1. Given Turkey’s recent economic problems and the problems created by the Covid-19 pandemic, how is this affecting your firm?
We can proudly say that we have successfully surpassed the challenging position that came along with the Covid-19 pandemic in all respectable matters thanks to our comprehensive experience gained throughout the 53 years in which we have provided legal services in Turkey. In these 53 years, our firm had to take innovative and cautious steps in order to tide over many different challenges such as several economic and political crises we have encountered as a country. So, when the first cases of Covid-19 were reported by the officials in Wuhan City, China, in December 2019, we knew that we had to prepare for the worst-case scenario. For this reason, we have accelerated our digitalisation process – thus taking it into a next level even though our digital infrastructure was already at advanced levels. As such, when the first Covid-19 case was announced in Turkey on 10 March 2020, we were already prepared to detach ourselves from our physical offices and started to work from our homes on 15 March 2020 through the decision mutually taken by our partners.
We still continue to maintain our working from home system despite the incomprehensibly increased workload during the pandemic. In the meantime, our lawyers often hold internal meetings among themselves in order to keep the constant communication in their departments to be able to uphold the urgency to take legal actions for our clients. We also endeavour to hold most of our meetings with our clients through online platforms so as to mitigate the risks of the pandemic. At the same time, considering the density in courthouses, we have created new hearing rooms in our offices, thus ensuring that our lawyers use the newly introduced virtual hearing system in the healthiest and safest way possible. Additionally, we are currently recommending mediation and arbitration as alternative dispute resolution methods to our clients due to the problems experienced in the proceedings, especially the prolongation of the judicial process in general caused by the pandemic.
2. What adjustments have you made in the current climate – fees, staffing levels etc?
The policies of our firm regarding the fees and hiring process have not changed as we hold our strong position in the market due to our existing retainer client base. On the contrary, given the intensity of the work in the restructuring area due to economic problems highly increased by the pandemic – which Turkey has already been encountering for several years, we were required to expand our team by hiring a partner from one of the leading private banks in Turkey to our financial restructuring practice group.
3. How can you and your clients mitigate the risks?
We believe that the consideration with regard to the drafting process of force majeure and hardship clauses is one of the most important key factors in order to mitigate risks in such circumstances. Even before the pandemic, we were very diligent and mindful with respect to the reviewing and drafting of the force majeure and hardship clauses in our clients’ contracts in order to protect our clients’ interests as much as we possibly could, as most of our clients focus on international trade at an advance level. Of course, our work regarding this matter has also intensified after the pandemic and our team had reviewed a significant number of contracts for our clients just to mitigate the risks based on the force majeure clauses and accordingly prepared numerous risk analysis reports where the legal strategies were underlined case by case. Further, we believe that conducting diligent and focused collaboration with our clients bearing a high volume of credit liabilities and afterwards cautiously managing the preliminary negotiation process with the banks on potential restructurings is another key factor, so as to prevent our clients from becoming financially distressed.
4. Which practice areas are busy, ie, the biggest originators of work, and why?
If we have to speak on our end, firstly, we would like to assert that our employment team was extremely busy during this course of time due to the new regulations constantly released by the Turkish Government with regard to the Covid-19 pandemic, such as the ban on the termination by the employer of contracts of employment, short-term work allowance, etc. The legislative changes regarding the issue have been closely followed up by our team since the very beginning of the quarantine, as numerous newsletters have been published by our firm after comprehensive legal researches regarding the matter in order to promptly notify our clients so as to avoid any potential employment disputes.
Further, our banking and finance/restructuring team is the second biggest originator in the firm as they were constantly in communication with both public and private banks, as well as with both national and international financial institutions while carrying out the restructuring of our clients’ heavy loans. We have received an enormous interest/application compared to previous years during the course of the pandemic, which is very pleasing as we are one of the leading firms in this practice area. We would like to further state that most of the law firms in Turkey would answer this question quite similarly, as the current legal practice in Turkey is currently focused on these areas respectively due to both new legal regulations released by the Government and the financial impasse Turkey is encountering at the moment.
