Turkey has traditionally been a strong trade partner for both Europe and Asia. The ten principles underlined in this report look at how a successful trading relationship can be achieved.
10 Principles that can help make your supply relationship successful
In recent decades Turkey has been increasingly involved in business relations with partners in Western Europe. Firmly intent on joining the European Union, the country has set off down the path of European integration, both commercially and legally.
Accordingly, relationships involving trade with Turkey do not normally require any greater level of preparation or legal review than trade with other neighbours of the European Union. Turkey is a free-market economy with few restrictions on imports. There are, however, certain particularities of Turkish law which a supplier should take into account when planning sales to customers in Turkey. This overview sets out ten rules that are quite simple to follow and can help make your trading relationships lasting and successful.
1. Put it in writing
2. Turkish law is very European
3. Verify your partner’s authority
- articles of association certified by the relevant trade registry;
- certificates of activity issued by the relevant trade registry;
- resolution of the board of directors approving the terms of and the transactions contemplated by the supply contract and authorizing a specified person or persons to execute the supply contract on its behalf;
- and a signature circular (an official document signed before a notary) setting out the name, signature and incumbency of the authorized signatories.
4. Securing your payment
- A payment guarantee issued by a reputable bank as an irrevocable, confirmed letter of credit undertaking to pay a certain amount or to accept or purchase bills of exchange drawn by the seller for the amount of the sales, or as a promissory note or a bill of exchange accepted or avalised (endorsed) by the bank. Bank guarantees in Turkey are always issued as guarantees on first demand.
A mortgage of immoveable property (ipotek). A mortgage is one of the most common and secure instruments for a creditor to guarantee its receivables in Turkey, provided that the customer has immoveable property that it is willing to use as collateral. To duly establish a mortgage, an official mortgage deed must be executed and registered with the title deed registry. The mortgagee will also typically wish to carry out a due diligence review of the property before accepting a mortgage. This is often time-consuming, so it is not usually expedient for a foreign supplier to negotiate a mortgage to secure a supply relationship.
A pledge of moveable property including receivables, bank accounts, shares, etc. As a general rule, in order to validly establish a pledge under Turkish law, possession of the moveable property must actually be transferred to the pledgee or to an agreed third party. An exception is moveables that are registered with a registry by law, such as motor vehicles, construction machinery and an enterprise pledge. In all other cases, the pledge must involve the actual transfer of possession, which is why pledges are rarely used in connection with supply relationships.
- Assignment of receivables, including future receivables, if their subject matter is determined. This can be an effective security instrument, particularly where the Turkish customer purchases goods for the purpose of reselling them.
5. Protect your intellectual property
6. Compete fairly
7. Take advantage of free trade zones
8. Stay on top of tax and customs rules
9. Enforcement of rights is no more difficult than in other countries
10. Insure your sales
This overview is intended to provide general guidance on the legal framework applicable to supply relationships with Turkish customers. It is not intended as legal advice and cannot replace a thorough analysis of specific supply arrangements.