Crisis, what crisis?

Crisis, what crisis?

As Covid-19 continues to wreak havoc, many countries face both an economic and a health crisis. But for Turkey, the concept of crisis is nothing new: it has long been part of everyday life. The current malaise, which predates the pandemic, has its origins in the attempted coup of 2016 and the government’s authoritarian response: over 300 people were killed and 75,000 arrested, including 2,700 judges. Such coups d’état have punctuated Turkey’s historical narrative in every decade since the 1960s. More recently, there was the currency and debt crisis of 2018, which saw the credit rating agencies downgrade Turkey’s debt to junk status.

Notwithstanding these difficulties, President Erdoğan is still firmly in control. Added to the $120bn in infrastructure spending since 2003, new highways and rail links are planned. Turkey’s $730bn economy, the world’s 20th-largest, even managed to expand slightly last year. But problems persist: inflation at 15% and interest rates recently hiked to 19%, while the Turkish Lira’s precipitous decline against the US dollar has sparked an exodus of foreign capital. In an effort to boost tourism, one of the country’s strongest sectors, Turkey announced that it would be the first country to accept British holidaymakers without Covid checks. Despite Erdoğan’s promises to cut inflation in an attempt to restore confidence, sustained turbulence undermines the country’s economic credibility. Continue reading “Crisis, what crisis?”

Sponsored briefing: Q&A – Serdar Paksoy

Sponsored briefing: Q&A – Serdar Paksoy

1. Given Turkey’s recent economic problems, how is this affecting your clients and how can you help mitigate the risks?

Turkey has been going through a period of economic uncertainty since the summer of 2018, when a number of factors led to a sharp devaluation of the Turkish lira against major foreign currencies and a surge in inflation. These volatile economic conditions have affected Turkish companies’ profits as well as their ability to serve their foreign currency debt, resulting in the need for debt restructuring and corporate divestments, especially within large conglomerates. This also led to the issuance of legislation to protect the currency, imposing that certain contracts be denominated in Turkish lira or delimiting the circumstances in which Turkish companies can borrow in foreign currency. The ambitious economic agenda of the Turkish government, however, is expected to put Turkey back on a path of sustainable growth.

We help our clients adapt to the new environment by overhauling their contracts and credit arrangements in order to comply with the new legislation. When acting for foreign players looking to invest in Turkey, we advise on adequate provisions in the transaction documents meant to anticipate the impact volatile economic conditions could have on the agreed deal terms. These may address a variety of issues, such as currency fluctuations between signing and closing, the target’s need for recapitalisation to remain in line with statutory equity ratios, or the necessity to redesign the target’s debt structure.

The current conditions in Turkey also bring significant opportunities for those foreign investors who continue to see the country’s mid-to-long-term business case, with a sizeable growth potential compared to more developed countries in many yet-underpenetrated sectors of the economy. Given Turkey’s history of economic downturns followed by spectacular rebounds, some investment advisers also see the current period as offering attractive valuations for buyers with the prospect of sizeable returns when the market recovers.

2. How has this affected the flow of foreign direct investment, the volume of deals and dispute resolution?

The current economic climate has led foreign investors to be more cautious with their investment plans and the factors upon which they build their business case. We see a significant slowdown in PE investment, since the current market conditions will often not match their pre-defined investment criteria. Strategic investors, on the other hand, continue to see the country’s opportunities, all the more so when it comes to target companies with sales skewed towards exports, which benefit from higher revenue against lower costs as a result of the currency devaluation. Restructuring plans within major Turkish conglomerates can also put on the market potentially attractive targets, which would not otherwise have gone up for sale.

Investors will, however, proceed with caution. Combined with the fact that sellers’ price expectations can initially remain relatively high, this results in longer transaction processes compared to previous years, with negotiations sometimes dragging on for months or being halted several times before the parties finally reach an agreement.

‘The ambitious economic agenda of the Turkish government is expected to put Turkey back on a path of sustainable growth.’

