A First Time Decision by the Turkish Personal Data Protection Board: Allowing Cross-Border Data Transfer by Approving a Letter of Undertaking Application

The Turkish Data Protection Board (the “Board”) stated that the letter of undertaking (taahhütname) application submitted by TEB Arval Fleet Management Company (as the data controller) for cross-border transfer of personal data was accepted on 9 February 2021 as per Article 9/2 of the Turkish Personal Data Protection Law No.6698. Thus, the Board allowed a data controller to transfer the personal data by way of issuing a letter of undertaking. The announcement was published on the official website of the Turkish Personal Data Protection Authority.

The decision matters since for the first time the Board accepts a letter of undertaking application of a company to exercise personal data transfer to another country. As known, according to the Turkish Personal Data Protection Law, a data controller is allowed to transfer personal data to a third country if (i) the data subject gives explicit consent or (ii) the third country assures adequate data protection. Alternatively, both the data exporter and importer (data controllers at both sides) may undertake procurement of adequate protection by issuing a letter of undertaking and seeking for the Board’s approval for this.

Until now, the Board issued no such decision. This way, it starts setting the precedence for allowing personal data transfer to other countries through letter of undertaking.

You may find the link of the announcement below (in Turkish language):

https://www.kvkk.gov.tr/Icerik/6867/TAAHHUTNAME-BASVURUSU-HAKKINDA-DUYURU

The Status of Renewable Energy Resource Documents in Turkey

Today’s energy transformation has led major energy consumers to explore new business models to take part in energy transition and use them for their own needs.  Corporate consumers, who have an important place in accelerating the energy transition, have voluntarily turned to renewable energy supply to achieve the reducing greenhouse gas emission targets expected of them[1].  In response to these needs, energy sector players have promoted renewable energy projects with different methods by developing business models that obtained an acceptance in many countries around the world.

In international energy markets, most preferred business models, in order to procure renewable energy by corporate consumers, are emerging as the systems of (i) self-generation or self-consumption, (ii) unbundled energy certificate attribute[2], (iii) green energy offers[3], and (iv) renewable power purchase agreements (PPA).[4]

In electricity markets where not all of these supply methods have yet developed, one of the most preferred method of purchasing renewable energy of corporate consumers is the purchase of energy attribute certificates.

In this article, we will provide brief information regarding renewable energy attribute certificates in the context of the Turkish energy market.

Certification and Tracking of Energy Resources in the Context of Turkish Law:

One of the methods that institutions use when performing energy transition is the purchase of renewable energy attribute certificates from a renewable energy producer or from brokerage companies trading these attribute certificates in a way unbundled from electricity – without purchasing electricity – or along with electricity.

Companies meet their renewable energy consumption targets by purchasing these products in a way that corresponds to their electricity consumption.

These certificates, which are used to track the resource of the generated energy, contain information about the characteristics specific to the power plant where the electricity is generated, such as the location of the power plant, the resource from which the electricity is generated (technology), and the age of the power plant or whether it receives incentives.

Until the Regulation on Renewable Energy Resource Guarantee Certificate will enter into force, one should review the Regulation on Certification and Support of Renewable Energy Resources for information regarding renewable energy resource certificates.  Article 24 of the Regulation on Certification and Support of Renewable Energy Resources states that the Renewable Energy Resource (the “RES”) certificate will be issued to producers producing electricity under the renewable energy resource license[5] (i) to determine and track the resource type of electricity produced from the power plant and (ii) to benefit from the applications within the scope of RESSUM (the Renewable Energy Resources Support Mechanism).  There is no regulation in the electricity legislation related to the unbundled transfer of the RES documents (without electricity purchase).  However, the fact that the RES document is issued in order to benefit from RESSUM applications may be interpreted as that a power plant that benefits from RESSUM cannot transfer unbundled RES document.  Moreover, the presence of certificates accepted in international markets will cause that the transfer of RES documents is not preferred by foreign institutions or institutions with foreign partners in practice.  In addition, despite these regulations in the legislation, the RES document is not issued in practice.  Therefore, the circulation of the RES document does not occur in practice.

Since 2016, it has been possible to certify Turkish renewable energy plants through the I-REC system and transfer these certificates unbundled.

Novelties in Renewable Energy Resource Guarantee Document System

Parallel to the developments in international markets, the Regulation on Renewable Energy Resource Guarantee Certificate in Electricity Market, issued by the Energy Market Regulatory Authority (the “EMRA”) on the subject, was published in the Official Gazette, numbered 31304 and dated November 14, 2020.  The regulation will enter into force on June 1, 2021.

According to the statement made by the EMRA, the RES – G system introduced by the regulation was created by taking into account the guarantee of origin (“GO”) structure in order to facilitate compliance with the system used in the European Union[6].

The RES – G system introduced by the regulation can be summarized as follows:

  • 1 (one) renewable energy resource guarantee document (“RES – G document”) may be issued for every documentable 1 MWh production.
  • Although RES – G certification is provided only for licensed power plants in the current situation, the EMRA reported that it is working on a structure that will allow unlicensed power plants to enter this system[7].
  • The system is designed as a voluntary market and has stated that only the resource of electricity consumed for consumers who supply electricity through the green tariff can only be made by the authorized supply companies with the redemption of the RES – G document obtained from the RES – G market.
  • The relevant renewable energy power plant can be registered as a user in the RES – G system for each calendar year.
  • In order to prevent double counting, the EMRA regulates that a power plant that registers in a certificate market aiming at providing information on the nature of energy, other than the RES – G system, in a calendar year will not be allowed to register in the RES – G system. Although the Procedures and Principles governing the details of the system have not yet been published, we believe that the tracking of double counting will be made based on the declaration and that the penalties stipulated in the legislation will be applied in case of violation.
  • License holders which have multiple-source electricity generation plants will be able to participate in the RES-G system and the organized RES-G market if only all of the energy sources used in the plant are renewable.
  • In accordance with the Regulation, the EMRA will function as a regulatory and supervisory body, Enerji Piyasaları İşletme A.Ş. (“EPİAŞ”), on the other hand, will perform the basic market functions included in the Regulation and assume the operation of the organized RES – G market by creating the RES – G system.
  • In the RES – G system, the meanings given to the terms export, transfer, redemption, repeal, disclosure, and cancellation provide information on how the system will work. Accordingly, EPİAŞ will issue the RES – G certificate electronically with the request of the legal entity that owns the licensed power plant and is included in the database.  The fact that a certain amount or proportion of electrical energy supplied to consumers is produced from renewable energy sources and documented through the RES-G certificate is disclosed to consumers by suppliers through an invoice and/or other disclosure means with it.  By trading the documents, the transfer of RES – G documents between the system users will occur.  A RES – G certificate is redeemed by the supplier by associating it with a specific renewable energy consumption.  The life of an issued certificate is twelve months. At the end of these twelve months, the relevant document will be canceled.
  • Certificates can be bought and sold between market players by bilateral agreement together with energy or unbundled from energy.