5. What changes do you expect once the effects of the pandemic have passed?
Aside from its negative aspects, the pandemic actually reminded us how important it is to keep up with the new age and integrate technology into the legal service we provide to our clients. Therefore, we firstly expect that the digital approach we are currently serving to our clients will be gradually increased and our law practice as a firm will reshape as it will take a form where the clients will meet the legal service they need much faster due to the developments we are planning with respect to our digitalisation process. Furthermore, we most certainly expect an increase on the employment disputes after the temporary regulations imposed by the Government such as the termination ban with respect to employment contracts are lifted. In this regard, we are planning to expand our legal service on employment law accordingly to our clients’ needs and legally guide them through their expected desire to dismiss a significant number of employees. Likewise, we expect the effects of Covid-19 on financial matters will continue for quite a long time even after the end of the pandemic. Therefore, we expect to be focused on the exercise on the fields of bankruptcy and restructuring for a much longer time as the risks on the liabilities towards the banks and financial institutions will increase through the effects of the pandemic.
6. How is your firm positioning for an anticipated resurgence in activity – infrastructure/project finance, M&A, disputes?
We are currently expanding our restructuring team by adding strong members who are well equipped and experienced on the field while having the creditor’s perspective. Moreover, we are constantly carrying out internal research on the potential types of disputes which we believe are going to be very common once the pandemic comes to an end. We also discuss the more complex types of disputes with the leading scholars in the community. As such, we have organised many webinars as we will be continuing to organise them on such issues that we think will attract the attention of our clients and those concerned. Further, as reaching out the information on the existing litigation of our clients has become significant, we developed an online mobile application where our clients can easily reach any information on their litigation/court files without the need to communicate with our lawyers.
7. How is the local dispute resolution market – what types of disputes are most common?
Cases regarding the adaptation of the contracts – not just standing with leasing agreements – due to force majeure is currently very common in the market and we highly expect the increase and spread of these cases into different fields where we expect our clients to be a party both to negotiate and litigate. We further expect an increase in the employment cases as the employers currently need to focus on the quality and the optimisation within the company where they will try to manage the operation with as few people as they can. We also foresee an enhancement with respect to cases regarding the termination of the contracts as the financial circumstances and the liability burden on companies are currently heavier than they were ever before. Further, even though the banks are currently quite reluctant to initiate legal proceedings against the borrowers due to some indirect implications made by the Banking Regulation and Supervision Agency in Turkey, the natural entities and companies are to be expected to file lawsuits and initiate enforcement proceedings in order to cover their receivables.
8. What types of refinancing and insolvency work have you been doing?
Our banking and finance/restructuring department is headed by managing partner Yunus Egemenoğlu. Because of our unmatched experience in restructurings, our firm has become the go-to firm in recent years for financially distressed companies – with large debt loads and numerous creditors – looking for a firm with the competence, experience and, most importantly, toughness, to successfully navigate the extreme complexity of such restructurings, so as to avoid otherwise unnecessary, and often catastrophic, liquidations. Probably the single most important ingredient in our success is the trust and respect the relatively small number of financial institutions in Turkey, including banks, have come to have in and for Yunus. Existing, and would-be, clients are aware of this, and as a result we have the busiest restructuring practice in Turkey.
Of note here is that these engagements often involve our clients taking advantage of, with our advice, Turkey’s relatively new concordatum procedure. Concordatum provides quasi-bankrupt status to financially distressed companies, affording them up to 22 months of protection from their creditors under the auspices of bankruptcy courts (which have the discretion, although limited, to extend that period). We are proud to say we were the first firm in Turkey to utilise, effectively, the concordatum procedure, and we were also the first firm to have a client emerge from it back in the black. And we are now, by far, the leading firm in Turkey with regards to the effective use of Concordatum, a reputation leading more and more clients to seek our banking and finance/restructuring Team’s expertise. And last, but certainly not least, we note Egemenoğlu Law Firm has always had a strong practice before the local bankruptcy courts, representing both creditors and debtors. In particular, our team has an extensive experience in protection of assets of natural and legal persons entering into economic hardship, providing them to continue their business life by not drowning in the foreclosure and custody press and providing them with unimpeded return to their business life by paying all their debts.
