL and PPL.

11.

6. If the country has sector-specific laws

regulating concessions in specific sectors, is it

clear which law is applicable to the granting of

concession for such particular sector and/or

infrastructure and/or services?

Please refer to our answers to Q4.

12.

7. If the country has a "local public services" law

for municipalities/local concessions/ PPPs for

infrastructure and/or services is it clear which

law is applicable to the granting of concession

for such particular local infrastructure and/or

services?

Local Public Services are regulated by Municipality

Laws No 5216 and 5393, and Special Provincial

Administrations Law No.5302.

Municipality Laws entitle the Municipalities to grant

concessions limited to public transportation services

(bus, rail and sealines) and water supply and waste

water treatment services.

Municipality Laws and Special Provincial

Administrations Law do not regulate the selection

procedures. In practice, Municipalities follow the

principles set forth in the SPL.

13.

2. INSTITUTIONAL FRAMEWORK

QUESTION

ANSWER

ARTICLE

COMMENTARY

8. Does the Law identify (or allow identification

by reference to other laws or regulations) the

public authorities that are empowered to award

concessions and enter into project agreements

("Contracting Authority")?

If yes, for information, which of the following

authorities are identified:

national authorities (e.g.: the government,

ministries, independent agencies)?

provincial authorities?

local or municipal authorities?

public enterprises?

YES

NO

YES

NO

In principle, each of the Laws directly identify

Contracting Authority.

BOT Law however does not identify the Contracting

Authority but authorizes the High Planning Council to

appoint the Contracting Authority.

14.

9. Is there a specialized agency established to take

care of concessions (which consent or

recommendation is necessary for the granting of

a concession, ex: Concession / PPPs Agency)?

Art. 47 of

Constitution,

Art. 6 of

Draft PPP

Law

There is no specialized agency established for

concessions. Contracting Authorities are required to

obtain the opinion of the State Council regarding the

concession agreement. This is however not in the form

of a consent.

Under the Draft PPP Law, in order to grant a

concession for projects exceeding YTL 10 million

(approximately €5 million), contracting authority is

required to be authorized by the High Planning Council.

For projects with a value below YTL 10 million

thresholds, the contracting authority can grant a

concession with the affirmative opinion of the State

Planning Council Department.

10. Is the division of power between different

public authorities involved in the concessions

granting process simple and coordinated (ex:

one stop shop)?

The division of power between different public

authorities involved in a concession is set by laws. It is

therefore clear. However we do not know how simple

and coordinated the internal interaction between such

public authorities is.

15.

3. DEFINITIONS AND SCOPE OF THE CONCESSION LAW

3.1 Concession definition

QUESTION

ANSWER

ARTICLE

COMMENTARY

11. Does the Law define one or several term(s) (i.e.

"PPP", "concession", "BOT", others) for the

arrangements to be regulated by the Law which

specify the limits of application of the Law?

For information, please provide the given definition, if

any.

(Irrespective of the name given in the Law the word

concession will be used for all types of defined

agreements for purposes of this questionnaire)

Art.1 of Law

no.406

Art.3 of Law

no.3996

Art. 2 of Law

no.4283

Art.7 of Law

no.3395

The Laws define Concession Agreements, BOT, BO

and Transfer of Operating Rights. The definitions of

BOT and Transfer of Operating Rights are general

definitions. The definitions of Concession

Agreements and BO are sector specific definitions.

BOT: BOT is defined under the BOT Law and is as

follows:

“The BOT is a financing model to be used in projects

requiring high technology or high financial resources

in which the investment costs are recovered with the

proceeds of the sale of goods or services during the

operation period.”

Transfer of Operating Rights: Transfer of Operating

Rights is defined under the Privatization Law and is as

follows:

“Transfer of Operating Rights is the transfer of

operating rights of an entity without transferring the

ownership rights of the assets of such entity.”