[1] For example, RE100 or Renewable Energy Demand Enhancement (REDE)

[2] The term “unbundled energy attribute certificates” (EACs) is used in America for the term GO, which is adopted in Europe.

[3] In some countries, it is used as utility green procurement.

[4] Corporate Sourcing of Renewables: Markets And Industry Trends, IRENA 2018 and EU WWF Report Global Corporate Renewable Power Procurement Models Lesson from India

[5] The reason why the license emphasis is specifically made here is to state that the Renewable Energy Resource (the “RES”) document will be used for producer license holders and only for the identification and tracking of proof of the resource type.

[6] https://www.shura.org.tr/wp-content/uploads/2020/08/Sunum-Dr-Hakki-Ozata.pdf

[7] https://www.bilkenteprc.com/post/renewable-energy-certificates-in-a-nutshell-turkish-certificate-scheme-part-2-onur-uyanusta

SMART CONTRACTS – AKILLI SÖZLEŞMELER, UYGULAMA ALANLARI, AVANTAJ VE DEZAVANTAJLARI

Blokzincir (blockchain) teknolojisinin hukuki, finansal ve teknolojik açıdan pek çok yeni kavramı ve gelişmeyi beraberinde getirdiği ve bu yeniliklerin yakın gelecekte hayatlarımızı şekillendirebileceği bilinen bir gerçektir. Hukuk kurallarının teknolojideki gelişmelere aynı hızda ayak uydurması kolay olmamakla birlikte blokzincir ağı üzerinden çalışan “akıllı sözleşmeler” (smart contracts) de hukuk dünyasında hala şüphe ile karşılanmaktadır.

Bu kapsamda sözleşme hukuku kapsamında çok tartışılan akıllı sözleşmelerin ne olduğunu, hukuki niteliğini, uygulama alanlarını, bu sözleşmelere aykırılık durumunu, avantaj ve dezavantajları ile birlikte kısaca anlatmaya çalışacağız.

Akıllı Sözleşme Tanımı ve Hukuki Niteliği

Genel olarak kabul görmüş bir tanımı olmasa da akıllı sözleşmeler için, bir sözleşmenin icrasını veya müzakeresini uygulamak veya onaylamak, dijital olarak kolaylaştırmak için tasarlanmış bilgisayar protokolü diyebiliriz.

Akıllı sözleşmeler, blokzincir sistemine dayanan ve bu kapsamda çalışan yazılımlardır. Bildiğimiz sözleşmelerden farklı olarak burada, önceden oluşturulan algoritmalarla zamanı geldiğinde gerçeklemek üzere sistem harekete geçirilerek bu çerçevede sözleşmelerin dijitalleştirilmesi ve otomatikleştirilmesi söz konusu olmaktadır. Diğer bir ifadeyle, akıllı sözleşme gereken şartlar yerine geldiğinde kendi kendini gerçekleştiren bir sözleşmedir. Sözleşmenin her aşaması algoritmalar tarafından denetlendiği için bu tür yapılarda belirlenmiş kurallara uymak zorunludur. Zira sözleşme edim ve yükümlülükleri sözleşme ifa edilmeden evvel bilgisayar kodları aracılığı ile önceden belirlenmiş olup, zamanı geldiğinde otomatik olarak uygulama bulmaktadır.

Akıllı sözleşmelerin hukuki niteliği ise hala tartışmalıdır. Klasik anlamda bildiğimiz bir sözleşme olduğunu iddia edemesek de taraflar arasında hukuki bir sonuç doğurması niteliği göz önünde bulundurulduğunda kesin ve net bir cevap vermek güçleşmektedir. Borçlar hukuku kapsamında bildiğimiz tanımda, sözleşme için gereken unsurlara bakıldığında, “hukuksal bir sonuç doğurmak amacıyla iki veya daha fazla kişinin karşılıklı irade beyanlarının uyuştuğunun bildirilmesi” gerekliliğini görürüz. Akıllı sözleşmeler, programlandıkları amaç doğrultusunda hareket etmek durumunda oldukları için, tarafların iradesi sözleşmenin başında alınacak (örneğin al-sat talimatı gibi) ve sözleşmenin kalanında edimlerin karşılıklı ifası otomatik olarak, algoritmalar aracılığı ile yerine getirilecektir. Diğer bir ifadeyle, sözleşme koşullarının yerine gelmesi için artık başka bir irade beyanı gerekli olmayacaktır.

Bu özellikler göz önüne alındığında, akıllı sözleşmeleri Borçlar Hukuku kapsamında tanımladığımız ve bildiğimiz sözleşme kapsamından tümüyle dışlamak doğru olmayacaktır. Bunlardan kaynaklanan bir uyuşmazlık söz konusu olduğunda hukuki referans noktası sözleşme hukuku olmakla birlikte şekil şartı, aşırı ifa güçlüğüne bağlı olarak uyarlama, cayma veya taraf değişikliği gibi durumların söz konusu olduğu hallerde ise akıllı sözleşmelerin henüz doğası gereği uygun yapılar olmamaktadır. Yine sözleşme serbestisinin esas olduğu durumlarda, değiştirilemeyen yapısı gereği esneklik olmaması akıllı sözleşmeleri klasik anlamda bildiğimiz sözleşmelerden uzaklaştırmaktadır.

Zamanla daha çok uygulama alanı bulması beklenen akıllı sözleşmeler için özel olarak bir hukuki düzenleme gelmesi daha yerinde olacaktır. Hukukun teknolojik gelişmelerin doğasına uygun şekilde ve yeterlilikte cevap vermesi ve bu doğrultuda güncel düzenlemeler getirmesi mühimdir.

Akıllı Sözleşmelerin Uygulama Alanları

Akıllı sözleşme kavramı, özellikle en popüler kripto paralardan biri olan ethereum ile yaygın bir şekilde kullanılmaya başlamıştır. Akıllı sözleşmeler ethereum’un en öne çıkan ve göz alan niteliği haline gelmiştir.
Akıllı sözleşmeler kripto paralarla birlikte geliştirildiğinden, halihazırda çoğunlukla finans ve bankacılık dünyasında kullanılmaktadır. Yine de, bu teknoloji dünya çapında elverdiği ölçüde pek çok alanda kullanılabilir. Örneğin tedarik zincirleri, hem ürünlerini takip etmek hem de tüm işlem ve ödemelerini otomatikleştirmek için bu yapıya başvurabilir. Aynı şekilde gayrimenkul, sağlık, vergi, sigorta ve sayısız birçok sektör de akıllı sözleşmelerin kullanımından ve getirdiği faydalardan pekala yararlanabilir.