3. Which practice areas are the biggest originators of work and why?

Corporate/M&A and dispute resolution remain the biggest originators of work, with M&A in particular holding itself at a fairly satisfactory level in view of current market uncertainties, as the practice is fed by large divestments and strategic opportunities. We do, however, see significant growth in debt restructuring and insolvency, compliance and investigations, as well as banking and finance work, all of which are driven by the impact of current economic conditions and the market players’ increased caution when proceeding with investments.

4. Do you anticipate a resurgence in infrastructure/project finance?

Although there has been a slowdown in infrastructure project tenders initiated by the government, we expect new tenders to be launched in the transport, healthcare and education sectors in the coming years. Some of these transactions will require sizeable project financing. Turkey has also set itself ambitious renewable energy utilisation targets, which will boost project finance activities in the country.

5. As a global downturn is increasingly possible, how well are Turkish companies positioned?

The Turkish economy remains strongly dependent on exports and foreign direct investment and the country would undoubtedly be affected by a global downturn. The previous major downturn in 2008 had shown that while Turkey’s banking system was at the time comparatively more robust than in Western economies due to strong capitalisation rules, the country was eventually affected by the crisis when the slowdown in its major export markets reverberated on the real economy.

Although the present situation may be riskier, with Turkey’s banking system already under tension due to the recent currency crisis, the Turkish economy’s resilience is noteworthy. Turkish companies may still benefit from a competitive advantage with a young, skilled and affordable workforce, and the growing ability they have demonstrated in recent years to export their strengths and know-how to new markets, such as African countries for the construction sector, and hedge their exposure to the local economy with investments abroad.

6. The Turkish central bank’s drive to reboot growth, slashing benchmark rates by 7.5%, and offering incentives for banks to offer credit – what impact is that having in bank advisory work?

Considering the liquidity of Turkish banks, we expect the lower interest rates to promote growth in the Turkish lending market across all segments, including retail and wholesale. The lower interest rates will also promote the refinancing market, especially in infrastructure projects. This being said, the lending landscape in Turkey is already quite busy with ECA [export credit agency] loans, trade finance, IFI [international financial institution] loans, sovereign borrowings and FI transactions.

7. Which sectors are of most interest to M&A/private equity investors?

Investors continue to be consistently attracted to the industrial and consumer goods sectors, as well as transportation and logistics. We also see foreign players increasingly seeking opportunities to invest in Turkish companies with a focus on emerging technologies, especially payment systems and communications technology, and believe this will be a key area of investment in upcoming years. Finally, there have been high-value entries in the Turkish financial sector from Middle East corporate groups, as well as some opportunities in the insurance sector, where a number of sizeable bancassurance arrangements will come up for renegotiation or new tender in upcoming years.

‘We see foreign players increasingly seeking opportunities to invest in Turkish companies with a focus on emerging technologies.’

8. As the Turkish energy sector is being rapidly reshaped, what opportunities does this provide?

Turkey is keen to bring a significant increase in its use of renewable energy in the coming years. These efforts will particularly materialise in the wind sector. The government is expected to announce a number of renewable energy resource zone tenders in the near future. These tenders should be smaller in size than the previous ones, meaning that the Turkish energy sector will offer more opportunities to a diversified group of investors.

9. What impact is there for Turkish companies complying with global regulations and new national regulations, eg the Turkish Data Protection Law, modelled on GDPR?

Given the significance of foreign investment in Turkey, many Turkish companies are well acquainted with the need to comply with global regulations, be it in the field of anti-bribery and corruption (especially FCPA [Foreign Corrupt Practices Act]/UKBA [UK Bribery Act]), international sanctions, data protection, corporate governance or financial reporting standards. Turkish companies with a foreign shareholder, or even a major foreign supplier, will often already apply global compliance standards in a number of areas.

The ongoing harmonisation of Turkish legislation with global regulatory standards is largely supported by the government as a tool to make the country an ever-more attractive destination for foreign investment and is generally welcome by local companies with the ambition to attract new investors despite the added burden on their internal processes.