Concession Agreement: The term concession is not

16.

defined under Turkish Law. The Law No.406

regarding Telegram and Telephone provides a

definition of the concession agreement for the

purposes of such law and the definition is as follows:

“The concession agreement is an agreement executed

between the Ministry of Transportation and the

operator (concessionaire) for providing of

telecommunication services and/or operating the

infrastructure thereof”.

BO: BO is defined under the BO Law and for the

purposes of such law is as follows:

“The BO is a model regulating the erection and

operating of power plants by private companies and

the sale of the electricity”.

In addition, the BL Law on Healthcare Institutions

refers to BL (Build and Lease) Model for the building

of the hospitals on lands allocated by the Ministry of

Finance. The law does not define the BL model.

Note that the following PPP models are defined in the

Draft PPP Law: BOT, BO, BL, Transfer of Operating

Rights. Draft PPP Law also permits the creation of

new models in which “Building Stage” of BOT,BO or

BL model includes completion, renovation,

development, research, restoration and maintenance.

17.

12. Does the Law provide that it applies to all

contracts entering into the definition of

concession irrespective of the name given to

such contract (concession, license, usufruct

right, lease, etc.)?

There is no such provision in the law.

18.

13. Does the Law make a clear distinction between

concessions and public procurement contracts

(i.e.: public works, supply or services) whereby

the distinguishing criterion is the transfer of

risks inherent to the exploitation?

The Law does not make a distinction between

concessions and public procurement contracts.

State Council precedents define the distinguishing

nature of the concession agreements as follows:

(i) the concessionaire is entrusted with total or partial

management of public infrastructures or services (i.e.

works and/or services for which the public authority

would normally be responsible);

(ii) the concessionaire bears the risk of operating such

works/services; and

(iii) the concessionaire has generally the right to

charge a fee for the works/services.

We therefore conclude that concessions are

distinguished by State Council precedents based on

transfer of risk inherent to exploitation.

19.

14. Does the Law make a clear distinction between

concession/PPPs and license (i.e. an

authorization to operate granted automatically

by a public authority when certain criteria are

met)?

No, the Law does not make a clear distinction

between concession/PPPs and license.

3.2 Application of the Law

QUESTION

ANSWER

ARTICLE

COMMENTARY

15. Does the Law provide that it prevails over any

sector-specific law or other laws dealing with

concession?

No. There is no prevailing law.

3.3 Concessionaire and Project Company

20.

QUESTION

ANSWER

ARTICLE

COMMENTARY

16. Can concession be granted to a domestic and/or

foreign person or can the shareholders of the

concessionaire be domestic and/or foreign

persons (without discrimination)?

Art. 2 of

Law

no.4501

Art. 2 of

Law

no.4686

Yes, concessionaires can be domestic and/or foreign

persons and shareholders of a concessionaire can be

domestic and/or foreign person.

There are laws referring to foreign concessionaires such

as law on International Arbitration for Concession

Agreements and Law on International Arbitration.

For information only, can concession be granted to

public entities or to entities jointly owned by private

and public entities?

There are no legislation permitting/restricting public

entities from becoming concessionaire.

3.4 Concerned sectors

QUESTION

ANSWER

ARTICLE

COMMENTARY

17. Does the Law identify (or allow identification

by reference to other law or regulations) the

sectors and/or types of infrastructure and/or

services in respect of which concessions may or

may not be granted?

Article 47

of the

Constitution

The Law does not identify the sectors and/or types of

infrastructure and/or services in respect of which

concessions may or may not be granted.

Article 47 of the Constitution provides that concessions

may only be granted to the extent regulated by law.

Therefore concessions may be granted only if a law is

enacted for the grant of such concession.

Sectorial laws allow the identification of services or

sector concerned

21.

18. Do the sectors eligible for concessions

correspond to a large extent to those listed

below, or if not, is the list of eligible sectors an

open-ended one (as opposed to being

exhaustive) allowing (or at least not preventing)

concessions to be granted in numerous sectors?