Akıllı Sözleşmeye Aykırılık Hali

Akıllı sözleşmelerde, programlandığı amaç doğrultusunda gereken edim, beklenen koşulun gerçekleşmesi halinde yerine gelmek zorundadır.  Önceden kodlanan bu koşul ve edimlerin ifasının gerçekleşmemesi durumuna rastlamak teoride mümkün değildir. Ancak ICO (initial coin offering – ilk kripto para arzı) gibi, henüz ortada bir ürünün olmadığı durumlarda, yani sadece bir vaadin olduğu durumlarda edimin ifası gerçekleşmeyebilir. Bu durumda Borçlar Kanunu kapsamında borçlunun temerrüdü veya tazminat hükümlerine gidilebilir.

Avantajları ve Dezavantajları

Avantajları: Akıllı sözleşmeler güven sorununu ortadan kaldırmaktadır. Sözleşmeler kurulurken tarafların, sözleşme konusunun gerçekleşip gerçekleşmeyeceği veya gelecek vade ve edimler için şüphe ve güvensizlikleri her zaman söz konusudur. Ancak, buradaki “if…then…” sistemi sayesinde güven duymaya ayrıca ihtiyaç kalmamaktadır. Zira sözleşme bir kere kurulduğunda ve taraflardan biri üstlendiği edimi gerçekleştirdiğinde (gereken koşulun gerçekleşmesi) yukarıda da bahsedildiği üzere sözleşmenin karşı edimi de akıllı sözleşmedeki programlama uyarınca otomatik olarak gerçekleşecektir. Örneğin;  “Bir yatırımcı ICO projesine ethereum gönderdiğinde bu coin karşılığı olarak, ICO projesi kapsamında üretilecek olan yeni coin oluşturulduğunda söz konusu varlığın devri otomatik olarak yatırımcı hesabına gerçekleşecektir” gibi.

Akıllı sözleşmelerin tercih edilmesindeki amaçlardan biri de bu nevi sözleşmelerde aracı kurum ve şahısların bulunmaması, bu sayede zaman ve masraftan büyük ölçüde kaçınılabilmesidir. Yine de her durumda bu tür sözleşmelerin kurulma aşamasında detaylıca incelenmesi ve talimatların gelecekteki farklı ihtimaller düşünülerek oluşturulması gerekmektedir.

Dezavantajları: Akıllı sözleşmeler için hala oldukça yeni bir teknoloji ürünü diyebiliriz. Zamanla pek çok ihtiyacı cevaplar hale gelebilecek olsa da, hala sorun yaratabilmeleri mümkün gözükmektedir. Bu kapsamda sözleşmeyi oluşturan kod ve algoritma mükemmel ve hatasız olmalıdır.

Ayrıca, teknolojinin yeniliği uygulamada çok fazla soruyu da beraberinde getirmektedir. Örneğin; hükümetler akıllı sözleşmelerin denetlemesini nasıl gerçekleştirecek? Bu sözleşmeler nasıl vergilendirilecekler? Sözleşmeye aykırılık durumunda ne olacak? Klasik anlamda bir sözleşmede aykırılık yaşanması halinde söz konusu uyuşmazlık mahkeme veya icra aracılığı ile çözülebilirken burada durum ne olacaktır?

Netice olarak;

Şüphesiz, akıllı sözleşmeler uygulamanın ayrılmaz bir parçası olma yolunda hızla ilerlemektedir. Böylesi bir potansiyele sahip teknoloji de gerek teknik gerek hukuki altyapı olarak zamanla daha da iyi oturacak ve pek çok alanda daha geniş uygulama bulacaktır.

Konu hakkında daha detaylı bilgi için lütfen; hande.aksu@ege-law.com veya info@ege-law.com

Novelties in the Turkish Electricity Market-December 2020

The Law amending the Electricity Market Law and Several Laws was published in the Official Gazette dated December 2, 2020. 

The main changes introduced by the law amendment are as follows:

– It has been stated that the Renewable Energy Resources Support Mechanism (RESSUM) prices will be applied in Turkish Lira for power plants that will be commissioned after 30/06/2021, and the President of the Republic has been authorized to issue procedures and principles on this issue.

– The President of the Republic has been authorized to determine the procedures and principles regarding the price to be applied, so as not to exceed the single-time active energy price belonging to its subscriber group in TRY krs/kWh from the end of the 10-year period for facilities covered by unlicensed electricity generation activities. 

– Unlicensed power plants have been given the option to switch to licensed production activities, provided that fifteen percent of the hourly market-clearing price (MCP) generated in the electricity market during the license period is paid as a contribution fee to the RES Support Mechanism.

Elektrik Piyasasında Güncel Gelişmeler – Aralık 2020

Elektrik Piyasası Kanunu ve Bazı Kanunlarda Değişiklik Yapılmasına Dair Kanun 2 Aralık 2020 tarihli Resmi Gazete’de yayınlandı. 

Kanun değişikliği ile getirilen ana yenilikler şöyle:

– 30/06/2021 tarihinden sonra devreye girecek santraller için YEKDEM bedellerinin Türk Lirası olarak uygulanacağı belirtilmiş, bu konudaki usul ve esaslarının çıkarılması konusunda Cumhurbaşkanı’na yetki verilmiştir.

– Lisanssız elektrik üretim faaliyeti kapsamındaki tesisler için 10 yıllık YEKDEM sürenin bitiminden itibaren TL krş/kWh cinsinden kendi abone grubuna ait tek zamanlı aktif enerji bedelini geçmemek üzere uygulanacak fiyat için de uygulamaya ilişkin usul ve esasların belirlenmesi için Cumhurbaşkanı yetkilendirilmiştir. 

– Lisanssız elektrik üretimi yapan santrallere, lisans süreleri boyunca elektrik piyasasında oluşan saatlik piyasa takas fiyatının (PTF) yüzde on beşinin YEK Destekleme Mekanizmasına katkı bedeli olarak ödenmesi koşuluyla lisanslı üretim faaliyetine geçilmesi seçeneği tanınmıştır.

THE RIGHTS OF LANDOWNERS IN TURKISH MINING LAW

Introduction Globally, two distinct legal frameworks or systems that regulate mining activities exist: whereas in common law countries, such as the USA and Australia, mines belong to the proprietors of the relevant mining lands (i.e. the landowners own the mines), in civil law countries, such as Turkey, the State and not the landowners own the […]

2nd Renewable Corporate Power Purchase Agreements (“PPA”) Workshop

                                                              EXECUTIVE SUMMARY

Date: 18 June 2020
Venue: Online
Organizers: Solarbaba and TurSEFF
Legislation and Moderation Support: Ege Law
Participants: 

  • Energy Companies: Aksa Energy, Aydem, BayWa, Borusan EnBW, EnerjiSA, Engie, Entek, Foton Energy, Limak, OMV, Pure Energy, RES Anatolia and YBT Energy
  • Financial Institutions: Akbank, AkLease, Garanti BBVA Bank, Garanti BBVA Leasing, Isbank, Is Leasing and TSKB
  • Electricity Consumer Brands: H&M, Inter IKEA Group Textile Category, Lindex and Sisecam

Guest Participants: EPDK, Coorbiz, ELDER and Oculus Insights

  • INTRODUCTION

Three workshops have been planned by TurSEFF & Solarbaba for 2020 in Turkey with the main theme of “Power Purchase Agreements (PPA) as a model to create new renewable energy installed capacity” and the second workshop was held. The purpose of those workshops is to brainstorm with the participation of different parties and to present the useful ideas emerging from the synergy as reports to the public opinion, thus, to open the subject to discussion for its development. Each workshop is designed to focus on a different key aspect of Renewable Power Purchase Agreements (PPA). 

