With the decision of the President no. 2018/85, announced on the official gazette dated 14th of September 2018 and numbered 30534, paragpraph g to article 4 of the Decree No. 32 on the Protection of Turkish Currency Value was added. Accordingly, it has been decided that, legal persons residing in Turkey, unless there is an exception determined by Ministry, are not allowed to enter into certain type of agreements which the value of agreement and other obligations are in foreign currency or are indexed to foreign currency. In addition, it is also decided parties of current agreements that are in foreign currency or indexed to foreign currenct should in 30 days re-decide the value or obligations in Turkish Lira . The decision and the amendments mentioned are published in the Official Gazette on 13th of September 2018 and entered into force.
1. WHAT DOES THE STATEMENT OF “RESIDENTS IN TURKEY” MEAN IN THE REGULATION?
Residents in Turkey are natural and legal persons who have registered addresses in Turkey. Turkish citizens who working oversea, are self employed outside of Turkey or are owning independent business outside of Turkey are considered as resident in Turkey in case they have a registered address in Turkey. According to us, foreigners who have residence permit in Turkey should also be considered in the scope.
2. WHICH CONTRACTS ARE UNDER THE SCOPE OF THE RELEVANT REGULATION?
All kinds of sale of movable and immovable assets, all types o movable and immovable lease agreements including vehicle and financial leasing agreements, service and labor contracts which are signed between parties that have both residence in Turkey.
3. WHAT DOES THE “FOREIGN CURRENCY” OR “INDEXED TO FOREIGN CURRENCY” WORDS ON THE DECISION MEAN?
Foreign currency implies that all kinds of foreign accounts, documents and instruments including cash which provide payment. Cash means all foreign currencies as banknotes. Indexed to foreign currency means a value indexed to any foreign currency.
4. WHAT ARE THE CONSEQUENCES IF PARTIES OF THE AGREEMENT CANNOT AGREE IN THIRTY DAYS FROM THE DATE WHICH THE REGULATION ENTERED INTO FORCE?
It is expected that other sub-regulations on the relevant subject which will include the necessary ways to finalize the agreement and the consequences of non-agreement will be issued soon.
5. CAN THE VALUE OF THE AGREEMENTS AND OTHER OBLIGATIONS ARISING OUT OF THE AGREEMENTS MENTIONED ON THE DECISION DETERMINED A COMMODITY?
According to our opinion, there are no restrictions mentioned to determine the value of the agreement of other obligations of the agreement mentioned on the decision with a commodity.
6. WHAT IS THE RELATIONSHIP BETWEEN THE RELEVANT CONTRACT AND THE PRINCIPLE OF NON-RETROACTIVITY OF LAWS?
The principle of non-retroactivity is a fundamental principle concerning the time-law enforcement of the rules of law. The principle simply means that a law shall only apply to facts and transactions happened after the publishment of law. This serves the legal credibility which is another main principle of the law. According to our opinion, applying the decision also to agreements signed (even started to enforce) before the announcement of decision and requesting from the parties to revise their agreements to “TL” in a very short time is a violation of the aforesaid principle and does not fall in an exception such as public interest or public order
7. WHAT IS THE EFFECT OF THE RELEVANT REGULATION TO RECENT CONTRACTS?
The relevant agreements should be revised as Turkish currency within the specified date. The regulation does not mention the consequences of non-revision which is expected to be regulated with additional regulation.
8. WHAT CAN BE THE EFFECTS OF THE RELEVANT REGULATION IN THE LONG TERM?
The fact that the prices of the agreement types mentioned on the decision will be determined with Turkish currency may negatively affect foreigners residing in Turkey and entities with foreign shareholders (especially the ones who are planning to return their profit to their homeland in foreign currency), people who are procuring certain products from outside of Turkey and in foreign currency, people who are making trade on certain products which are already being trade in foreign currency because of the product itself.