CONCESSIONS IN TURKISH LAW

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• CONCESSIONS IN TURKISH LAW
• Ibrahim BAYLAN
• Legal Adviser
• Public Procurement Authority

 Concessions and Public-Private
Partnerships Ankara, 10-11 March 2008
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What is a concession?

• Concession is the operation of the public
  services by private entities under a contract.
• Concession is described as a relationship based
  on a contract where a public legal entity selects
  and assigns a private entity which is under its
  supervision, to establish and operate a public
  service in return for the fees charged from the
  beneficiaries of that service

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General characteristics

• A contractual relationship
• Long term contract
• Operation right and supervision
• Rights and liabilities of the Contracting Entity
• Power to impose supervisions and sanctions
• Power to make unilateral changes
• Power to terminate the contract unilaterally

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General characteristics

• Rights of the concessionaire
• Right to demand protection of its financial
  stability
• Right to demand respect for the advantages
  granted to him
• Right to ask for fees
• Right to sue
• Liabilities of the concessionnaire
• Personal execution
• Ensuring the continuity of the service
• Adapting the service to changing conditions

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General characteristics

• Awarding concessions
• The idea that the entity is free to chose the
  concessionnaire has been abandoned and now it is
  believed that the concession should be awarded
  transparently and through a procedure based on
  free competition.
• According to the Public Concessions Act dated
  1910, (Menafii Umumiyeye Müteallik Imtiyazat) the
  authority to award concessions on behalf of the
  state belongs to the Council of Ministers by
  taking the opinion of the Council of State.
• According to the Municipality Law no. 5393, the
  services listed in Article 15 (e), (f) and (g),
  can be transferred via concessions for a period
  of maximum 49 years with the opinion of the
  Council of State and the decision of the Ministry
  of Interior.

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General characteristics

• Conclusion of the concession
• Termination of the period
• Unilateral termination by the entity
• Termination with court ruling
• Redemption of the contract (rachat)
• Rules of legal procedures in concession contracts
• As a rule, disputes arising from concession
  contracts shall be resolved by administrative
  jurisdiction. However, in case of a foreign
  company, the parties may decide that the disputes
  are to be solved by arbitration.

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Historical development

• Starting from the second half of the 19th
  century, concessions were efficiently used in the
  Ottoman period.
• In the first years of the Republic period,
  concession model was abandoned and the public
  services were executed by the ministries, local
  administration and State Economic Enterprised
  which were established to carry out those
  services.
• In mid 80s, the concession model revived under
  different concepts such as BOT, BO, transfer of
  operation rights, etc.
• The procedures in question were accepted as
  financing models

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Historical development

• With the Law no. 3096 of 1984, it was adopted
  that contracts on establishment and operation of
  a generation facility or transfer of operation
  rights can be signed between the Ministry of
  Energy and Natural Resources and domestic and
  foreign capital companies apart from TEK (Turkish
  Electricity Institution) subject to private law
  to generate, transmit, distribute and trade
  electricity.
• With its ruling in 1992, the Constitution Court
  qualified the contracts on electricity
  generation, transmission, distribution and trade
  as concession contracts.

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Historical development

• With the Law no. 3996 dated 1994 on Performance
  of Certain Investments and Services within the
  framework of Build-Operate-Transfer Model, it
  was adopted that the investments and services in
  question shall be carried out under a contract
  which is subject to private law and which does
  not constitute a concession.
• The Constitution Court ruling of 1994 stated that
  the BOT contracts under Law no. 3996 are
  administrative contracts and shall be subject to
  administrative jurisdiction and for their
  pre-examination and jurisdiction, the Council of
  State shall be authorised and responsible.

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Government assessment

• Constitutional amendments
• Article 47 of the Constitution and its title were
  amended and the last paragraph was regulated as
  such Those investments and services carried out
  by the State, State Economic Enterprises and
  other public corporate bodies which could be
  performed by or delegated to real or corporate
  bodies through private law contracts shall be
  determined by law.
• The following provision was added to Article 125
  National or international arbitration may be
  suggested to settle the disputes which arise from
  conditions and contracts under which concessions
  are granted concerning public services. Only
  those disputes involving foreign elements can be
  solved by international arbitration.
• With the amendment made on Article 155, the
  pre-assessment duty of the Coucil of State on
  concession agreements and contracts was converted
  to the duty of providing an opinion.

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Other amendments

• Law no. 4501 dated 2000 on Principles to be
  followed in the settlement of disputes arising
  from concession agreements and contracts through
  arbitration regulates that the parties may
  decide to settle the disputes arising from
  concession agreements and contracts through
  arbitration.
• Article 17 of the International Arbitration Law
  no. 4686 repeals article 5 of the Law no. 4501
  and states that the Law no. 4686 will be applied
  to the contracts from then on.

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Other amendments

• Following the amendments brought to Article 47 of
  the Constitution, more importance has been given
  to sectoral arrangements.

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Concession arrangements in EU Law

• Directive 2004/18 on Public Procurement
• Works concessions
• Rules to be followed in works concessions are
  laid down in Articles 56 to 65 of the Directive.
• Service Concessions
• There is no arrangement in the Directive related
  to the award of concessions.
• Concessions are regulated within public
  procurement.
• PPP is regarded as an approach.
• Interpretative communications

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Alignment process

• Results of the screening process In order to
  start the negotiations in the public procurement
  chapter, one of the pre conditions for Turkey is
  to regulate the area of concessions and
  especially the works concessions in line with the
  EU communautaire.
• Preparation of a framework regulation related to
  the procedures of awarding concessions is
  foreseen within the project carried out between
  OECD-SIGMA and the Ministry of Finance.
• Works on public procurement legislation have been
  initiated on the basis of the EU Directives
  2004/17 and 2004/18 in order to provide the basis
  for the awarding of concessions and settlement of
  disputes in this area.
• The State Planning Organisation prepared the
  Draft Law On The Performance Of Certain
  Investments And Services Under The Framework Of
  Public Private Partnership Models

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THANK YOU