The first workshop took place with a focus on “electricity generation and trading” on February 22, 2020 at TurSEFF office with the participation of energy companies, who are currently working on the issue. Financial institutions, energy companies and corporate consumers participated in the second workshop with a focus on “finance” on June 18, 2020. The third workshop will be organized focusing on “consumer” aspect with the participation of more corporate electricity consumers from different sectors. 

In the executive summary of the second workshop below, the issue is presented from the perspectives of three parties of Power Purchase Agreements (PPA); (i) energy companies (electricity producer / seller) who are the IPPs (Independent Power Producers) and investors for renewable energy projects, (ii) corporate electricity consumers (buyers) who buy clean energy to be generated from these power plants in the long term and (iii) financial institutions to finance the projects.

  • ELECTRICITY CONSUMERS (BUYER) PERSPECTIVE:

From the perspective of textile sector:

Textile industry is among the most important sectors in Turkey in terms of production and trade. According to IHKIB’s (Istanbul Apparel Exporters’ Association) “Developments in the Global Apparel Industry” report dated 2019; Turkey ranked sixth place in the world in 2019 with 17.6 billion US dollars in export value for apparel exports. Moreover, the European Union countries’ apparel imports from Turkey in 2019 was 15.2 billion US dollars in import value and Turkey ranked third with 11.1% share.

Many global textile brands have production coordination offices and common manufacturing supply chains in Turkey. There is also a “Brands Joint Platform” with the participation of more than 20 global textile brands carrying out studies for manufacturers in textile supply chains. Three brands, which are members of that platform – H&M, IKEA Group Textile Category and Lindex contributed on the consumer side by participating in our workshop. 

These brands have goals and roadmaps on sustainability and climate change for 2030, 2040, whose details can be seen in their annual sustainability reports and they need to select their manufacturers in their global supply chains in accordance with the goals to be able to attain them. In this context, brands follow the manufacturers in their supply chains by conducting performance evaluations in the process to assure their compatibility with the goals. These performance evaluations require manufacturers to carry out some works and improvements in the process for the utilization of renewable energy and energy efficiency to reduce their carbon emission in line with the goals of being carbon neutral and then carbon positive of the brands. The brands also organize various trainings and awareness raising activities to contribute to the efforts of the manufacturers in their supply chains.

The textile manufacturers in Turkey are in a variety of size and capacity; along with the large factories, there are smaller manufacturers subcontracting or producing in limited rental spaces unfit for on-site renewable energy applications as well. For this reason, regarding the consumption of electricity from renewable energy, the brands demand from the manufacturers to generate their own electricity within the scope of self-consumption, if applicable, and if not to purchase electricity from renewable energy or renewable energy certificates instead. As per examples in Europe, i.e. Portugal and Italy, there is “Green Tariff” and the brands benefit from it. Having various alternatives in a country make it easier for the manufacturers to attain these goals according to their scope or scale. In this sense, they think that having various options such as Renewable Power Purchase Agreements (PPA) or Renewable Energy Certificates (REC) alternative to installing renewable energy systems in their will facilitate the transition on the consumer side.

Brands’ goals are global, and the same criteria and goals apply to manufacturers in all countries they work with. In this regard, taking the necessary steps to comply with the criteria and to keep their performance evaluation scores high is a subject to be seriously taken into consideration by the manufacturers in Turkey for the sustainability and global competitiveness of their business.

From the perspective of energy companies:

The European Green Deal is a forthcoming subject and brings serious opportunities and risks. There are substantial opportunities particularly in terms of both new renewable energy capacity increase and decarbonization of the industrial infrastructure in Turkey. With the good governance of the process it is possible to transform the possible risks here into opportunities. Therefore, the electricity consumers are expected to focus more on this issue of transformation and the energy companies should support consumers more in this regard.

The most critical heading in the European Green Deal for electricity consumer industrial companies in Turkey is “Border Carbon Adjustment” related to “Carbon Leakage” because Turkey is among the largest suppliers of the European Union and majority of the products of Turkey are exported to the E.U. countries (41.1% according to the Jan – May 2020 data of the Turkish Ministry of Commerce). Within the Green Deal, the European Union aims to price its emissions within the scope of its historical responsibilities. Due to the obligations that will be imposed on its industry, the European industry may lose its competitiveness compared to other countries or there is a risk that the European industry may shift to production outside the E.U. and because of that “Border Carbon Adjustment Mechanism” is considered to be applied for the non-member country suppliers. Once this mechanism will be established, the industrial companies in Turkey wishing to export their products to the European Union will have to bear an additional cost for both emissions from the generated electricity supplied by the grid and from their own processes. It would be wise for all companies to seriously consider these two aspects and start working on them. In this context, Renewable Power Purchase Agreements (PPA) may become a good option for electricity consumers to purchase electricity from renewable energy at a more affordable price. Although Green Tariff is another option for this, it is observed that it brings an additional cost to the consumer in some foreign applications. In addition, establishing a Carbon Emission Trading infrastructure and market it in line with Renewable Power Purchase Agreements (PPA) will be a positive development on the consumer side.

International companies having significant investments and/or supply chains in Turkey currently create substantial demand in the Turkish market for supplying their electricity consumption from renewable energy in accordance with their decarbonization goals. Likewise, many energy companies having international shareholders and active in the Turkish market have been working on Power Purchase Agreements (PPA) to be able to meet the demands of above-mentioned consumers’ international accounts for their operations in Turkey. Some of the global energy companies are waiting for the development of Renewable Energy Power Purchase Agreement (PPA) Mechanisms to enter Turkish market. 

