ABSTRACT
In this article, the concept and types of investment zones, the determination of the legal nature of the management companies operating in these zones within the scope of administrative law and private law, and the law they are governed by in the light of court decisions will be discussed.
I. INTRODUCTION
Investment zones are special areas created by states to accelerate economic development and attract domestic and foreign investors to specific geographical areas. States agree with various companies to operate in these zones. Management companies can generally be defined as a company that undertakes the administrative and organizational functions of a specific investment zone. The duties of management companies generally include responsibilities such as providing for the needs of companies investing in these zones, organizing and managing the zone, and providing a favorable environment for investors. The legal nature of these management companies and the supervision of the legal activities to which they are subject are important in terms of determining their responsibilities and guiding the parties in case of disputes. In this way, the confidence of investors in these companies in the market will increase and the economic development process, which is the ultimate goal of the countries, will not be interrupted.
II. CONCEPT OF INVESTMENT ZONE
Investment zones are regions created to promote economic development and encourage investors to operate in specific geographical areas. In these zones, the state offers various incentives such as tax breaks, infrastructure support, land and building rental advantages to support private sector investments.
States aim to attract both domestic and foreign investors through investment zones. Investment zones strengthen national economies by promoting economic development and increasing employment. In addition, these zones provide states with the opportunity to increase their international competitiveness and increase foreign trade.
There are currently four types of investment zones in Turkey: Technology Development Zone (“TDZ”), Organized Industrial Zone (“OIZ”), free zone and industrial zone. Each zone differs in terms of the incentives and advantages offered by governments, investor profiles and the objectives to be achieved.
III. INVESTMENT ZONES
A. Technology Development Zones (Technoparks)
Technology Development Zones are established to encourage research and development activities and to attract investment in high technology areas. There are currently 101 TDZs, of which 87 are active and 14 are approved and under construction1. Earnings from software development, R&D and design activities in these zones are subject to tax exemption. In addition, software produced in TDZs is exempt from VAT, and the wages of R&D, design and support staff are also taxfree, with half of the employer’s share of the SSI premium covered by the state.
B. Organized Industrial Zones
Organized Industrial Zones are areas where companies can operate with the benefit of infrastructure and social facilities. There are 392 OIZs in Turkey, of which 274 are active and 118 are under construction. Investors benefit from various advantages such as VAT and real estate tax exemptions, low cost of water, natural gas and communication expenses during and after land purchases and facility construction.
C. Free Zones
Free Zones are special areas located outside Turkey’s customs territories that encourage export-oriented investments. There are 19 free zones in Turkey, 18 of which are active. These zones are exempt from taxes such as customs duty, corporate tax, VAT, stamp duty and real estate tax. Companies can freely transfer profits from these zones to Turkey or abroad without limitations. Other advantages include exemption from title deed fees on property purchases and sales, and VAT exemption on construction, project, settlement, permitting and approval processes.
D. Industrial Zones
Industrial Zones are special zones that aim to increase the global competitiveness of the national economy and create areas suitable for large-scale investments. These zones increase production, employment and technology transfer, while speeding up bureaucratic processes, making them attractive for investors. There are 40 Industrial Zones in Turkey. These zones offer advantages such as easement rights, public investment financing and bureaucratic conveniences. They also provide a favorable environment for high-tech investments, and easement rights are granted at lower rates than those on Treasury lands. Additional incentives can also be provided by the President.
IV. MANAGEMENT COMPANY
A. Management Company in General
Management companies are institutional structures that ensure the execution of the administrative and organizational activities of the relevant investment zones. These companies undertake important tasks such as coordinating infrastructure services, providing logistical support, facilitating permitting and licensing processes in order to meet the needs of companies investing in these zones. In addition to the orderly and effective management of the investment zone, they also provide supportive services such as market research, legal and financial consultancy, communication with local authorities, etc., in order to create a competitive and efficient business environment for investors. Ultimately, management companies play a critical role in the sustainable success of investment zones and the achievement of investors’ objectives.
B. Legal Nature of the Management Company
1. Distinction between Administrative Law Contract and Private Law Contract
As a rule, the administration may conclude both administrative law contracts and private law contracts. Administrative contracts are concluded for the protection of the public interest and the execution of public services and are subject to administrative jurisdiction. According to the Council of State, in order for a contract concluded by the administration to be considered an administrative contract; (i) one of the parties to the contract must be the administration, (ii) the subject of the contract must be the execution of a public service and the purpose of the contract must be public interest, and (iii) the contract must grant the administration superior powers2.
