© OECD A joint initiative of the OECD and the European Union, principally financed by the EU CONCESSIONS IN TURKISH LAW İbrahim BAYLAN Legal Adviser Public Procurement Authority 10 March 2008

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU What is a concession? l Concession is the operation of the public services by private entities under a contract. l 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

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU General characteristics l A contractual relationship l Long term contract l 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

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU 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

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU General characteristics l 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 İmtiyazat) 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.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU General characteristics l Conclusion of the concession Termination of the period Unilateral termination by the entity Termination with court ruling Redemption of the contract (rachat) l 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.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Historical development l Starting from the second half of the 19th century, concessions were efficiently used in the Ottoman period. l 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. l In mid 80s, the concession model revived under different concepts such as BOT, BO, transfer of operation rights, etc. l The procedures in question were accepted as financing models

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Historical development l With the Law no 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. l With its ruling in 1992, the Constitution Court qualified the contracts on electricity generation, transmission, distribution and trade as concession contracts.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Historical development l With the Law no 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. l The Constitution Court ruling of 1994 stated that the BOT contracts under Law no 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.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Government assessment Constitutional amendments l 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.” l 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”. l 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”.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Other amendments l Law no 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. l Article 17 of the International Arbitration Law no repeals article 5 of the Law no and states that the Law no will be applied to the contracts from then on.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Other amendments l Following the amendments brought to Article 47 of the Constitution, more importance has been given to sectoral arrangements.

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Concession arrangements in EU Law l 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. l Concessions are regulated within public procurement. l PPP is regarded as an approach. l Interpretative communications

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU Alignment process l 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. l 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. l 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. l The State Planning Organisation prepared the Draft Law On The Performance Of Certain Investments And Services Under The Framework Of Public Private Partnership Models

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU THANK YOU