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Brief Overview of the PPP Legislation
under Turkish Law

blog-post
MARCH10

Brief Overview of The PPP Legislation Under Turkish Law


Subject:

Brief analysis of the new Law on Construction and Renovation of Premises and Obtaining Service through Public Private Partnership Model by the Ministry of Health and Amendment of Various Laws and Statutory Decrees numbered 6428, dated February 21, 2013.

The new Law on Construction and Renovation of Premises and Obtaining Service through Public Private Partnership Model by the Ministry of Health and Amendment of Various Laws and Statutory Decrees numbered 6428, dated February 21, 2013 (the “Law”) has been published in the Official Gazette on March 9, 2013. This Note aims to provide a brief analysis of the Law.

I.Introduction:

The Law intends to determine general principles and procedures of public-private partnership (“PPP”) contracts between the Ministry of Health and private companies in order for construction of facilities, refurbishment of existing facilities or obtaining of consultancy and R&D services as well as services requiring high technology or financing for these projects. In this respect, the Law determines the general principles, the procedure, duties and rights of the parties to the PPP contract.

II. Major Issues

1. Project Types

Article 2 determines the structures anticipated for PPP projects. The Ministry of Health should have the approval and authorization of High Commission of Planning (Yüksek Planlama Kurulu) to issue a tender. We may find three different types of PPP projects.

Regarding construction projects, the contractor is entitled to the right of superficies on immovable property of the administration and to remuneration in exchange for the public service offered. The property right on the facility constructed is transferred to the administration upon termination of the term of construction agreement between the contractor and the administration as per Article 7. 

Concerning refurbishment projects, the remuneration may be public service offering and/or operating commercial service facilities and/or payment for the refurbishment. Finally, the Ministry of Health may issue a tender for research, consulting, developing and project services related to these construction and restoration projects. 

2. Tender Types

According to Article 3, three methods may be used for PPP contracts: open tender procedure, restricted tender procedure or negotiated tender procedure. 

3. PPP Contract

According to Article 4, the PPP contract is subject to private law and the contract term may not exceed 30 years (in addition to the construction period). During the contract term, the administration has the right to supervise and to audit the contractor’s activities. The administration may also authorize a different person (public or private) to audit contractor’s activities.

 It is noteworthy to mention that the contractor has the right to transfer all its rights and duties on the PPP contract to a third person which fulfills the conditions required by the Law upon prior approval of the administration.

 Regarding all disputes arising under this contract, Turkish courts have jurisdiction; and Turkish law is applicable. However, parties may sign an arbitration agreement provided that the Turkish law is applicable to the dispute and the place of the arbitral proceeding is Turkey.

4. Remuneration and Funding

 According to Article 5, the contractor is not entitled to any remuneration before the termination of the construction with the exception of partial termination and partial service offer with the administration’s approval.

 Article 6 states on the other hand that contractor has to provide entire funding for the project.

5. Cashing the Performance Bond

 One of the key features of this Law is that, in case the contract is terminated on grounds attributable to contractor, performance bond of the contractor is registered as revenue to the Treasury and such performance bond is not deducted from the liability of contractor.