Although the Council of State determines whether a contract is an administrative contract based on the criteria set out by the Council of State, the Court of Cassation stated in one of its decisions that the fact that the defendant, as a public entity, pursues public interest and that the contract is related to the public service provided by the defendant is not sufficient for the acceptance of the contract relied upon in the case as an administrative contract3. Therefore, whether a contract is an administrative contract or not should be evaluated separately for each concrete case.
Private law contracts of the administration are contracts concluded by the administration according to the rules of private law. These contracts are like contracts between two private law persons. One of the parties to the contract is the administration and the other is a private law person. In the private law contracts of the administration, although the administration is one of the parties to the contract, the administration is not granted a superior authority over the private law person within the scope of the contract4. In other words, the administration was not a party to this contract with public power, but as a private law person.
In the light of the above information, in the event that the legal transactions of the Management Company give rise to a dispute, the judicial remedy for the dispute may be determined by making an assessment within the framework of the criteria provided for the legal transaction in question.
2. Nature of the Management Company under the Organized Industrial Zones Law No. 4562
Article 5 of the Law No. 4562 on Organized Industrial Zones (“Law No. 4562”) stipulates that an OIZ is a private law legal entity that operates in the public interest. The nature of an OIZ is shaped in a model that requires the cooperation of both the private sector and public authorities. OIZs are authorized to carry out expropriation transactions in line with the decision of their enterprising committee or general assembly, within the framework of the public benefit decision issued by the Ministry. This enables OIZs to undertake not only economic activities, but also important tasks such as land acquisition and infrastructure development in the public interest. In expropriation processes, the OIZ’s cooperation with local administrations allows the OIZ to act on behalf of its own legal personality, while the costs and land costs are borne by the OIZ. Article 5 of Law No. 4562 states that OIZs “can carry out expropriation transactions within the framework of the public interest decision and the authority granted by the Ministry”, which gives OIZs a legal privilege in terms of serving the public interest. In this context, OIZs, despite being governed by private law, also have certain legal responsibilities and obligations due to their activities in the public interest.
3. Nature of the Management Company under the Technology Development Zones Law No. 4691
Article 5 of the Law No. 4691 on Technology Development Zones (“Law No. 4691”) describes the nature of the Management Company and subparagraph (k) of Article 3 states that the Management Company refers to the company established as a joint stock company in accordance with the Law No. 4691 and responsible for the management and operation of the Zone. In practice, when the transactions of the Management Company are examined, it is seen that it does not have any “public power privilege” in matters such as unilateral action, ex officio enforcement, benefiting from the presumption of legality, the status of its properties, and the collection of its receivables. This “privilege of public power” means that the administration; (i) it can take unilateral action and does not need an additional court decision for the enforcement of this decision, (ii) the acts of the administration benefit from the presumption of legality, (iii) the administration’s property has the status of public property, (iv) a separate collection procedure is envisaged for public receivables, (v) enforcement cannot be applied for a debt, (vi) their contracts are considered as administrative contracts, (vii) their personnel are considered as public officials, (viii) compulsory membership, (ix) compulsory dues procedure, (x) tax exemption procedure, (xi) disputes are subject to administrative jurisdiction, (xii) they are subject to administrative liability regime for compensation of damages, and (xiii) the lack of freedom of will in private law5.
As a matter of fact, pursuant to Article 4/5 of Law No. 4691, zoning plans, parceling plans and amendments shall be prepared by the Management Company during the planning process and shall enter into force upon approval by the Ministry. Licenses and permits related to land use, design and construction of buildings and facilities according to the implementation zoning plan shall be granted by the Ministry in accordance with the provisions of the Zoning Law dated 09.05.1985 and numbered 3194. Furthermore, pursuant to Article 4/7 of Law No. 4691 and Article 19/4 of the Technology Development Zones Implementation Regulation (“Regulation”) published in the Official Gazette dated 10.08.2016 and numbered 297976, the Management Company submits its expropriation requests to the Ministry, and as a result of the Ministry’s assessment, the expropriation procedures are carried out by the Ministry in accordance with the principles set forth in the Expropriation Law dated 04.11.1983 and numbered 2942. In other words, the Management Company can only request expropriation from the relevant administration and it is the Ministry itself that performs the expropriation. Article 46 of the Constitution, titled Expropriation, states that expropriation transactions may be carried out by the state and public legal entities, provided that the conditions specified in the relevant article are met. Therefore, it is clearly understood that institutions that do not have the characteristics of the state and public legal entities cannot have both direct zoning permits and direct expropriation powers.