For information:

a) does it include the transportation sector?

is the railway system included?

are rail transport services included?

are ports included?

are airports included?

are public roads included?

b) does it include the electricity sector?

is the generation of electricity included?

is the transmission of electricity included?

is the distribution of electricity included?

c) does it include the water and wastewater sector?

is water production included?

is water treatment included?

is wastewater treatment included?

is water distribution included?

is wastewater collection (sewerage) included?

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Sectors which are currently eligible for concessions are

sectors for which a law for the related concession is

enacted. Sectors eligible for concessions correspond to

a large extent to those listed below

By way of transfer of operation rights

Government has monopoly over the transmission of electricity.

The Municipality Law permits granting of water concessions by

Municipalities. The Law does not specify whether it refers to

water production, water treatment, wastewater treatment etc. We

are aware however of concessions related to water production and

water distribution.

22.

d) does it include solid waste collection, transfer or

disposal?

e) does it include the oil, gas and mineral sector?

f) does it include other public services such as

education, health care and prisons?

g) does it include any other sectors or infrastructure

(please specify)?

Yes

No

Yes

Healthcare only.

Telecommunications e.g GSM operators and 3G

operators.

4. SELECTION OF THE CONCESSIONAIRE

4.1 General Considerations

QUESTION

ANSWER

ARTICLE

COMMENTARY

19. Does the Law require in principle the

Contracting Authority to select a concessionaire

through competitive procedures?

Article 3 of

BO Law and

Article 6 of

BO

Regulation

(defined

Even though the Laws (except BO Law and BO

Regulation) do not directly refer to competitiveness, the

Laws reflect competitive bidding procedures. BO Law

and BO Regulations clearly indicate that the selection

should be competitive.

23.

below) Article 9 of the Draft Law refers to competitiveness of

selection procedures as one of the main principles of

the Draft Law.

20. Is there reference in the Law to the principles of

transparency, equal treatment and

proportionality?

The Laws do not refer to the principles of transparency,

equal treatment and proportionality.

Draft PPL Law refers to transparency, competition,

equal treatment, availability of necessary information

for public supervision and efficiency.

21. Is there a provision in the Law concerning the

publication of information related to the

competitive procedures in the Country media

and in the international media (for large

projects)?

Article 5 of

BOT

Decision,

Article 6 of

BO

Regulation,

Article 20 of

Highways

Regulation,

Articles 8 of

Regulation

for the BL

of

Healthcare

Institutions,

Article 18 of

Privatization

Law

There is not any uniform publication requirement for

the Laws.

(1) For BO Projects, bids are announced in the Official

Gazette.

(2) For BOT Projects and for Transfer of Operation

Rights of Highways, bids are announced in the

Official Gazette and at least 2 widely distributed

newspapers.

(3) For BL Projects, bids are announced in the Official

Gazette, at least 2 widely distributed newspapers

and the Internet.

(4) For Operation Rights transferred under the

Privatization Law, bids are announced in

accordance with the Privatization Law which only

requires the bids to be announced before the tender

in accordance with the transparency principle. No

detailed regulation.

Draft Law does not refer to announcement provisions.

This is to be regulated by regulations under the Draft

24.

Law.

22. Are there provisions of the Law, regulations or

special manual, recommendation governing in

detail the selection of the concessionaire

("Regulations") (i.e.: the pre-selection of

bidders, the procedure for requesting proposals,

other procedure such as competitive

dialogue/two stage procedure)?

(1) Regulation for BO Projects for Thermal Power

Plants (BO Regulation) dated 01.08.1997

(2) Decision of the Council of Ministers for BOT

Projects (BOT Decision) dated 06.08.1994

(3) Regulation for the Construction, Maintenance and

Operation of Highways (Highways Regulation) dated

01.03.1993

(4) Regulation for BL Projects for Healthcare

Institutions dated 03.07.2005

Listed regulations include detailed provisions regarding

the selection of the concessionaire including the pre-

selection of bidders, the procedure for requesting

proposals. Draft Law also refers to regulations (to be

drafted) governing the selection of the concessionaire in

detail.