The Turkish Data Protection Law provides a good example of this trend. Introduced in 2016, the new piece of legislation replaced hitherto scattered and little-enforced privacy regulations with a full-fledged data protection regime, giving companies two years to audit their data processing practices – in many cases for the very first time – and put them in compliance with the new law. This called for an abrupt change in culture, but as in most emerging markets corporates have been quick to adapt. While the legislator had deliberately opted to mirror the Turkish Data Protection Law on the 1995 EU Directive, rather than GDPR, in order to soften the impact of the new regime, we see that many Turkish companies have chosen to transition directly to the higher GDPR standards in order to boost their ability to do business on the international stage.

For more information, please contact:

Serdar Paksoy, managing and senior partner

Orjin Maslak
Eski Büyükdere Caddesi
No:27 K:11 Maslak 34485

T: +90 212 366 4757


Sponsored briefing: New practice commenced in 2019 – current status of mandatory mediation in commercial lawsuits

Sponsored briefing: New practice commenced in 2019 – current status of mandatory mediation in commercial lawsuits

Mehmet Selim Yavuz of Yavuz & Uyanık discusses the effects of the new rules

Prior to 2016, the Court of Cassation was the only high court reviewing rulings of the courts of first instance. This led to an enormous workload for the court; hence final rulings could only be reached after a seriously long period of time. The Turkish judicial system was reformed with a view to address this and the appellate courts were established in 2016 as a judicial authority between the courts of first instance and the Court of Cassation. Continue reading “Sponsored briefing: New practice commenced in 2019 – current status of mandatory mediation in commercial lawsuits”

Sponsored briefing: Growing interest in asset deals

Sponsored briefing: Growing interest in asset deals

Yegan Liaje of Pekin & Pekin describes a rising interest in asset deals following a period of economic uncertainty in Turkey

Turkey has faced some serious financial challenges in recent years, such as high inflation, currency collapse and rising borrowing costs; however, surprisingly, these challenges have not dramatically affected the Turkish M&A market in terms of total transaction volume; though, we have noticed that it has affected the deal type in which investors have gained interest. In the last two years, we have experienced asset deals attracting more attention in the eyes of investors, despite share deals still having more advantages. Although investors do not have to bother with costly revaluations and retitles of individual assets, and can typically assume non-assignable licenses and permits without having to reapply for the same licenses and permits in share deals, asset deals also have some noticeable benefits.

Probably the most appealing advantage of asset deals is to enable buyers to pick and choose what they want to buy in the relevant target company without being bound to the whole company, all the unwanted remaining assets and certainly their unwanted liabilities. In other words, asset deals provide a playing field for investors where they can freely choose what suits best their business insight, in contrast to share deals where the shares of the target company are purchased with all attached shareholding rights and obligations, but the target company would remain liable against third parties for all historic claims.

On the other hand, asset deals do have some procedural disadvantages as well; each category of asset and liabilities subject to the relevant asset deal will be evaluated separately for consent requirements or formal perfection requirements rendering asset deals procedurally more burdensome. Furthermore, even where there are no consent requirements or formal perfection requirements, notifications would have to be provided to creditors in order to prevent good-faith payments made by creditors to the seller with respect to acquired assets, since under the Turkish Code of Obligations, such good-faith payments would discharge the debts of creditors who were not informed of the transfer. One more interesting point about asset deals in Turkey: as per the Turkish Labour Code, in the event that a workplace is transferred to another legal body on the basis of a legal transaction, the employment contracts that exist at the workplace at the date of transfer are automatically transferred to the transferee together with all rights and obligations. Therefore, buyers are not able to pick and choose when it comes to employees!