In order to give another example, pursuant to Article 18 of the Regulation, “Public institutions and organizations and university personnel whose services are needed as researchers and administrative personnel in the activities in the Zone may be employed on a permanent or part-time basis with the permission of the institutions they work for”. The personnel to be employed pursuant to the relevant article may not be permanent employees of the Management Company, but may be the personnel of the relevant public institution or university, but the personnel temporarily assigned here will not be permanent employees of the Management Company even if they have the status of public servant.
It should also be noted that Article 10 of Law No. 4691 explicitly stipulates that the provisions of the Public Financial Management and Control Law No. 5018, the Court of Accounts Law No. 6085, the State Procurement Law No. 2886 and the Public Procurement Law No. 4734 shall not apply to TDZs. Accordingly, the fact that the financial management, procurement methods and conditions, and audit principles and procedures of public administrations will not apply to TDZs reinforces the thesis that the “privilege of public power” does not apply to TDZs.
4. Differences of the Management Company from Municipal Economic Enterprises and State Economic Enterprises
Municipality Economic Enterprise (“MIE”) is a commercial organization with the status of a joint stock company or limited liability company established or capitalized by municipalities, as defined in the Metropolitan Municipality Law No. 5216, Municipality Law No. 5393, Special Provincial Administration Law No. 5302. The difference between an MIE and a Management Company arises in the shareholding structure of the established company and the nature of the services to be provided by the company. MIEs can be defined as economic enterprises that do not fall within the scope of State Economic Enterprises (“SEE”) and in which municipalities own more than half of the capital, either alone or jointly7. MIEs are economic enterprises established by municipalities or in which they participate in the capital and in which they own more than half of the capital, either alone or jointly, and are established to carry out certain services and activities that fall within the municipalities’ mandate. Although municipalities may become shareholders of the Management Company, there is no such obligation under Law No. 4691.
While SEEs operate according to the rules of private law, except for matters reserved by law, they must also comply with the rules of administrative law as public legal entities8. SEEs refer to enterprises and assets owned by the state or other public legal entities. They are usually large-scale enterprises operating in strategic sectors. Investments and services specified by law allow for the transfer of activities carried out by SEEs to the private sector or cooperation with the private sector.
The Management Company is not stateowned like SEEs and municipalities are not required to own more than half of the shares in the Management Company, as is the case with MIEs. Instead, it can be established and operated entirely by universities and the private sector. Therefore, the Management Company differs from SEEs and MIEs.
C. Authorities and Responsibilities of the Management Company
The Management Company is the organization responsible for the management and operation of the technology development zone, as defined in Article 5 of Law No. 4691. The Management Company was established to ensure the effective management of the TDZ and to support R&D and technology development activities.
The main duties of the Management Company include the planning and project design of the TDZ, provision of necessary infrastructure and superstructure services, execution of all services required for the TDZ, establishment of incubation centers and technology transfer offices, evaluation of R&D or design projects and allocation of space to entrepreneurs deemed appropriate. The Management Company is also responsible for managing the TDZ in accordance with the purposes set out in Law No. 4691 and the relevant regulations, preventing unlawful behavior of entrepreneurs and third parties and taking the necessary measures.
V. LAW GOVERNING THE TRANSACTIONS OF THE MANAGEMENT COMPANY
A. Management Company under Turkish Law
Article 3 /z (pp) of the Technology Development Zones Implementation Regulation, which is entitled “abbreviations and definitions”, defines the Management Company as a company established as a joint stock company in accordance with the Law and responsible for the management and operation of the zone. The duties and responsibilities of the Management Company are comprehensively regulated in Article 5 of the Law.
Within this framework, the Management Company is responsible and obliged to carry out the planning and project design processes for the Technology Development Zone, to provide all necessary services to the zone, to provide infrastructure and superstructure services, to establish incubation centers and technology transfer offices, to evaluate research and development design projects and to allocate space within the zone to entrepreneurs who are deemed appropriate, to ensure that the zone is managed in accordance with the relevant laws and regulations, to prevent entrepreneurs and third parties from acting contrary to these rules and to take necessary measures.
