TURKEY - European Bank for Reconstruction and · PDF fileConstitution and in numerous laws....
Transcript of TURKEY - European Bank for Reconstruction and · PDF fileConstitution and in numerous laws....
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.
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)?
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
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