For more information, please contact:Yegan Liaje, senior partner, M&A

Pekin & Pekin
10 Lamartine Caddesi
Taksim 34437 Istanbul

D: +90 212 313 35 48
T: +90 212 313 35 00
F: +90 212 313 35 35

Sponsored briefing: Economic crisis and the popularisation of voluntary termination of labour contracts

Sponsored briefing: Economic crisis and the popularisation of voluntary termination of labour contracts

Murat Uyanık of Yavuz & Uyanık discusses Turkish labour law developments

Turkey’s progress towards full membership of the EU had gained pace by the beginning of the 2000s. To achieve full legislative alignment with the EU acquis, the Turkish labour law was renewed and a new concept was introduced to the country’s labour law sphere: employment protection. Continue reading “Sponsored briefing: Economic crisis and the popularisation of voluntary termination of labour contracts”

Sponsored briefing: Med-arb: a hybrid approach to ADR and its applicability in Turkey

Sponsored briefing: Med-arb: a hybrid approach to ADR and its applicability in Turkey

Matur & Ökten’s Bahar Nalan Danış discusses combining mediation and arbitration

Today’s world is changing at a dazzling speed, and so is the way we deal with disputes. Although originating from thousands of years ago, we may well state that alternative dispute resolution (ADR) in its modern meaning was developed in the 20th century and has continued to evolve ever since, due to its fast solution-providing rate, which suits the requirements of modern business life.

In the last few decades, different forms of ADR have gone global. The forms that make up ADR include mediation, arbitration, negotiation, ombudsman services, consensus building and new hybrids of these processes, including med-arb, which features characteristics of both mediation and arbitration.

Brief background

Before reviewing the essence of med-arb, it is important to understand the meaning of each process, as well as their growth as ADR processes.

Mediation and arbitration have operated separately for many years. Mediation is the procedure wherein a neutral and impartial professional acts as a mediator, who facilitates the communication between conflicted parties and assists them to find a resolution. If the matter is resolved, parties sign a binding agreement. The advantages of mediation are that the parties craft their own solution and it is more affordable. The most common criticism addressed to mediation is that it does not guarantee a final resolution.

Arbitration, on the other hand, is more of a court-like process, where parties attend hearings, submit evidence, etc, based on which the arbitrator makes a binding decision. The benefit of arbitration is that it is faster and more efficient than traditional litigation. It is, however, criticised for being adversarial and the parties have limited control of the resolution.

The two methods can seem pretty different from each other in terms of the principles they rely on and how they work, yet great results are produced when they are combined together. The parties are guaranteed an outcome in med-arb, either through mediation or arbitration. Therefore, interconnecting mediation and arbitration can save time and cost in settling. It has become the most applied form of combined ADR processes over time, with an increased attention in the recent years, especially after the successful examples set by IBM v Fujitsu and Federal Deposit Insurance Corporation v Cherry Bekaert & Holland.

Two worlds colliding

Med-arb can be applied in different ways, the most common of which is the conduct of mediation and arbitration consecutively. In this method, the parties first try to resolve their dispute through mediation, aka ‘pre-arbitral mediation’. In case no understanding can be reached fully or partially within the pre-specified period or the time determined by the mediator/med-arbiter, parties continue with arbitration for the whole dispute or partially for the sections they cannot agree on. It is statistically shown that most cases of med-arb turn into successful mediations with no requirement for arbitration.

It is possible for both stages to be followed up by the same person who acts as the med-arbiter, which is known as the ‘med-arb same’ model. Or, a mediator and an arbitrator manage each respective phase, which is the ‘med-arb different’ model.

Turkish practice

Arbitration in Turkey is regulated under the International Arbitration Law No. 4686, dated 2001, whereas mediation is a much newer concept introduced to Turkish law in 2012 via Law No. 6325 on Mediation in Civil Disputes (Mediation Law). Neither law specifically refers to med-arb as a dispute resolution method, however it can be understood from the wording of Article 5/1 of the Mediation Law that there is no obstacle to applying arbitration following the mediation process. The said article, taking its basis from Article 10 of UNCITRAL Model Law on International Commercial Mediation, stipulates that ‘parties, mediator or third parties cannot allege the followings as evidences or testify as witness on these, when a lawsuit is filed or arbitration is resorted to regarding the dispute’.