23. Does the Law / Regulations provide that, if the

Contracting Authority rejects an applicant at the

time of pre-selection or disqualifies a bidder, it

must make public the reasons for the decision

(or inform the rejected bidder thereof explaining

the reasons for rejection)?

25.

26.

4.2 Award of concession

QUESTION

ANSWER

ARTICLE

COMMENTARY

24. Does the Law / Regulations provide that all

proposals are ranked solely on the basis of the

evaluation criteria set forth in the pre-selection

documents/ request for proposals?

(1) BO Regulation sets forth the evaluation criteria and

indicates that the bidding commission should evaluate

the bids based on such criteria. Evaluation criteria

includes compliance with pre-selection documents,

engineering and design of the project, safety of the

project (including safety standards of the suggested

equipment), availability of the financing, production

costs and bidding price. The bidding commission is

required to prepare a comparative study of the bids.

(2) BOT Decision does not require that proposals to be

ranked solely on the basis of the evaluation criteria set

forth in the pre-selection documents. BOT Decision

require the bidding commission to select the bid with

lower economic burden to Treasury when there are 2

bids with equal terms.

(3) Privatization Law does not have an article providing

that the proposals are ranked solely on the basis of the

evaluation criteria

(4) Highways Regulation require the bidding

commission to select the bidder with the highest bid to

the extent that such offers meets the evaluation criteria

in the pre-selection documents.

27.

(5) BL Regulation for Healthcare Institutions indicates

that the bidding commission should evaluate the bids

based on the evaluation criteria set forth in the selection

documents.

Article 8 of the Draft Law indicates that bidding

strategy includes the evaluation criteria to be applied

for the appointment of the bidder.

25. Does the Law / Regulations provide that a

notice of the award of the project, identifying

the concessionaire and including a summary of

the essential terms of the project agreement is to

be published?

Such a requirement is only provided in the Privatization

Law and the Law on the Transfer of Operation Rights

of Airports. Both laws require the notice of award to be

disclosed to the public. No detailed provisions as to the

scope of the notice of award.

26. Does the Law / Regulations provide that the

Contracting Authority or any other public

authority maintain records of key information

pertaining to the selection and award

proceedings?

(1) BO Regulation and BOT decision require the

bidding commission to prepare a bidding report

including key info such as pricing of offers and the

reasons of the bidding commission for selecting the

winning bidder.

(2) Privatization Law requires all actions during the

tender process are recorded in a report to be signed by

all parties to the tender.

27. If the answer to 26 is yes, does the Law provide

that such record is accessible for public or at

least to interested parties?

28.

4.3 Final negotiations

QUESTION

ANSWER

ARTICLE

COMMENTARY

28. Does the Law /Regulations contain provisions

regulating final negotiations (i.e. post contract

award) so that transparency, equal treatment and

competition are preserved?

29. Does the Law / Regulations provide that the

Contracting Authority has the authority to

terminate negotiations with the invited bidder

when it becomes apparent that the bid will not

result in an agreement and start negotiations

with the second ranked candidate?

Article 31

of the BO

Regulation

In the BO Regulation, Contracting Authority has the

right to terminate the execution procedures if the

concessionaire does not come to execute the agreement

or does not bring the required bid security. Contracting

Authority may invite the second (or third) ranked

candidate if the first (or second) ranked bidder does not

come to execute the agreement or does not bring the

required bid security.

29.

4.4 Concession Award without competitive procedure

QUESTION

ANSWER

ARTICLE

COMMENTARY

30. According to the Law / Regulations, does the

Contracting Authority have the authority to

award a concession without competitive

procedures only in limited exceptional

circumstances such as the ones listed below?

For information, which of the following conditions

allowing direct negotiations are provided for?

when there is an urgent need for ensuring

continuity of the provision of service and

engaging in a competitive selection procedure

would be impractical?

for projects of short duration and with an

anticipated initial investment value not

exceeding a specified minimal amount (or with

an anticipated turnover not exceeding a

specified minimal amount)?

reasons of national defence or national

security?

cases when there is only one source capable of

providing the required service (e.g.: in the case

of patented technology or unique know-how)?

when an invitation to the pre-selection

Even though the Laws (except BO Law and BO

Regulation) do not directly refer to competitiveness, the

Laws reflect competitive bidding procedures which

limit the possibility to use direct negotiations

30.

proceedings or a request for proposals has been

issued but no applications or proposals were

submitted or all proposals failed to meet the

evaluation criteria?

others (please specify)?

