Legal Framework of Foreign Direct Investments

International Law Resources

1. Multilateral International Agreements to which Turkey is a party

ICSID Convention (International Centre for Settlement of Investment Disputes)

Multilateral Investment Guarantee Agency (MIGA) Agreement

World Trade Organization Agreements

Agreement on Trade-Related Investment Measures (TRIMs)

Energy Charter Treaty

Memorandum of Understanding on Cooperation for the Promotion of Trade and Investments Between Member States of the Islamic Development Bank Group (IDB)

The Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, the Apostille Convention (1961)

New York Arbitration Convention (The Convention on the Recognition and Enforcement of Foreign Arbitral Awards)

The Singapore Convention on Mediation

2. Bilateral Agreements to which Turkey is a Party

3. Customery International Law

4. Basic Principles of Law

5. Judgments and Doctrine

6. Investment Agreements between Turkey and Foreign Investors

National Resources

Constitution

Foreign Direct Investment Law

6458 Law on Foreigners and International Protection

5682 Passport Law

6735 International Labour Force Law

Free Zones Law No. 3218

6745 The Law on Supporting Investments on a Project Basis and Amending Certain Laws and Decree Laws

5746 Law on Supporting Research and Development Activities

4691 Technology Development Area Law

5901 Turkish Citizenship Law

2644 Land Registry Law

Regulation on the Implementation of the Turkish Citizenship Law

Regulation on the Employment of Personnel of Foreign Nationality in Foreign Direct Investments

Procedures and Principles Regarding the Exceptional Acquisition of Turkish Citizenship by Foreign Investors

Decision on State Aids in Investments

Regulation on Work Permits for Foreigners to Work in Free Zones

Implementation Regulation of the Law on Work Permits of Foreigners

Foreign Direct Investment Law – No: 4875 

Objective And Scope

Article 1.

The objective of this Law is to regulate the principles to encourage foreign direct investments; to protect the rights of foreign investors; to define investment and investor in line with international standards; to establish a notification-based system for foreign direct investments rather than screening and approval; and to increase foreign direct investments through established policies. This Law establishes the treatment to be applied to foreign direct investments.

DEFINITIONS

Article 2.

The terms used in this Law shall have the following meanings:

a) Foreign investor:

1) Real persons who possess foreign nationality and Turkish nationals resident abroad, and

2) Foreign legal entities established under the laws of foreign countries and international institutions, who make foreign direct investment in Turkey.

b) Foreign direct investment:

i) Establishing a new company or branch of a foreign company by

foreign investor,

ii) Share acquisitions of a company established in Turkey (any percentage of shares acquired outside the stock exchange or 10 percent or more of the shares or voting power of a company acquired

through the stock exchange) by means of, but not limited to the following economic assets:

1) Assets acquired from abroad by the foreign investor: Capital in cash in the form of convertible currency bought and sold –

by the Central Bank of the Republic of Turkey, Stocks and bonds of foreign companies (excluding government bonds), –

– Machinery and equipment,

– Industrial and intellectual property rights;

2) Assets acquired from Turkey by foreign investor: Reinvested earnings, revenues, financial claims, or any other investment-related rights of financial value,

– Commercial rights for the exploration and extraction of natural resources.

c)The Undersecretariat: The Undersecretariat of Treasury.

Article 3.

a) Freedom to Invest and National Treatment

Unless stipulated by international agreements and other special laws: 1. Foreign investors are free to make foreign direct investments in Turkey,

Foreign investors shall be subject to equal treatment with domestic investors.

b) Expropriation and Nationalisation

Foreign direct investments shall not be expropriated or nationalised, except for public interest and upon compensation in accordance with due process of law.

c) Transfers

Foreign investors can freely transfer abroad: net profits, dividends,

proceeds from the sale or liquidation of all or any part of an investment,

compensation payments, amounts arising from license, management and

similar agreements, and reimbursements and interest payments arising from foreign loans through banks or special financial institutions. d) Access to Real Estate (annulled by B.2003/71, R: 2008/79 decision of the Constitutional Court dated of 03/11/2008)

e) Dispute Settlement

For the settlement of disputes arising from investment agreements

subject to private law and investment disputes arising from public service

concessions contracts and conditions which are concluded with foreign

investors, foreign investors can apply either to the authorised local courts,

or to national or international arbitration or other means of dispute

settlement, provided that the conditions in the related regulations are

fulfilled and the parties agree thereon.

f) Valuation of Non-Cash Capital

Non-cash capital is valued within the regulations of Turkish Commercial Law. In case that stocks and bonds of companies established abroad are used as foreign capital share of foreign investors, the values determined by the relevant authorities in the home country, or by the experts designated by the courts of the home country, or any other international institutions performing valuations will be accepted.

g) Employment of Expatriates

Work permits are issued by the Ministry of Labour and Social Security for foreign personnel to be employed in the companies, branches and entities established within the scope of this Law.

In accordance with the Article 23 of the Law on Work Permits for Foreigners No. 4817 dated 27 February 2003, the definition of the key personnel within the scope of the Regulation the companies and the entities with foreign capital which shall be in the context of the Regulation, and other special procedures and principles concerning the work permits of the key personnel will be determined in a Regulation to be prepared jointly by the Undersecretariat of Treasury and the Ministry of Labour and Social Security,

Provisions stipulated in Article 14, paragraph 1, sub-paragraph (b) of Law No. 4817 will not be applicable to those personnel to be employed within the context of this Regulation. The conditions under which the provisions stipulated in paragraph 1 of Article 13 of Law No. 4817 are to be applied to key foreign personnel employed will be specified in the Regulation.

h) Liaison Offices

The Undersecretariat is authorised to permit foreign companies established under the laws of foreign countries to open liaison offices, provided that they do not engage in commercial activities in Turkey.