B. Legal Nature of Management Companies in the Light of the Decisions of the Court of Dispute
In order to determine the legal nature of the Management Company authorized in special zones, the decisions of the Court of Dispute, which is authorized to resolve conflicts of jurisdiction between courts in Turkey, should be examined. Although there is no decision on TDZs among the decisions of the Court of Dispute, it is observed that the Court of Dispute has ruled that OIZs are private law legal entities and therefore the jurisdiction for such disputes is the judicial jurisdiction. For example;
In the decision of the Court of Dispute dated 25.09.2017, numbered 2017/242 E. and 2017/517 K., it was decided that since the defendant Emirdağ Organized Industrial Zone is a private law legal entity, the transaction regarding the rejection of the plaintiff’s land allocation request should be examined by the judicial jurisdiction according to the provisions of private law and the decision of the Afyonkarahisar Administrative Court to reject the objection of jurisdiction was abolished9.
In the decision of the Court of Dispute dated 25.02.2019 and numbered 2018/880 E. and 2019/118 K., it was decided that the case should be heard by the judicial jurisdiction since the defendant OSTİM Organized Industrial Zone is a private law legal entity and the transaction subject to the lawsuit is based on a private law relationship, and the decision of Ankara 15th Administrative Court to reject the objection of jurisdiction was abolished10.
In the decision of the Court of Dispute dated 05.07.2021 and numbered 2021/301 E. and 2021/404 K., it was stated that Çorlu 1 Organized Industrial Zone is a private law legal entity and the judicial review of the transactions established by private law legal entities will be carried out by the judicial jurisdictions and the case should be heard in the judicial jurisdiction, therefore, the Organized Industrial Zone is accepted as a private law legal entity and the judicial review of such decisions should be carried out in the judicial jurisdiction, and the decision of Tekirdağ 1st Administrative Court to reject the objection of duty was abolished11.
In light of the above-mentioned court decisions, it may be interpreted that TDZs are private law legal entities and therefore disputes regarding TDZs should be resolved by the judicial jurisdiction. However, the fact that there are many decisions in which the issue of jurisdiction has been resolved before the Court of Dispute, even for OIZs for which there is an explicit regulation, raises the concern that the issue would be brought to the Court of Dispute even if there was an explicit regulation on TDZs. At this point, it should be noted that even if there is an explicit provision in Law No. 4691 stipulating that TDZs are private law legal entities and are subject to private law in their transactions, there will always be the possibility of a jurisdictional objection in a possible dispute.
C. Constitutional Court Decisions Regarding the Nature of Investment Zones Management Companies
Law No. 4691 defines the Management Company as a company established as a joint stock company and responsible for the management and operation of the TDZ. Accordingly, although it is stated that the Management Company is a joint stock company to be established in accordance with the Turkish Commercial Code No. 6102, there is no clear statement in the Law No. 4691 regarding the legal personality of the Management Company. It should be noted that the Constitutional Court, with its decision dated 16.10.2003 and numbered 2001/383 Merits and 2003/92 Decision, annulled the first sentence of the fifth paragraph of Article 5 of Law No. 4691, which states as follows: “The management company is a private law legal entity that makes or has made expropriation on behalf of the public interest”12.
Although the aforementioned provision clearly states that the Management Company is a private law legal entity, upon the application made to the Constitutional Court, Article 5 of the Law No. 4691 was annulled and the current version of the Law No. 4691 was adopted, on the grounds that private law legal entities do not have the authority to directly expropriate on their own behalf and that such a regulation is contrary to Article 46 of the Constitution. Although the relevant decision of the Constitutional Court reiterates that the Management Company is a private law legal entity by stating that the Management Company cannot have the power of expropriation, the fact that the current version of the article does not include a clear statement that the Management Company is a private law legal entity has raised questions about the legal personality of the Management Company.
In the said decision, the Constitutional Court, in a way, annulled the article on the grounds that the Management Company is a private law subject and cannot expropriate on its own behalf. In this respect, it can be concluded that the Constitutional Court has explicitly recognized that the Management Company is a private law legal entity. Although it can be interpreted that the Management Company is a private law legal entity and its transactions are subject to private law since it is clearly stated in Article 3 of Law No. 4691 that it will be established as a joint stock company, the lack of an explicit regulation on this issue and the question of whether the Management Company has the privilege of public power creates a controversy.
There are four types of investment zones, in other words special zones, in Turkey. These zones, which provide various advantages to investors, are called technology development zones, organized industrial zones, free zones and industrial zones. Technology development zones, organized industrial zones, free zones and industrial zones are structures that support economic development and have similarities between their management companies and operators. The management companies and operators in these zones aim to increase the attractiveness of the zones by providing infrastructure and services to meet the needs of investors.
