COVID-19 and force majeure under Turkish law

Posted in COVID-19 Corporate, M&A and securities

Since the first case of the COVID-19 was confirmed in Turkey on March 11, the number of confirmed cases and deaths continues to increase. To safeguard public health, the government has been actively legislating to assure necessary precautions may be taken and to provide support to individuals and communities. For example, curfews have been imposed on those over the age of 65 and legislative changes were adopted to enable students training in health-related sectors (uzmanlık öğrencileri) to join healthcare workers in the effort to provide service and support to those in need.

The COVID-19 pandemic is also taking a toll on businesses globally. With no end to the outbreak in sight, businesses are beginning to consider if invoking force majeure clauses can limit their contractual liability in the face of performance setbacks encountered due to the COVID-19 outbreak. Below is a brief summary of the force majeure concept under Turkish law.

Applicable legislation

In the absence of a tailored, detailed force majeure contract provision, the existence of a force majeure event largely depends on court discretion. At the current time, because there is no catch-all statutory definition of force majeure under Turkish law, the courts will evaluate each claim based on the specific facts presented in case. Examples of force majeure events are provided under some specific legislation including, without limitation, the Tax Procedure Law No. 213, the Public Procurement Contracts Law No. 4735 and the Turkish Petroleum Law No. 6491, but these are not exhaustive.

If the courts consider the COVID-19 outbreak as a force majeure event in a specific case, and it:

  • renders the performance of the contracting parties’ obligations absolutely impossible, the parties are released from their contractual obligations. 

or

  • prevents the performance of the contracting parties’ obligations temporarily, the parties’ contractual obligations are postponed until the force majeure event ceases to exist.

Force majeure criteria

Criteria generally taken into account in court precedents in the determination of whether an event constitutes a force majeure event notably include, without limitation, assessment of whether the event was unforeseeable at the time of execution of the contract, was otherwise unavoidable, and whether it occurred externally/outside the parties' control.

Conclusion

On March 18, 2020, Turkish President Erdoğan introduced an economic stimulus program (for further information, please see Turkey launches stimulus package amid COVID-19 threat) whereby ‘force majeure’ will be included as a note in the credit rating (kredi sicili) of companies facing credit default due to consequences of the COVID-19 pandemic in April, May and June 2020. On March 24, 2020, the Revenue Administration announced that due to the COVID-19 outbreak, the withholding tax declarations (muhtasar vergi beyannameleri) and value added tax declarations (katma değer vergisi) for April, May and June of those active in various industries including, without limitation, the retail, automotive and construction sectors are postponed until July 27, 2020 To date, other than these few specific announcements, there has been no catch-all official or legislative decision, announcement, or order to consider COVID-19 a force majeure event in Turkey. 

Therefore, in the absence of an explicit force majeure contract provision relating to epidemic/pandemic events, the applicability in Turkey of the concept of force majeure to COVID-19 will be subject to court discretion based on the specific facts of each case.

For further information , please click here to refer to Norton Rose Fulbright’s global COVID-19 information hub or for specific information on force majeure regulations under other jurisdictions:

Canada

France

United Kingdom 

US

 

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