Legal Alert: A Way Out for Many Public Procurement Contractors in Turkey

As all other actors in Turkish economy, public procurement contractors have also suffered due to unexpected economical fluctuations. Many of the public procurement contracts has become more expensive for contractors, even some are not feasible anymore. More importantly, some contractors have faced risk of debarment.

Lawmakers, to deal with this problem, promulgated Law No. 7161 dated 17/01/2019 (“Law”) which adds a Provisional Article to Public Procurement Contracts Law (Law No. 4735, dated 05/01/2002). The Provisional Article offers a way out (termination/assignment) for public procurement contractors of which manufacturing cost unexpectedly increased.

Accordingly, Provisional Article applies to the following:

1. Contracts that have been entered into before August 3, 2018;

2. Contracts that have been executed in accordance with the Law No. 4734 (also applies to exceptions in the Article 3 of Law No. 4734);

3. Contracts that are still in effect as of January 18, 2019.

Public procurement contractors who would like to terminate/assign the public contracts must submit their request in writing within 60 days after the Law come in force (January 18, 2019). Contractor’s request will be evaluated by the related authority and the decision will be made in co-ordination with Ministry of Treasury and Finance.

In case a public contract is assigned, assignee will be subject to the terms and conditions of the original tender as of the assignment date. Any restriction or sanction will not be imposed on the assignee due to assignment. As for the joint venture contractors, assignments or stock transfers among shareholders will not make them subject to qualification requirements of the original tender.

Provisional Article also prevents contractors that terminated or assigned the public procurement contracts from claiming for any payment which applies or covers beyond to the termination/assignment date. Any certificate of termination issued under Provisional Article will be exempt from stamp duty.

In short, Provisional Article may be a way out for many public procurement contractors who have been struggling due to economic fluctuations which increased manufacturing cost unexpectedly.

Author: Yunus Çağlar, Esq.