Some of the concerns observed on the consumer side by the energy companies regarding the structure of Renewable Power Purchase Agreements (PPA) are as follows:

  • Electricity purchase is currently not a primary business for corporates, to whom the energy companies’ intent to sell electricity through Renewable Power Purchase Agreements (PPA) and it is far outside their value chain. The relationship between the electricity consumers and producers should be improved to disseminate the knowledge to all level of consumers. While all these developments are taking place, it becomes very crucial to inform and raise the awareness of electricity consumers. At this point, the structures and platforms established by companies are also very important in terms of providing information and experience exchange among themselves.
  • There is a misperception that renewable electricity may be more expensive than normal electricity. One of the most determinant factors in the preference of the Renewable Power Purchase Agreements (PPA) by consumers is the price factor and the fact that the prices of electricity produced from renewable energy have dropped considerably will cause the Renewable PPAs to be preferred more and more by the consumers. Currently, some consumers meet their electricity demands from the grid but purchase additional Renewable Energy Certificates. Even though this operation can be considered as a kind of Renewable PPA, the long-term predictability of the electricity price provided to the customer by a long-term Renewable PPA to create new capacity cannot be achieved in this structure.
  • In addition, the electricity consumers are hesitant when to sign long-term Renewable PPA, today or within few years. “Cannibalization Effect” is one of the main issues of the electricity market due to technological developments. Although the answer to this question requires some market knowledge and projections, the best decision can be made for the company with the help of the project developers or independent consultants.
  • The electricity consumers want to ensure that the energy supplied comes from renewable resources. For this reason, the Renewable Energy Certificates (REC), which will allow the buyer to keep track of the electricity consumed, are expected to gain importance.
  • In the self-consumption model on the unlicensed side, electricity cannot be sold according to the legislation. In this model, consumers can use the electricity they produce by investing in their rooftops themselves. If the sale of electricity generated in unlicensed power plants is allowed and a collateral structure can be established in this regard, energy companies can invest in factory rooftops, install RSPVs (Rooftop Solar PV) and sell the electricity to factory owners. By this way, a more consumer-friendly structure for the electricity consumer can be created with a new business and finance model within the scope of the self-consumption model, and both industrial and energy companies may win.
  • FINANCIAL INSTITUTIONS PERSPECTIVE:

The financial institutions in Turkey have achieved a significant growth in renewable energy financing. The key element of this growth was the YEKDEM mechanism, a feed-in-tariff scheme introduced by the Turkish Government in 2010. YEKDEM have offered elements that reduce the risk of financial institutions with a fixed price and public electricity purchase guarantee. The fact that the financing provided is mainly in US Dollars enabled financial institutions to eliminate the exchange rate risk.

The financial institutions agree that a new market will be formed after YEKDEM with Renewable Power Purchase Agreement (PPA) models. The fact that financial institutions have not had a prevalent experience so far indicates the needs will be determined more clearly over time. However, all financial institutions participating in the workshop are eager to take part in this new market. The most critical issues are how the legal structure will be formed, what the contracts will cover and how the risks will be minimized.

The PPA model is the financing of a bilateral agreement. The best example of a PPA is Mini-YEKAs (Licensed renewable power plant public tenders with installed capacities 10-20 MWs each). The fact that one of the contracting parties in Mini-YEKAs is the government, makes it a model in which many risks of the investor are eliminated at the initial stage.

In the PPA model, when financing is done based on the contract between the two parties, financial institutions must be able to measure the credibility of both parties and evaluate their guarantees. 

Since rooftops are important area that may be subject to Renewable PPAs, experiences in financing RSPV (Rooftop Solar PV) investments will be guiding. Earning income from the savings in rooftop solar energy investments does not enable the repayment of financing with external cash flow. In that case, where there is no income transfer, leasing financing comes into prominence because the balance sheet evaluation of the investing institution is essential. Eliminating obstacles for renting roofs and enabling roof sharing will be the developments that will pave the way for the financing of Renewable PPAs. 

Requirements for the PPAs to finance them:

For the development of PPA financing, it is important to establish the structure of the contracts. The PPAs should be carefully reviewed and formulated by the lawyers from the very beginning. What the contracts will cover is the most important factor for financing institutions. The involvement of financial institutions in the financing process before the contract, agreeing on pricing, maturity, payment terms and other scope of the contract and adjusting the financing conditions accordingly are among the factors that will increase the accessibility of projects to finance and reduce the risk for all parties. 

The Renewable PPAs are expected to include at least the following clauses: 

  • The maturity of the contract is one of the basic criteria for financing. Payment plan and terms must be compatible. 
  • It is extremely important that the contract is final and irrevocable. If the contract is terminated, the subject of the penal sanctions to be applied should be clearly stated in the contract. The financial institutions expect that the contract can only be terminated under the very limited circumstances. Even if the contract is terminated, the presence of penal clause in the contract that the principal and the reduced amount of interest during the term of the loan to be paid on the day of termination, will be the priority of the financial institutions. 
  • The contract price must be predictable. Forming these contracts at a fixed price will keep the investor, the electricity buyer, and the financier on the safer side of the project returns. However, pricing may be expected to be subject to a certain escalation mechanism. The buyer may want to set the price with a market clearing price (MCP) minus a price, but this situation may make it difficult for the financial institutions to finance and increase the demand for equity due to market risk. Of course, it is obvious that every financial institution will make decisions in line with their own risk perception and risk appetite for the financing of projects subject to such contracts and will implement a policy in this direction. 
  • Contract Currency: If contracts are signed in Turkish Lira, prices may be indexed with a TL reference interest rate (TLREF); as in the MCP mechanism of EPİAŞ. It is a good model that can be used in the example where the maximum and minimum prices are determined based on US dollars, 25% – 25% CPI-PPI (Consumer Price Index – Producer Price Index), 50% exchange weight in foreign currency. However, the primary choice of financial institutions is a contract in US dollars.

Major risks: 

Project risk is one of the major risks that financiers will take, and there is no problem in analyzing the project risks with the experience of financial institutions in this regard. However, the buyer’s ability to pay the amount specified in the contract during the term of the contract is the most important risk for financial institutions. The financial strength of the buyer and the long-term sustainability of its business activity are other important parameters of risk measurement. In a fixed price contract, the price of the buyer party may remain too high over time within the agreed term and therefore the buyer party may want to terminate the agreement. 

Risk management: 

In Turkey, there is no sophisticated balance sheet risk assessment mechanism as in the advanced economies to assess the risk of the buyer side. Long-term O&M (Operation and Maintenance) agreements with the EPCs (Engineering Procurement Construction Companies), performance bonds, construction period insurances will be risk mitigating instruments. Determining how the buyer’s payments will be made, monitoring the payments, and guaranteeing them to the financial institution are other important elements of risk management. For the case of excessive price fluctuations, if both parties put forward their spot market expectations in writing in advance to reshape the contract accordingly, such approach may relieve all parties. 

Collaterals: 

Since the PPA model seems risky by the financial sector representatives, the financial institutions may request an additional collateral. The letter of guarantee or financial security will complement the process. State-supported credit insurance will also be one of the guarantees that will increase the financing capability. Of course, the insurance period must match the term of the contract. The formation of a state-supported credit insurance that will ensure these commercial risks will pave the way for the system.      

As a result, the PPA model creates a new market potential on the side of financial institutions. Although financial institutions prioritize the potential in the private sector, the PPA model has a huge market potential especially for financing the municipalities. The model, in which the contract risk is eliminated, and payments are secured by the public, will enable commercial finance institutions to evaluate the potential in this area. The financial institutions assume that the electricity suppliers are corporates. As market go into more depth, small players will enter the sector and additional measures may be required to increase these enterprises’ access to finance. 