31. According to the Law / Regulations, is there a

procedure (rules) to be respected for the award

of a concession without competitive

procedures?

Special case of unsolicited proposals

QUESTION

ANSWER

ARTICLE

COMMENTARY

32. Does the Law / Regulations provide for the

Article 3 of BO Law/Regulation permits unsolicited proposal. If

31.

adequate framework for the Contracting

Authority to handle unsolicited

proposals/private initiative concessions

(proposal relating to the implementation of a

concession that is not submitted in response to a

request or solicitation by the Contracting

Authority) that ensure transparency and equal

treatment and do not distort competition?

BO Law

and Article

6 of BO

Regulation

the Contracting Authority accepts an unsolicited

proposal, it is then required to create competitive

bidding grounds. The Contracting Authority is required

to draft a tender document and announce the tender in

the Official Gazette.

4.5 Review procedures

QUESTION

ANSWER

ARTICLE

COMMENTARY

33. Does the Law allow the bidders who claim to

have suffered or that may suffer loss or injury,

to seek review of the Contracting Authority’s

acts or failures to act?

Articles 11-13

of Law on

Administrative

Proceedings

Not regulated in the Laws.

Pursuant to the Law on Administrative Proceedings, in

case a bidder claims to have suffered or that may suffer

loss, it has the right to ask the Contracting Authority to

review its decision/act or failure to act. If such request

is dismissed by the Contracting Authority, the bidder

has the right to bring an action before the

Administrative Court.

Article 12 of the Draft Law suggests that claims

regarding the bidding procedures will be heard by the

State Procurement Office in accordance with the

relevant regulations.

5. PROJECT AGREEMENT

32.

5.1 Model or list of provisions

QUESTION

ANSWER

ARTICLE

COMMENTARY

34. Does the Law contain (or refer to) a model

concession/PPP agreement which use is optional

(for guidance only as opposed to being

mandatory) or a mandatory list of provisions to

be included in the agreement (the content of

such provisions being left for negotiation)?

Article 10

of the BO

Regulation,

Article 16

BOT

Decision

and Article

30 of the

BL

Regulation

for

Healthcare

Institutions

BOT Decision, BO Regulation, BL Regulation for

Healthcare Institutions set forth a mandatory list of

provisions to be included in the agreement. The

content of such provisions are being left to the

Contracting Authority to determine. Very little

flexibility however in the negotiation of the provisions

of the proposed draft of Concession Agreement

Privatization Law and Highways Regulation include

neither a model agreement nor a mandatory list of

provisions.

5.2 Duration and extension of the project agreement

QUESTION

ANSWER

ARTICLE

COMMENTARY

35. Does the Law provide that the concession

duration should depend on the length of time

taken for the amortization of the private

investment and an appropriate return on the

capital?

For information, please provide the given duration (if

Article 7 of

BOT Law,

Article 5 of

the

Highways

Law and

Article 32 of

(1) BO Regulation caps the duration of the power

purchase agreement between the Turkish

Electricity Trading Corp and the

concessionaire with 20 years. Parties can

decide to extend the term of the power

purchase agreement by mutual agreement to be

determined 1 year before the expiry of the

33.

any) and relevant information in the Law with respect

to the conditions for extension.

the BL

Regulation

for

Healthcare

Institutions,

Article 15 of

the

Privatization

Law

contract.

(2) BOT Law caps the duration of the concession

to 49 years and indicates that the Contracting

Authority should determine the duration of the

concession considering the nature of the

project, amortization of the investment

including return, repayment of the loans, the

amount of the capital and operating principles.

No provision for extension.

(3) Privatization Law caps the duration of the

transfer of operation rights to 49 years. No

provision for extension.

