Articles

PPP Route from Concessions to BLTs in Turkey

For a country with such an excellent track record of PPP deals, in terms of numbers and value, Turkey surprisingly has neither a general PPP law nor a central PPP governmental authority.

The grandfather of all PPP models in Turkey up until the 1980s was the “concession” method, which continued to be run mainly under the Ottoman-era Concessions Law of 1910. The outdatedness of that regulatory framework is not the only shortcoming of the concession model, the main problem with it is that concession contracts fall under administrative law, making them (i) subject to the prior review of the Council of State’s High Court of Administrative Law (“Danıştay”) before their execution, revision, or in principle their subsequent adjudication; and more importantly (ii) vulnerable to cancellation of the underlying tenders or procurement processes.

Starting in the 1980’s, the legislative agenda focused more on creating private law-governed contractual schemes for PPPs. The overwhelming desire of the public and the legislature was to narrow energy and infrastructure investment gaps, while scaling back the power of public entities to scrutinize public service or infrastructure projects delegated to the private sector.

During the 1980s and 1990s, new methods of delegation such as the Build-Operate-Transfer (“BOT”) and Build-Operate (“BO”) PPP models emerged as alternatives to the inflexible concession method, marking a distinct shift to the use of private law contracts. These earlier efforts (i.e. the initial BOT laws and pioneer deals) were challenged before the Constitutional Court and the Council of State in numerous cancellation lawsuits, some with success and some merely prolonging the investment periods and undermining the bankability of the deals.