  • ELECTRICITY PRODUCERS (SELLER) PERSPECTIVE:

The suggestions of energy companies participating in the workshop on Renewable PPAs, which are in use as a financing model in the renewable energy sector in many countries of the world, can be summarized as follows.

Legislative status regarding Renewable PPAs:

  • In the self-consumption model on the unlicensed side, electricity cannot be sold according to the legislation. In this model, investors can invest in their own rooftops and consume the electricity they generate. If the sale of electricity generated in unlicensed power plants is allowed and a collateral structure can be established in this regard, energy companies can invest in factory rooftops, install RSPVs (Rooftop Solar PV) and sell the electricity to factory owners. This will pave the way for Energy Service Company (ESCO) model or the Built-Operate-Transfer (BOT) in the sector. This model does not contradict the self-consumption model, and it is a financing model within the self-consumption model. In this way, the self-consumption RSPV projects and as well as WPP (Wind Power Plant) projects as the upper limit for self-consumption system investments is 5 MW, can be implemented faster. Both industrial and energy companies can win.
  • On the licensed side, there is a YEKDEM model coming to an end and a new mini-YEKA model. Licensed companies have been already selling electricity from different types of resources. While YEKDEM has an electricity purchase guarantee (feed-in-tariff), PPA is not an attractive commercial model, but it is predicted that it will be attractive for renewable power plants to exit YEKDEM after completing their 10-year period starting from 2021. In the current situation, although there is an energy company that will make the investment, the consumer to buy the electricity and the financial institution that will provide financing, it is very difficult to create licensed renewable capacity due to grid connection capacity limits. For the case that the electricity producer, consumer, and financier sign a Renewable PPA, it will be useful to define the methodology of the grid connection capacity allocation to develop the PPA structure. As a proposal, one of the cities announced in the Mini-YEKA package may be declared as a pilot city and proceed as a tender with the corporate renewable PPA model. Energy companies who want to implement this business model may compete for grid capacity allocation based on fixed electricity purchase prices in the PPAs by bringing the agreement they have made with corporate electricity consumers, without demanding an electricity purchase guarantee from the state. 
  • An alternative point of view that came to the agenda in the workshop is the creation of a single regulation specific to the PPA that can cover renewable energy investments of all sizes, without making any distinction such as unlicensed or licensed. For example, an industrialist may install 2 MW on his rooftop or buy 2 MW equivalent electricity from 20 MW power plant or may become shareholder for 2 MW of a 20 MW power plant and receive the energy. However, it is very important to include unlicensed energy generation facilities in the market regulated by EPİAŞ. 
  • Workshop participants predominantly interpret the Renewable PPAs as long-term corporate bilateral electricity trade agreements with the purpose of creating new renewable capacity, which we call “additionality”, and the three items mentioned above are related to this.
  • Moreover, some of the workshop participants have negative priced wind project portfolios in hand and this is an overall market portfolio of 2500 MW. If these portfolios are given the Renewable PPA alternative, it will be possible to realize these investments that currently occupy the grid capacity, thus it is an option for the creation of new renewable capacity “additionality” that has been brought to the agenda. 
  • In addition, participating energy companies are currently working on the Renewable PPAs for the wind power plants (a total capacity of 3500 MW in the perspective of 2020-2024) that are out of or will exit YEKDEM after 10 years. Although these power plants are discussed in our workshop, they are not the priority topic of our workshop, as they are completing return of investment periods, have the ability to sell electricity at affordable prices, can easily sell them with shorter-term agreements, and there is no chance of creating “additionality” – new capacity. 
  • Again, a view that came to the agenda in the workshop is that there is no legislative obstacle against all what mentioned and can be solved with business models. Although there are a small number of companies that have already accomplished this model or are close to do so, it will be beneficial to enable or support the Renewable PPA issue for capacity increase in renewable energy with some legislative changes, especially for more players of different sizes to reach and enter the market. 

Inclusion of unlicensed generation into the system with the logic of a virtual power plant:

On the unlicensed generation side, opening the way for the management of these projects in the power market (EPİAŞ) by combining these projects in a virtual power plant structure by an aggregator, will create a positive effect for the Renewable PPAs to become more prevalent. Thus, these projects may have a more predictable and objective structure both on the financing side and for the market risk to be taken and may be subject to PPAs. With the ability to trade the energy generated from those facilities and enabling them to perform market access transactions, those small distributed facilities can be managed with the logic of portfolio management and combined with demand side, new added value areas may be created. 

Implementation of Renewable Energy Certificates and pricing carbon:

It is critical to ensure that the resource is from renewable energy and monitoring it so that the new structures and business models such as Renewable PPA based on renewable energy can develop in the market. In this context, creation of Renewable Energy Certificates (REC) related mechanisms along with the legislation is crucial. With the YEK-G regulation, which was published as a draft in early July after our workshop, a step was taken towards this. 

As explained in detail on the consumer side, along with the E.U. Green Deal and expected Carbon Border Adjustment, Turkey may also begin pricing carbon. This is one of the most important issues for Renewable PPAs to become commercially attractive. 

Competition law and contracts over 5 years:

Energy companies stated that supply contracts having a maturity more than 5 years cannot be signed due to competition law restrictions. This issue is also discussed in Europe. The general assumption is that supply contracts longer than 5 years disrupt the competitive market, but there are some exceptions to this acceptance. If the relevant supply contracts contribute to technological development, the consumer benefits from this and can obtain a price guarantee, the relevant contracts will be exempt from this 5-year limitation. There are evaluations that the electricity sales contract signed for the sale of electricity produced in a nuclear power plant in Europe should not be subject to this limitation for the reason stated above. 

YEKDEM costs may be removed for Renewable PPAs:

In case of signing a Renewable PPA, energy companies recommend not to charge YEKDEM costs from projects within the scope of this model since electricity trade is realized between the parties without burdening the state. In this way, the Renewable PPA, renewable energy and new renewable capacity may be supported indirectly. 

Expectations from financial institutions:

With the decrease in renewable energy project costs and return on investment periods, especially in solar energy projects, the state-supported purchase-guaranteed structures in the world are leaving their places to free market mechanism business models. Likewise in Turkey, as YEKDEM will stop at the end of 2020, it is possible to observe that starting this year EMRA have taken some steps to pave the way for free market mechanism business models with various draft regulations such as YEK-G.

Until today, financial institutions have been financing renewable energy projects in a much different structure within the framework of the YEKDEM mechanism. It is important that financial institutions closely follow these changes and start working to adapt themselves to new business models with free market mechanisms. There are highly experienced financial institutions in Turkey and based on experience we can observe that these institutions have capabilities to rapidly adapt to changes in the legislation. 

At this point, the expectation of energy companies from financial institutions is that they are willing to leave a little more their comfort areas to finance new structures and business models such as Renewable PPA for the market to develop and to start developing the necessary financial structures and models to finance those models in a way that will bring the least burden to all parties. 