(4) BL Regulation for Healthcare Institutions caps

the duration of the concession to 49 years and

indicates that the Contracting Authority should

determine the duration of the concession

considering the feasibility of the project.

Duration should include the investment phase

and the operation phase. No provision for

extension.

(5) Highways Law provides that the concession

duration shall not exceed 49 years. No

provision for extension.

Draft Law caps the duration of all concessions/PPP

projects in Turkey with 49 years. It also requires that

the Contracting Authority determines the duration of

the concession considering the amortization of the

investment. The Draft does not include any provisions

regarding extension.

34.

5.3 Termination of the project agreement

QUESTION

ANSWER

ARTICLE

COMMENTARY

36. Does the Law provide for a restrictive list of

termination events (such as those listed below)?

material breach by the other party;

if performance is made impossible by the

occurrence of circumstances beyond either

party’s control;

mutual consent.

Article 26

of BOT

Decision,

Article 6 of

Highways

Law.

The Law does not provide for a restrictive list of

termination events. The following regulations provide

for the termination rights of the Contracting Authority.

(1) BO Law does not list the termination events.

(2) BOT Law lists the termination events for the project

agreements such as breach by the concessionaire,

insolvency or bankruptcy of the concessionaire. The

Law does not describe the list as restrictive.

(3) Highways Law identifies the termination events as

breach by the concessionaire and insolvency of the

concessionaire.

(4) Regulation of BL for Healthcare Institutions

identifies the termination events as breach by the

concessionaire. The Regulation provides for a curing

period.

35.

37. Does the Law provide for (or does not prevent)

compensation of the concessionaire:

37.1. in case of termination for public interest?

37.2. for losses incurred as a result of public authorities

acts?

37.3. in all cases of early termination (including in case

of serious breach or failure by the concessionaire), for

the non-depreciated value of assets financed by the

concessionaire?

The Laws do not provide or do not prevent for

compensation of the concessionaire. They indicate

however that the consequences of termination are to be

regulated in the concession agreement.

"Turkish concession agreements have traditionally

given the granting authorities a unilateral contractual

right to terminate the concession for default or

insolvency of the concessionaire. However, the

concessionaire has been given no corresponding

contractual right to terminate the agreement, whether

by reason of a default of the granting authority or a

prolonged force majeure event. The legal philosophy

behind this stance has been that because it is only the

state that can grant the concession, it is also only the

state that can take it away. In the event the granting

authorities did breach the terms of the concession

agreement (and it must be emphasised here that these

concession agreements have generally included very

few obligations on the part of the grantor entity) or an

extended force majeure event prevented the

concessionaire from being able to benefit from the

concession, the concessionaire would have no choice

but to pursue legal proceedings in Turkish courts based

on Turkish principles of unjust enrichment, bad faith or

other similar legal doctrines.

Furthermore, there have been few concession

agreements in Turkey providing for any termination

payment or refund of concession fees in the event of

early termination of the concession agreement."

(extract from "Turkish Concessions—Not for the

36.

Faint-Hearted"Latham & Watkins-Finance Department

Number 772 8 December 2008)

5.4 Tariff setting, service standards

QUESTION

ANSWER

ARTICLE

COMMENTARY

38. Does the Law provide for clear guidance for all

aspects of interaction between the bodies that

have the power to award concessions and the

bodies that regulate tariffs and service

standards?

The answer is no. Note however that the Highways

Law refers to general criteria for setting the tariffs and

BL Regulation for Healthcare Institutions sets forth the

criteria for determining the lease amount. As a side

note, please be informed that the Contracting Authority

and the authority that set the tariffs/pay the fees are

generally the same entity in Turkey.

5.5 Financial responsibilities of concessionaire and Contracting Authority

37.

QUESTION

ANSWER ARTICLE COMMENTARY

39. Does the Law provide that the concessionaire

can collect tariffs or fees for the use of the

facility or its services?

(1) BOT Law provides that the concessionaire can

collect tariffs or fees for the use of the facility or its

services for the BOT Projects.