More recently – given Turkey’s economic difficulties and the Covid-19 pandemic – our workload in this practice area, not counting the increase in restructuring work, has also increased dramatically. Being the leading law firm in the restructuring area, we firstly examine the financial situation of the company from a legal perspective where we make assessments on the assets/wealth of the shareholders and the company and the related collaterals. Furthermore, we choose and recommend the suitable instrument such as bankruptcy, concordatum, financial restructuring by evaluating the specific conditions of each event.
9. Which sectors are/will be of most interest to investors, and why?
We strongly believe that investment in the following sectors has been increased and will continue to increase due to the Covid-19 pandemic:
- Food and beverage, as the purchases especially through market chains have undeniably increased with people being stuck at home due to prolonged curfews and other measures taken by the Government in order to prevent and stop the spread of the virus all over country.
- Cleaning supplies, as people want to increase their hygiene and cleanliness standards in order to protect themselves against the virus.
- Medication, we observe that the investments made in this area (vaccine and drug studies on Covid-19 in particular) have increased/will increase due to the understanding that people with chronic diseases are more affected by the virus along with other diseases such as influenza, pneumonia, etc.
- E-commerce, as the purchases through e-commerce websites such as Trendyol have undeniably increased with people being stuck at home due to prolonged curfews and other measures taken by the Government in order to prevent and stop the spread of the virus all over country.
- Logistics, as the transportation needs has been increased due to consumption frenzy over the e-commerce websites with people being stuck at home due to prolonged curfews and other measures taken by the Government in order to prevent and stop the spread of the virus all over country.
10. What Turkish legislation in 2020/21 will affect your clients and drive advisory work?
We strongly believe that the legislative changes made on the following matters will adversely affect our clients as it will have further affects upon our advisory work:
Mediation: As it became a cause of action for the lawsuits to be filed in consumer courts with the Law on Making Amendment on the Civil Procedure Code and other Laws No. 7251 dated 28 July 2020, as it has previously also become a cause of action for the disputes arising from employment and commercial law. As such, we are continuing to expand our mediation practices as we have been doing for the past several years, and we strongly believe that in the upcoming years the application of the mediation procedure as an alternative dispute resolution method may escalate even more.
Virtual hearings: The possibility to hold a hearing through video and audio transmission is not a new regulation completely, however, considering the increasing Covid-19 cases in Turkey and the amendments made on the Civil Procedure Code with the Law No. 7251 constitutes the importance of broadening the scope of this application. As such, we have created new hearing rooms in our offices and our lawyers have attended over 100 virtual hearings since the beginning of the year. We strongly believe that the application of this procedure must continue to increase even more after the pandemic, in order for our legal system to keep up with the recent technological developments.
Remote-work regulations: Although the definition and main elements of the remote working concept, which was included in the Labour Law in 2016, were determined at that time, it was stated that the procedures and principles related to the subject would be regulated by another regulation. The expected regulation was published in the Official Gazette, nearly five years after, in March 2021, yesterday. We strongly believe that some of the companies that switched to remote/home working systems with the pandemic, will partially cling to this working system for a while, and some may even switch to the remote working system completely even if the pandemic is over. In fact, we have no doubt that this issue will come to our attention frequently in the coming years as we already have clients who have switched/are considering switching to a completely remote working model.
Banking law regulations: The Banking Regulation and Supervision Agency (BDDK), with its decision dated 17 March 2020 and numbered 8948, took various measures related to the Covid-19 pandemic such as increasing the 90-day default period for the classification of loans as non-performing loans to 180 days. Within this framework, the validity date of the applications was determined as 31 December 2020, but upon its recent evaluation, the Agency decided that it would be appropriate to extend the aforementioned regulations for the same purposes and extended the validity date of the relevant regulations to 30 June 2021. In addition to these regulations, economic packages such as the Business Continuing Support Package, in which the companies affected by the Covid-19 pandemic were provided with KGF-guaranteed credit support regardless of their sector, were announced in order to meet the working capital needs of the enterprises and to maintain the employment level. We will continue to follow the regulations with respect to banking, closely for our clients’ payments and debt restructuring as we believe there will be more regulations and organisations in order to survive from the financial disaster accumulated through the pandemic.