While the Regulation on the Implementation of Free Zones published in the Official Gazette dated 17.08.2002 and numbered 2484913 defines free zone operators as public institutions and organizations, domestic and foreign real or legal persons authorized by the President of the Republic to make the investments required for the establishment of a free zone or the renewal and improvement of the infrastructure of an existing free zone or the new investments required in the zone within the scope of the investment commitments to be determined by the contracts to be concluded with the Ministry and to operate this zone, there is no mention of the legal nature of the free zone operator neither in the Free Zones Law dated 15. 06.1985 dated 15.06.1985 and numbered 3218, neither in the Free Zones Law nor in the Free Zones Implementation Regulation Moreover, there is no decision of the Court of Dispute regarding free zone operators. Likewise, while the Industrial Zone Management Company is defined in the Industrial Zones Law dated 19.01.2002 and numbered 4737 as a company established as a joint stock company in accordance with the relevant law and responsible for the management and operation of the zone, the Industrial Zones Law dated 19.01.2002 and numbered 4737 does not contain any phrase regarding the legal nature of the industrial zone management company. In addition, there is no decision of the Court of Dispute regarding the industrial zone management company.
At this point, it would be useful to consider the OIZs regulated by Law No. 4562. Pursuant to Article 5 of Law No. 4562, it is expressly stipulated that OIZs have the right to request expropriation proceedings and that they are private law legal entities by stating that “An OIZ is a private law legal entity that can carry out expropriation proceedings upon the application of the board of directors upon the decision of the enterprising committee or the general assembly, within the framework of the public benefit decision and the authority granted by the Ministry.” In the first version of the article, similar to the first version of the regulation in Law No. 4691, it was stated that “OIZ is a private law legal entity that can carry out or have carried out expropriation transactions within the framework of the public benefit decision and the authority determined by the Ministry upon the application of the entrepreneurial committee.” As a result of the application made to the Constitutional Court against the said regulation, the Constitutional Court annulled only the expression “can carry out expropriation transactions” in the article with its decision dated 31.10.2013 and numbered 2013/49 E. and 2013/125 K14.
As can be seen, while the provision for TDZs is almost identical to the provision for OIZs, the Constitutional Court has made different decisions regarding TDZs and OIZs. Therefore, it was necessary to investigate the court before which the lawsuits filed within the scope of the activities of OIZs were heard and compare them with those of TDZs.
VI. CONCLUSION
Investment zones are an important tool to accelerate economic development and attract domestic and foreign investments. Technology development, organized industrial, free and industrial zones in Turkey support economic growth by offering various incentives to investors. The legal nature of the management companies increases the efficiency and reliability of the activities in these zones, thus contributing to the uninterrupted progress of the economic development process.
BIBLIOGRAPHY
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FOOTNOTE:
1 https://www.invest.gov.tr/tr/investmentguide/sayfalar/investment-zones. aspx (Access date: 13.01.2025).
2 8th Chamber of Council of State, E. 2016/12066 K. 2018/2322 T. 24.04.2018.
3 13th Civil Chamber of Court of Cassation, E. 1982/6438 K. 1982/6996 T. 18.11.1982.
4 Mümin Güngör, Public Law Lessons, Ankara 2022, p. 297.
5 Efe Dündar, Teknopark Incorporated Company, Ankara 2021, p. 52-53.
6 Official Gazette dated 10.08.2016 and numbered 29797 (Access date: 13.01.2025).
7 Turgut Tan, Administrative Law, Ankara 2019, p. 185.
8 Tan, Administrative Law, Ankara 2019, p. 170.
9 Court of Dispute T. 25.09.2017, E. 2017/242, K. 2017/517 (Access date: 13.01.2025).
10 Court of Dispute T. 25.02.2019, E. 2018/880, K. 2019/118 (Access date: 13.01.2025).
11 Court of Dispute T. 05.07.2021, E. 2021/301, K. 2021/404 (Access date: 13.01.2025).
12 Constitutional Court T. 16.10.2003, E. 2001/383, K. 2003/92 (Access date: 13.01.2025).
13 Official Gazette dated 17.08.2002 and numbered 24849 (Access date: 13.01.2025).
14 Constitutional Court T. 31.10.2013, E. 2013/49, K. 2013/125 (Access date: 13.01.2025).