(2) BL Regulation for Healthcare Institutions and BO’s,

there is a direct payment mechanism from the

contracting authority to the concessionaire. In the BOs,

concessionaire can sell the energy which is not

purchased by the contracting authority and can directly

collect the fees.

(3) Highways Regulation does not specifically

determine who collect the tariffs. Note however that

the regulation indicates that the contracting authority

will receive a certain portion of the collected tolls. This

implies that the concessionaire will collect the tolls and

transfer a certain portion to the contracting authority.

38.

40. Does the Law provide the possibility for fixed

and/or consumption-based payments to the

concessionaire by the public authorities?

(1) BOT Regulation provides for payments by the

public authorities but does not regulate the scope of

payments and indicates that the project agreements

should regulate the payments.

(2) BO Regulation provides for capacity payments to

the concessionaire by the contracting authority.

Capacity payments are up to certain percentage of the

annual net production capacity.

(3) BL Regulation for Healthcare Institutions

determines the lease price to be paid by the public

authority based on the investments costs and profit

margin of the concessionaire.

39.

6. SECURITY AND SUPPORT ISSUES

6.1 Security Interests

QUESTION

ANSWER

ARTICLE

COMMENTARY

41. Does the Law provide for the possibility for (or

not specifically prevent) a concessionaire to

create security interests on the project assets and

proceeds or other valuable guarantees related to

the project?

Article 40

of the BL

Regulation

on

Healthcare

Institutions

The Laws do not provide for the possibility for (or not

specifically prevent) a concessionaire to create security

interests on the project assets. The only exception to

this is the BL Regulation on Healthcare Institutions

which require the approval of the Ministry of Health for

transfer of lease agreements during the investment and

operation phase. This may be interpreted as the

approval of the Ministry of Health is required for the

assignment of lease revenues.

Turkish concession agreements, however, generally

restrict the ability of the lenders lending to the project

to obtain a security interest in the share capital of the

concessionaire and there is no example of Step in right

granted to the Lenders

40.

42. If the answer to 41 is yes, does the Law clearly

state which types of security can be provided

and include some of the most common type of

guarantees in project financing (such as those

listed below)?

For information, can a concessionaire pledge or

assign:

the proceeds and receivables arising out of the

concession?

the assets for which it has rights of use under a

project agreement?

its property?

shares of the Project Company?

the project agreement?

or obtain other valuable guarantees (please

specify)?

Yes

No

Yes

Yes/No

No

Please

clarify

No reference to types of security.

Based on the general security law principles in Turkey

6.2 Government support

QUESTION

ANSWER

ARTICLE

COMMENTARY

41.

43. Does the Law provide for the possibility (or not

specifically prevent) the public authorities to

provide support to the Contracting Authority

and guarantee for the proper implementation of

concessions by the Contracting Authority?

Not specifically provided or prevented depend on

sectorial policy not on the PPP nature of the contract.

44. Does the Law provide for the possibility (or not

specifically prevent) the public authorities to

provide financial or economic support for the

implementation of concessions?

Under the BO Law, Turkish Electricity Trade

Corporation is permitted to buy a certain percentage of

the net annual production capacity of the plant.

Law No 4749 regarding Public Financing (including

guarantees to be provided by public authorities) permit

for guarantees to BOT, BO and Transfer of Operations

projects by the Treasury. Guarantees are in the form of

payment guarantees of the payments by the purchasing

public authority.

42.

45. If the answer to 44 is yes, does the Law clearly

state which public authorities may provide such

support and which types of support can be

provided?

For information, are the following types of support

provided for:

interest-free or low interest public loans?

loan guarantees?

direct or indirect equity participation by the

government in the project?

subsidies for operations in non-profitable

sectors?

direct subsidies?

pro-poor subsidies?

tax and customs benefits?

foreign exchange protection (convertibility and

transfer guarantees)?

protection from competition?

