State of Emergency and Its Probable Impacts on Daily and Business Life
As is known, state of emergency (“SoE”) has been announced on Thursday, 21 July 2016, at 1 a.m. for a period of ninety (90) days in order to restore order in our country. In this Article, we briefly explain and assess concept of the SoE and evaluate probable impacts of SoE in business and daily life.
1.What is a SoE?
According to Article 119 and 120 of the Constitution of the Republic of Turkey dated 07.11.1982 and numbered 2709 (“Constitution”) it is regulated that a SoE may be declared in the events of deterioration of public order, natural disaster or epidemic. In such cases, the Council of Ministers under the chairmanship of the President of the Republic, after consultation with the National Security Council, may declare a SoE in one or more regions or throughout the country for a period not exceeding six months. In the event of declaration of a SoE, this decision shall be published in the Official Gazette and submitted to the approval of Grand National Assembly.
Accordingly, a SoE has been declared for a period of ninety days by means of Council of Ministers’ decision numbered 2016/9064 and such decision has been published in the Official Gazette dated 21.07.2016 and numbered 29777. Please click here for the complete text of the decision.
Procedures and principles in case of a SoE are regulated by Statute of State of Emergency dated 25.10.1983 and numbered 2935. In the event of a nationwide SoE declaration throughout the country, as it is for the time being, governors are in charge and authorized under the coordination and cooperation of the Ministry.
SoE measures that may directly or indirectly affect daily and business life, are stated as follows according to the Article 11 of the Statute;
•To set up curfew, to prohibit or limit people or vehicles from roaming,
•To search the body, vehicles, and belongings of the individuals; search and to confiscate crime objects and other objects which have evidential value,
•To make compulsory to carry personal identification documents at all times,
•To ban publishing, copying, printing and distributing of newspapers, magazines, leaflets, flyers, posters etc.,
•To record or prohibit the use of verbal tapes, writing, picture, film, disc, audio or visual tapes when necessary,
•To enforce or demand to enhance special protection measures in order to provide inner security for sensitive public or private institutions or banks,
•To prohibit carriage or transportation of any weapons and bullets regardless of presence of a gun license,
•To prohibit the entrance of persons or groups to the country that may endanger public order or/and safety, to order deportation of such persons and groups or to prohibit their entrance to or residing in certain regions within the country,
•To prohibit or postpone indoor or outdoor protests and demonstrations,
•To suspend activity of associations by separate suspension decisions for each association for a period of three months at most,
•To enforce permission process before layoffs of employees or postpone layoff decisions limited to three months, considering economic status of employer except for (i) consent of employee, (ii) behaviors contrary to the morals and good faith, (iii) health problems, (iv) normal retirement and (v) expiration or termination of fixed term employment contracts.
2. In Terms of Force Majeure
The term of force majeure refers unforeseeable and unavoidable conditions that are not related to business activity and beyond control of debtor and that prevent performance of a general obligation or liability. According to the Turkish Code of Obligations, in the event that contractual obligations cannot be performed due to SoE measures, this condition shall be deemed as force majeure due to consisting impossibility of performance and thus, the debtor shall be discharged from its debts or it may be required to wait until the end of force majeure - for the performance of obligations. On the other hand, conditions should be evaluated on a separate basis whether a SoE creates a force majeure event or not according to the aspects of each case.
Moreover, declaration of a SoE may not cause impossibility of performance automatically regarding national and international contracts/conventions (i.e. CISG). The circumstances should give rise to impossibility of related performances such as confiscation of bank accounts, appointment of a trustee to a company of the contracting party, devaluation/sudden and high increase in exchange rates in foreign currency transactions or arresting/imprisonment of a debtor of a contract party with personal performance obligations etc.