On the other hand, Turkey passed Law No. 7155 on Legal Proceedings for Monetary Receivables of Subscription Agreements, which became effective as of 2019, requiring ‘mandatory mediation’ for commercial cases as a prerequisite before filing legal action. According to Article 23/18 of the cited law, in cases where there is an arbitration clause, such compulsory mediation condition shall not apply.

As for the question of whether a mediator can act as a med-arbiter under Turkish law, Communiqué on the Mediation Law dated 2013 set forth in Article 12/4 that the mediator cannot assume later the duty of an arbitrator in relation to the same dispute. This Communiqué was abolished and replaced with a new one in 2018, which does not refer to such prohibition. On the contrary, it is specified in Article 4/6 of Mediators’ Ethic Rules announced by the General Directorate of Mediation that the mediator can actually act as an arbitrator if the parties in conflict agree so in writing.

A first in the world: groundbreaking move from Turkey

As an exciting new development, the Istanbul Arbitration Centre (ISTAC) has just published rules governing med-arb on 15 November 2019 on its website, which has become the world’s first institutionalised written med-arb rules. By presenting the ‘first of its kind’ rules, ISTAC aims to widen the prevalence of med-arb.

We have witnessed many commercial disputes, both local and multinational, being settled in Turkey, especially in Istanbul via arbitration.

Med-arb can be more effective than arbitration indeed, as the parties will participate in the mediation phase in sincerity and good faith, knowing that if they fail to reach an agreement, they will lose control over the outcome and have to go along with the med-arbiter/arbitrator’s decision. It can also be more efficient than mediation, since parties will be more likely to assert reasonable demands and demonstrate a more conciliatory attitude than in mediation alone, increasing the opportunity for a more satisfying result for all involved.

We hope this two-tier system will also become a preferred choice of settlement in Turkey in the years to come.

For more information, please contact:

Bahar Nalan Danış, attorney at law – mediator (Young Mediators Initiative of the International Mediation Institute)

Matur & Ökten & Karayel Keßler Law Office

İnönü Cad No:24/4

Gümüşsuyu, Taksim



T: +90 212 260 1062


Sponsored briefing: Turkey M&A outlook: 2020 and beyond

Sponsored briefing: Turkey M&A outlook: 2020 and beyond

Gamze Çiğdemtekin (pictured, left) and İpek Batum (pictured, right) of Çiğdemtekin Çakırca Arancı assess what lies ahead for the deals market over the next few years

Global economic uncertainties have affected the M&A market, and the recession in the Turkish market was as expected for 2019. According to the data reported on M&A transactions in 2019, the volume of the total M&A transactions in Turkey was $7.4bn. While many economists predict the M&A market may slightly fall in 2020, Turkey’s New Economic Program has optimistic targets that give confidence to investors to take advantage of the current market and expect higher returns in the next three years. Furthermore, there are significant opportunities still available for investors, with emerging sectors taking the spotlight. Continue reading “Sponsored briefing: Turkey M&A outlook: 2020 and beyond”

Sponsored briefing: Notable developments in Turkey’s oil and gas policy

Sponsored briefing: Notable developments in Turkey’s oil and gas policy

Yazıcı’s Kerem Arıç explores three key areas of growth for the country’s energy sector

Due to its dependence on oil and natural gas imports, Turkey has been in need of structural changes in its energy sector. Although the share of natural gas in power generation was significantly reduced in 2019, the overall reliance on natural gas and oil imports creates major challenges both from a commercial and strategic perspective. To overcome these challenges and increase its energy security, the Turkish government made a fundamental decision to move from a role of investor to a role of policy maker and regulator. As a result, Turkey’s oil and gas policy has been mainly driven by the following ground rules: Continue reading “Sponsored briefing: Notable developments in Turkey’s oil and gas policy”