May 2020



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Draft Legislation for New PPP Models in the Transportation Sector

Based on Article 485(1)(ç) of the Presidency’s Decree (Kararname) No. 1 dated 10 July 2018, the Presidency has prepared a new draft Resolution (Karar) regarding the procedure and principles for the realisation of infrastructure investments and services through public-private partnership (“PPP”) model in the transportation sector (the “Draft Resolution”).


The Draft Resolution covers, among others, the following transportation sector projects:

  • railways,
  • ports,
  • airports,
  • roads connecting any industrial facilities, factories, refineries, industrial zones and any other similar facilities to motorways.

The tenders for research & development, design and consultancy works related to such projects may also be tendered pursuant to the terms of the same Draft Resolution.

Presidency Approval

Projects to be tendered by the Ministry of Transportation and Infrastructure (the “Ministry of Transportation”) within the scope of the Draft Resolution are required to be submitted to the Presidency for approval prior to initiation of the tender process. A preliminary feasibility report must be prepared by the Ministry of Transportation and submitted to the Presidency together with the application for approval.

PPP Models

The Draft Resolution provides that, among others, build-operate-transfer (BOT), build-operate (BO), transfer of operation rights (TOR), build-lease-transfer (BLT) and build (B) models may be used to realise the projects.

One of the most important novelties of the Draft Resolution is to envisage the “Build (B)” model as a possible PPP model, whereby the private company (SPV) would be responsible for the construction, renovation, rehabilitation, restoration, capacity increase, completion and procurement of equipment, etc., excluding the operation of such facilities.

The Draft Resolution also mentions operate-transfer (OT) as an alternative model in addition to transfer of operation rights (TOR). In the OT model, differently from TOR, the SPV does not make a TOR fee payment to the administration, but on the contrary, the administration provides certain public supports to the SPV since the project does not generate sufficient revenues.

Tender Methods

The Draft Resolution envisages two possible tender methods as (i) tender among pre-determined bidders, and (ii) negotiations method.

The tender among pre-determined bidders involves a pre-qualification process and Dutch auction, while the negotiations method may be used in exceptional cases where, for example, no bid was submitted for the tender among pre-determined bidders method or in case there is an urgency for conducting the tender or a force majeure event.

Private Law Nature of the Project Agreement

The Draft Resolution provides that the project agreement to be signed between the Ministry of Transportation and the SPV to be established by the successful bidder will be governed by private law. According to Turkish Constitution, such determination about the private law nature of a project agreement can only be made by a law to be enacted by the Parliament. Therefore, the validity of such provision of the Draft Resolution would be legally questionable.

The Draft Resolution also provides that the term of the project agreement cannot exceed 30 years, except for time extensions permitted under the project agreement.

Direct Agreement with Lenders

The Draft Resolution provides that the Ministry of Transportation may sign a direct agreement with the lenders of the project in order to provide step-in and substitution rights to the lenders.

Debt Assumption by the Ministry of Transportation

The Draft Resolution provides that the Ministry of Transportation would assume the debt to the lenders (including the interest and financing costs) in the event of early termination of the project agreement.

In the previous motorway deals in Turkey, the debt assumption was made by either the Ministry of Treasury or Finance or the General Directorate of Highways, depending on the total investment amount of the project. Under the Draft Resolution, the debt assumption will not be made by those authorities but the Ministry of Transportation itself. Since the ministries represent the legal personality of the State under Turkish law, debt assumption by the Ministry of Transportation would be helpful to increase bankability of the projects.

Types of Public Support

The Draft Resolution provides that the Ministry of Transportation may provide certain financial supports to the SPV in the form of, among others, demand guarantee, revenue guarantee and shadow fees/contribution share.

FX Adjustment for Availability Payments

The Draft Resolution permits the Ministry of Transportation to agree on FX adjustment in the project agreement only for the availability payment and provided that the loan obtained by the SPV is in foreign currency.

Assignment of Ministry’s Receivables

Another novelty of the Draft Resolution relates to the assignment of receivables of the Ministry of Transportation to the lenders as security. The Draft Resolution also provides that a pledge may be established in favour of the lenders of the bank account of the Ministry where the revenues of the Ministry generating directly or indirectly from the project are deposited. This is an additional instrument to increase bankability of the projects as it provides assignment of receivables of the Ministry in addition to assignment of receivables of the SPV.

Minimum Equity Ratio

The Draft Resolution requires the minimum equity ratio to be 30%.

Financing through Project Bonds

The Draft Resolution also includes a provision aiming at facilitating the financing of the projects through project bond. It provides an exemption for the projects realised under that Resolution from the general issuance threshold restriction of Turkish law. Consequently, the restriction that the issuance amount cannot exceed 3 times the equity of the SPV would not apply if the project is financed through project bonds.

International Arbitration and Governing Language

The Draft Resolution permits the parties to agree on international arbitration as the dispute settlement method of the project agreement. It also permits to determine the seat of arbitration abroad on the condition that the governing law will remain Turkish law.

The Draft Law also provides that the project agreement can be signed in both Turkish and English languages on the condition that the Turkish version shall prevail in case of contradiction.

Tax Exemptions

The Draft Resolution provides certain tax exemptions for the projects to be realised under that resolution. For example, it provides that the project agreement and all other transactions between the Ministry of Transportation and the SPV (including its sub-contracts and sub-subcontracts at any level) shall be exempt from stamp tax, VAT and duties. As a matter of Turkish law, tax exemption can only be granted by laws enacted by the Parliament. Therefore the validity of such tax exemptions would be questionable from legal perspective.


The Draft Resolution is an important instrument to increase the feasibility and bankability of PPP projects in the transportation sector, as it provides new PPP models, such as Build (B) and brings additional securities for lenders such as assignment of Ministry’s receivables or pledge over Ministry’s accounts in addition to the SPV’s receivables and accounts. However, it should be noted that some of its provisions, such as private law nature of the project agreement, details of the tender methods and tax exemptions, may be subject of a legal challenge since as a matter of Turkish law such provisions can only be introduced by a law to be enacted by the Parliament. Please also note that this analysis is based on the draft of the resolution available as of the date hereof and may need to be revised depending on its final text if and when the Resolution is issued.

This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This should not be acted upon in any specific situation without appropriate legal advice. This information is protected by copyright and may not be reproduced or translated without the prior written permission of Ergün Avukatlık Bürosu.