Hence, it is advisable that, regardless of which side of a contract you might be, to be prepared for potential impacts and to avoid substantial losses during the SoE, a careful consideration shall be significantly beneficial to specify whether there is a possibility or right of the corresponding party of the contract to rely on force majeure not to fulfil its liability or not, as well as whether you might suspend your contractual obligations by relying on force majeure.
3. In Terms of Impacts on Exchange Rates and Contracts:
In accordance with the relevant provision of the Turkish Code of Obligations, in the case of emergence of an extraordinary situation which is unpredictable and cannot be expected to be predicted at the time of execution of the contract due to reasons which are not attributable to the debtor and which changes the conditions of the contract against the debtor in such a way that expecting the performance of the obligations shall be contrary to good faith, the debtor may request from the Court to adapt the contract to the new conditions or may request the cancellation of the contract.
In foreign currency contracts, adaptation of the contract may be requested in case of a sudden increase in the exchange rates, if the emerging situation is “unpredictable” and if it creates “undue hardship”. Supreme Court decisions vary in relation to contracts whether they might be adapted or not due to sudden increase in the exchange rates. However, Supreme Courts’ main criteria is the evaluation of the “timing” and “case specific basis” with respect to the fluctuations in the exchange rates (i.e. SoE). For instance; in case Euro currency increases five times against Turkish Lira, the current value at the end of first year of a lease contract executed a year ago, the court will evaluate each case based on the facts which cause such increase. Fluctuations in exchange rates occur as a result of many reasons in interaction. Thus, it has been mentioned by Supreme Court that the merchant parties of a contractual relationship shall behave prudently as per the requirements of business life, being aware of the Turkish economy and considering the fluctuations in economy with respect to decisions rendered in court files on adaptation of contracts during either in the economic crisis in 2000s or following terrorist attacks. In this respect, declaration of a SoE does not necessarily mean that exchange rates will increase whereby it shall not constitute a legal basis for the acceptance of adaptation lawsuits as an increase in exchange rates or depreciation in Turkish Lira has not occurred yet. Consequently, declaration of a SoE does not constitute a force majeure merely without creating economic results.
4. In Terms of Employment Contracts:
As mentioned above, there are measures to be applied in SoE situations such as “delaying the layoffs for a period of three-month at most regarding employer’s current situation except for the reasons such as request of employee, contradiction to the rules of morality and good faith, health issues, retirement and end of a fixed term employment contract or termination.”
According to this provision, an employment contract may be terminated based on reasons such as contradiction to the rules of morality and good faith, retirement, and health issues. However, in case a Ministry renders a decision to apply such measures as regulated under the aforementioned provision, employer who is willing to terminate an employment contract of an employee shall postpone such layoff for a period not exceeding three months. The reason lying behind this provision is avoiding disruption of trust relationship between employers and employees. As such decision shall have an impact on all companies nationwide; Ministry is entitled to render a decision in this regard at any time. Any progress that might occur during the SoE period shall directly be shared with yourselves.
Due to the dismissals of a high number of judges and public prosecutors in civil and administrative courts followed by custody and arrest of the same; it is expected for us to experience a shortage/lack of adequate number of judges and public prosecutors in all courts especially in Istanbul and Ankara Courts. In addition, with the Regional Courts of Justice (Intermediate Courts of Appeal) entering recently into force as of 20.07.2016 and most of the judges being assigned to Intermediate Courts of Appeal; it is highly possible for judicial proceedings to considerably slow down for a while especially compared to the period prior to 15.07.2016.
It is also worth to underline that assignment of new judges instead of dismissed judges would be a time consuming process. In cases where the judge was dismissed, it is possible for the judges of other courts to be temporarily assigned to such courts which do not have a judge at the first place. Nevertheless, as temporarily assigned judges will not be well informed of case files and refrain from taking responsibility or proceeding the cases, especially with respect to preliminary injunctions, provisional seizure, final judgments and thus delay judgments as much as possible.
In conclusion, due to recent events, disruption and slowdown of judicial proceedings is highly possible in Turkish courts.