No

Yes

No

No

Yes (if you

include

purchase

guarantees)

No

No

No (note

that foreign

exchange

regime in

Turkey is

not

restrictive)

We have answered this question based on the Laws and

the Law No 4749 regarding Public Financing. We have

not included the subsidies that may be provided to the

PPP projects in other regulations not because of their

PPP nature but because of the sector invested.

In addition to the types of support provided in the list,

the Laws permit for allocation of publicly owned land

to a PPP project in the form of usufruct rights. Under

the BL Law for Healthcare Institutions, usufruct rights

over the publicly owned land are provided to the project

without cost. Article 21 of the Draft PPP Law clearly

permits for the allocation of publicly owned land and/or

grant of usufruct rights to PPP.

Law No 4749 regarding Public Financing (including

guarantees to be provided by public authorities) provide

for guarantees by the Treasury of payments to

concessionaires by the public authorities in BOT, BO

and Transfer of Operations projects. Loan Guarantees

by the Treasury are also permitted to a private company

to the extent that more than 50% of the share capital of

such company is owned by public entities.

Article 19 of the Draft PPP Law provides for

guarantees by the public authorities, Ministry of

Finance or by Treasury for payments to be made to the

concessionaire by the public authorities or consumers.

If the demand by the public authorities or consumers is

predictable, such guarantee cannot exceed 50% of the

estimated demand. Draft PPP Law also permits for

43.

No

bridge loans, repayment guarantee for bridge loans.

44.

6.3 Lenders’ rights

QUESTION

ANSWER

ARTICLE

COMMENTARY

46. Does the Law provide for the possibility for the

lenders to “step-in” or substitute a qualified new

concessionaire in case of concessionaire

defaults without a new tender?

5 of

Licensing

Regulation

regarding

the

Electricity,

Natural

Gas, LPG

and Oil

No step-in rights in the Laws or in the existing

Concession Agreements

Lenders have the right to petition the Energy Board for

the Energy Board to issue a license to a third party in

case a electricity generation licensee defaults under the

facility agreements. Note however that the Lenders are

required to undertake all the obligations of the

defaulting licensee before the Energy Board.

7. SETTLEMENT OF DISPUTES AND APPLICABLE LAWS2

7.1 Settlement of disputes

QUESTION

ANSWER

ARTICLE

COMMENTARY

2 For further information on the settlement of disputes, please refer to:

PFI Guide, Consolidated legislative Recommendations, Recommendations 57, 69 and 71.

45.

47. Does the Law permit the Contracting Authority

to enter into concession agreement that is

subject to international arbitration?

125 of

Constitution-

International

Arbitration

Law No

4501

Law No 4501 permits for international arbitration in

concession agreements to the extent that (i) at least one

of the shareholders of the concessionaire is a foreign

entity or (ii) the project is capitalized with foreign funds

or (iii) the project is financed with foreign

funds/lenders.

48. Has the government of the country ratified the

following international conventions?

48.1. the Washington Convention on the Settlement

of Investment Disputes (ICSID) (1965)?

48.2. the New York Convention on recognition and

enforcement of foreign arbitral awards (1958)?

7.2 Applicable laws

QUESTION

ANSWER

ARTICLE

COMMENTARY

49. Does the Law permit the Contracting Authority

to enter into concession agreement that is

governed in whole or in part by foreign law or

at least allow the concessionaire to enter into

financing and construction agreements governed

by foreign law?

Article 4 of

Law

numbered

4501

Not directly permitted. However, International

Arbitration Law No 4501 permits the parties to

determine the applicable law to the dispute. Therefore

the parties are indirectly allowed to enter into

concession agreement that is governed by foreign law.

In practice, we have only seen Turkish Law governed

concession agreements.

50. Has the country ratified any international

convention for the protection of foreign

Turkey ratified the Convention of the Multinational

Investment Guarantee Agency. Turkey signed bilateral

46.

investments? investment treaties with different countries including

with the United States, United Kingdom.

EFECTIVENESS ASSESSMENT: HOW THE LAW WORKS IN PRACTICE:

(please comment based on the previous 2006 effectiveness general assessment)