Recommendations for renewable PPA financial risk elimination:

  • In the case that the YEKDEM model is no longer on the agenda, the electricity market may create a mechanism and/or fund in order to minimize or eliminate the buyer risk in the Renewable PPAs emphasized by the financial institutions.
  • Additional collaterals may be developed to facilitate the work of financial institutions. An amount of EUR 50-100 million may be used to finance projects to be made under the Renewable PPAs model, in cooperation with a green fund or a development bank. Local financial institutions in Turkey may be included as well. This fund may manage all these risks on a market basis.
  • Insurance companies may develop different products to minimize or eliminate the buyer risk in Renewable PPAs.
  • Secondary market / derivative products may be introduced. For example, there are products traded on international platforms to ensure weather derivatives; if the wind does not blow or if the solar radiation is not at the desired level. 
  • The guarantees like the ones provided in long-term commodity trading, may also be applied in energy trading, and instruments such as Coface and KGF may be used.
  • Again, on the buyer side, a more developed mechanism may be established for the balance sheet risk assessment side as in Europe.
  • Financing mechanisms may be developed to apply the project finance approach. For that, financial institutions may issue Green Bonds.
  • With all these alternative proposals, it is an important aspect to include the financial institutions in the subject from the stage when the Renewable PPAs are started to be discussed.

Feasibility and cost reduction due to technological advances:

From the point of view of energy companies, the attraction of the Renewable PPA for all parties is primarily related to the feasibility of the projects and the return on investment. Investments have become very attractive now, when we approach from the technology and costs perspective and follow the decline in renewable energy costs in recent years. However, it is expected that the efficiency will increase, and the costs will decrease with new PV panel technologies, especially in solar energy. The decrease in the return period of investments will both increase the interest of investors and facilitate the work of financial institutions with shorter-term Renewable PPAs. In addition, the development of storage technologies and the decrease in costs will enable new, more flexible business models in the market.

Global companies may transfer global knowledge and experience to Turkey:

International companies having operations or/and Turkish business partners in Turkey having experience on Renewable PPAs, may transfer these global know-how and experience to Turkey and thus serve the local market to develop and the sector to raise its competitiveness rank globally and to attract foreign investor to invest more in Turkey.

  • QUESTIONNAIRE 1

Question: In your opinion, is leading the Renewable PPAs up more important in licensed applications or unlicensed applications?

Result: 35% Licensed, 65% Unlicensed

  •  QUESTIONNAIRE 2

Question: In your opinion, is leading the Renewable PPAs up more important in solar power or wind power?

Result: 80% Solar Power, 20% Wind Power

 

  • CONCLUSION
  1. Renewable Power Purchase Agreements (PPA) online workshop organized by TurSEFF and Solarbaba on June 18, 2020 has been an important step especially in terms of involving financial institutions and the consumer side of all PPA parties in the studies.

With this workshop, financial institutions had the opportunity to hear the knowledge and experience of energy companies conducting global activities on an alternative business model such as Renewable PPA. In addition, energy companies had the opportunity to listen and understand the approaches of different financial institutions on the Renewable PPA model.

Moreover, the consumer perspective was also included in the workshop and it was decided to organize the third workshop with a “consumer” focus with the participation of more consumers from different sectors in the participants list.

 

FINANCIAL LEASING UNDER TURKISH LAW


Under Financial Leasing, Factoring And Financing Company Law Numbered 6361 (hereinafter referred as “Law”), Financial Leasing is stated as a leasing transaction enabling one of the following aspects on condition to be based on a financial leasing contract; transferring the possession of an asset by the lessor authorized pursuant to the Law or related legislation to the lessee at the end of the lease giving the lessee the right to purchase the asset at a sum less than its current market value at the end of the lease period.

  • What can you rent with financial leasing and what are the advantages of benefiting from financial leasing method for energy projects?

In accrodance with Article 19 of the Law; movables and immovables may be subject to a financial leasing contract in Turkey. Any goods which indivudally constitutes an asset may be leased under financial leasing contract.

Thus, financial leasing is an advantageous method to be used while meeting the investment of energy facilities and its equipment. It enables a building owner to use a renewable energy installation without having to buy it. The installation is owned or invested in by another party, usually a financial institution. The building owner pays a periodic lease payment to that party that is determined under financial leasing contract.

Using financial leasing method will also bring some advantages listed below while imlementing the Energy Poject:

  • Without touching your equity, the project can be financed.
  • Periodic payment plans are created according to the cash flow of the project.
  • There is an option to purchase the leased asset at a representative price at the end of the leasing period.
  • The project’s financial electricity needs will be met and it also contributes to the annual greenhouse gas emission reduction.
  • It plays an important role in increasing productivity and profitability by using the working capitals to meet other needs of the firms by providing them to be used by renting instead of purchasing the investment goods.
  • The financial leasing contract has some tax advantages. As per Decision of the Council of Ministers dated 30.12.2007 and numbered 2007/13033, %1 VAT is appliacable for some equipments or complementary parts of the project. Also the investors who hold “Investment Incentive Certificate” will be subject to customs tax exemption and VAT exemption support while leasing of machineries and equipments that are covered by the financial leasing contract.
  • The financial leasing contracs and the papers related to its acqusition, amentdement or security deposit are exempt from stamp tax or charges.
  • Risk management with fixed rent against fluctuations in currency values and interest rates.
  • What are the phases of financial leasing process?

1-The lessee selects the property or asset and makes a preliminary agreement with the seller including the price and delivery terms.

2-Prior sale of the property or asset, the lessor presents the payment plans to be applied to the lessee for the investment to be made.

3-Upon agreement on payment plan between the lessee and lessor, the parties executes a financial leasing contract in a written form. Every natural and legal person authorized to conduct legal proceedings may be a lessee and participation and development banks as well as financial leasing companies may be a lessor under a financial leasing contract. Real estate and movable goods under financial lease contract shall be annoted or registered to the land registery, to the special registries for movable goods, if any, be and notified to the Association of Financial Leasing, Factoring and Financing Companies (“the Association”). Movable goods not registered to a special registery shall be registered to the special registery to be kept by the Association. The registery to be kept by the Association is accessible by public and the persons who are not party of a financial leasing contract may not allege that a lease annoniation was unbeknownst by to them.

4- Upon execution of financial leasing contract, the lessor buys the property from the seller and the invoice is issued to the lessor. In imports, the importer is the lessor. It fulfills the necessary financing conditions for the import of the good and imports the good. By delivering the goods to the lessee, the lessee obtains the property. The purchased property must be insured. The insurer party is specified as per mutual covenant of the parties under the financial lease contract. But in any case, insurer premiums shall be paid by lessee.

5-In accordance with the terms of the financial leasing contract, rental fees are collected from the lessee.

6-In case the lessee and lessor agreed purchasing of the property and/or asset under financial lease contract, at the end of the contract period, the goods are transferred to the lessee at a representative price.

  • Is ıt possible to operate financial leasing from a company incorporated abroad?

