Turkish Government Limits Foreign Currency Denominated Transactions

The Presidential Decree on the Amendments to the Decree No. 32 on Protection of the Value of the Turkish Currency (the Decree") has been published in the Official Gazette dated 13 September 2018 and numbered 30534 and entered into force starting from its publication date.

By the Decree, it has been regulated that resident persons in Turkey shall not determine the contract price and other contractual payment obligations in a foreign currency or indexed to a foreign currency in the following agreements;

• Purchasing and sales of movable property and real estates,

• Renting of movable property and real estates,

• Car rentals and financial leasings,

• Leasings,

• Employment contracts,

• Service contracts,

• Work contracts.

With the Amending Decree, related to the amendment mentioned above, it is indicated that except for the situations stipulated by the Ministry, the concluded agreements determining contract value or other additional contractual payments in a foreign currency or indexed to a foreign currency, which are still in force, shall be adapted to Turkish currency within 30 (thirty) days of the effective date which is until 13 October 2018.

It appears that the agreements and transactions that will be subject to the prohibition are kept wide but the decision gives the related ministry the authority to make exceptions. Determination of exemptions by the Ministry are essential and should take priority. The implementation of the scope of commercial contracts which will be subject to the prohibition, especially service contracts, will be clarified with the decisions and regulations of the related ministry.

Another issue that may create legal discussion within the scope of the decree is the possibility of adjustment of contract prices to Turkish Lira creating legal disputes between the parties to the contract. We believe that such disputes may create controversy regarding the applicability and future of the relevant contract.