In accordance with Article 51 of Law, the financial leasing companies which are incorporated abroad can make financial leasing to the investors who are located in Turkey on the condition that cross-border financial leasing contract is registered at the special registry of Union of Financial Leasing, Factoring and Financing Companies (hereinafter referred as to ‘Union’ or ‘FKB’).

  • Is it possible to sell and lease back the equipment or asset which I own?

The sell and lease back method is not regulated under prior regulation, namely Financial Leasing Law No.3226. However under Article 51 of Law; sale and lease back is regulated as a financial leasing method which enables businesses to sell an asset, property rights of which is owned by said business, to a financing company and continue to use such asset by leasing it back from the same financing company by means of a financial leasing contract. The sell lease back method has exemptions with respect to corporation income tax, VAT, stamp tax and title deed fees.

According to statistics, % 30 of electricy production is aimed to be obtained from renewable energy sources in 2023 and 3 GW installed power is aimed to be reached in solar energy. Considering the need of natural resources and global change in the world, benefiting from financial leasing’s method opportunities will bring advantages for investors that designing projects.

As the financial leasing has its own legislation, seeking legal advice is recommended in order to procure the lessee’s rights under lease contract. Please be noted that the content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For detailed information please contact; info@ege-law.com or duygu.tuncer@ege-law.com

 

 

 

1-Türkiye Ekonomisinde Yenilenebilir Enerji Projelerinin Gerçekleştirilmesinde Sorunlar ve Çözüm Önerileri-Günüşen Yılmaz-A Yılmaz

 

CYBERSECURITY AND DATA PROTECTION: DIRECTORS’ LIABILITY


There is no single company that does not deal with data. Employee files, fiscal reports, product information or business plans are easily falling within the definition of data and besets every company with data protection obligations. Bearing the potential to face severe implications alone brings data protection to the top priority for any company and makes data one of the most important assets that a company has. Undoubtedly, when liability of a company is at stake, directors and board members’ role will be an integral part to this. As a legal entity, companies operate through real persons and in particular managed by directors and board members. This brings us to our subject, namely, directors’ and board members’ liability on data protection.

What obligations does data protection include?

This includes; guarding the availability of the data to employees who need it; providing the integrity of the data (keeping it correct and up-to-date); the confidentiality of the data; and the assurance that it is available only to people who are authorised. Who are obliged to provide data protection in terms of GDPR and KVKK? In terms of data protection and cybersecurity, there are two main applicable legislations in Turkey; the General Data Protection Regulation (“GDPR”) and Turkish Data Protection Law (“KVKK”).

GDPR bears responsibility on the controller for procurement of data protection. According to article 24, the controller must implement appropriate technical and organisational measures to ensure and to be able to demonstrate that processing is performed in accordance with GDPR. Moreover, the controller is also responsible for regular updating of such measures. Parallel with the GDPR and although defining the controller as the data responsible, article 12 of KVKK sets out that the data responsible shall take the necessary technical and organisational measures to provide data processing, data access and to keep personal data in accordance with respective laws.

Who is the controller? Who shall be deemed as the controller?

Both under GDPR and KVKK, the controller (or the data responsible) is defined as the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data. Thus, whoever determines means and purposes of processing data must be deemed as the controller. Since companies are obliged to ensure the robustness of IT infrastructures, security of data and protection from cyber risks, the very same is to be deemed as “the controller” or the “data responsible” in terms of two main applicable legislations in Turkey. KVKK clearly states that data responsible are guardians of the personal data that is obtained for processing purposes. Data responsible is the supervisor in procurement of the integrity of personal data, execution of the mandatory and necessary precautions to protect it and furthermore, such responsible entities are not allowed to disclose the personal data in a way to contradict with applicable law and regulations.

Board of Directors’ Position in terms of Data Protection Liability

Directors and board members of a legal entity cannot be accepted as the controller in terms of data protection regulations. The data responsible (or the controller) is the one who determines “how” and “why” the data is processed and in a company, the legal entity itself corresponds to these questions. In terms of Data Protection Law, directors are not deemed as the controller and sanctions to be imposed under KVKK are applicable on the legal entity. Besides, there is no specific provision under Turkish Data Protection Regulation that holds representatives of a legal entity liable for cyber security breaches and data protection violations. However, what if an action of a director leads to a sanction of the legal entity under KVKK are applicable on the legal entity.

Data Protection Regulation?

In this case, general liability provisions of the Turkish Commercial Code (“TCC”) can be resorted at all times. If a company is subject to fine under KVKK due to its director’s misconduct, it shall be able to recourse to liability of the director. Article 553 of the TCC suggests that members of Board of Directors may only be liable against to company, to shareholders or to the creditors of the company if they damage the company by failing to perform their duties arising from articles of association and law with their fault. Moreover, directors are obliged to perform their duties with utmost diligence and care to protect interests of the company based on the good faith principle.

Directors who fail to perform their duties and cause damage due their fault shall be held liable against company under TCC. Thus, any act of breach that violates safekeeping of personal data and failing to take necessary precautions and monitor these on behalf of the company shall lead to the liability of the representatives.

Worth mentioning that under German law there are explicit provisions that may lead to the liability of directors due to data protection failures. 1 According to the German Stock Corporation Act, Section 93, directors are obliged to gain proper oversight of cybersecurity and must act with utmost care within their establishment. Furthermore the same Act suggest that directors must take appropriate and necessary measures in particular to establish a monitoring system to detect any threat at an early stage which may endanger continued existence of the company.

Lack of specific regulation defining directors’ duties within data protection scope in Turkey and having TCC as a single resort may result in “non-liability” of a director. As known, TCC grants the opportunity to directors to assign their representation power to a third person by an internal directorate. Thus, such third party will be held liable in case of failing to act with care and diligence. However, there should be circumstances where such liability cannot be run from as in the case of public debts. A Director is hold liable (and even with their personal assets) if a company owes public debts irrelevant from the assignment of powers and duties to a third person.

To Conclude

Rapid developing nature of IT law requires specific attributions in relations to the liability of the directors. General liability provision of TCC may fall short in meeting some needs, as it necessarily requires “fault” precondition. No failure by the directors should be left out of sight especially actions deriving from negligence. In order to enhance law enforcement and make Turkey an effective contributor in the international fight against cybercrime, we believe more measures must be taken in respect to safekeeping of personal data.

For more information, please contact hande.aksu@ege-law.com or info@ege-law.com

COVID 19 PRECAUTIONS- PRESIDENTIAL DECREE

COVID 19 PRECAUTIONS- PRESIDENTIAL DECREE

On 22 March 2020 a Presidential Decree has been published on the Official Gazette and entered into force as precautions against COVID 19 pandemic.

The Decree suspends all enforcement and bankruptcy procedures, except enforcement procedures due to maintenance payments, beginning from the Decree date until 30 April 2020.  Accordingly new enforcement procedures will not be commenced and provisional remedies will not be enforced and executed until 30 April 2020.