Corona's legal effects on foreign investors in Turkey ... options and opportunities

The latest news circulating in the Arab media indicates that most of the companies in Turkey owned by Arab investors, which operate in areas such as trade, tourism, personal transport, restaurants and hospital services, are suffering from severe damage due to the outbreak of the Corona virus (Covid-19) pandemic.

There is no doubt that the Corona outbreak has damaged Turkey’s economy and markets, as has happened in various parts of the world, forcing most companies, projects and investments to stop working, or at least continue to operate with minimal capacity. It seems that the current recession will continue during the weeks and maybe the coming months, which means that these companies will face major financial difficulties day after day.

Not only are these difficulties - which companies face in light of the Corona pandemic - limited to financial difficulties; there are also legal ramifications for the massive recession that now hangs over economic life. Many issues - such as employee status, lease contracts, service purchase contracts, repayment of bank loans, and ongoing legal processes - have become a major concern for business owners.

In this article, we will try to clarify some of the main legal issues related to investors who have projects in Turkey:

1- Corona's Repercussions on the Labor Law:
All employers must take the necessary measures to prevent the spread of the virus in the workplace. Providing health and safety requirements at work is one of the basic legal duties of employers, according to Turkish labor laws.

In the event that any employee is injured in the workplace as a result of a lack of preventive measures, that injury is classified as a "work-related accident", due to which the employer has legal responsibility.

In view of this, employers must provide the necessary supplies such as disinfectants, protective clothing, masks, etc., and they must carry out a risk assessment and educate their employees, effectively monitor the implementation of precautionary measures in the workplace, restrict work trips and comply with quarantine procedures when necessary.

They should also prioritize methods of work that reduce direct face-to-face interaction among employees, such as working from home and holding online meetings.

In the event that the employer refuses to take these necessary measures arbitrarily, the employee can terminate the work contract based on a legitimate reason. The law obliges the employer to pay end-of-service indemnities and leave notifications to employees whose work contracts are terminated based on a legitimate reason.

- Corona virus outbreaks can be considered a valid cause (force majeure) based on the Turkish Labor Law, which stipulates that if employees are unable to continue work for a compelling reason, the employer must pay half of their salaries for one week, starting from the date the exhibitor appears Which is a force majeure. In the event that the force majeure effect continues after a week, the employer can cancel the employment contracts of the employees concerned.

- If the employer decides to keep the employees ’contracts and continue to pay their salaries despite the work stoppage, then the employer has the right - after the removal of the force majeure - to ask the employees to work shifts to compensate for the period during which they did not work, which may reach four months based on some conditions.

- There is a fund for employers in Turkey called "short work grant", and affected companies - with the emergence of a good reason to stop work - can apply for this grant to pay the salaries of their employees from this fund. However, some requirements must be met to obtain this grant, and employers can consult a lawyer to find out more details about this.

- According to the previous decisions of the Turkish Court of Appeal, the employer has the right to decide when the employee can use his paid leave. As such, the employer can compel his employees to take paid leave.

- With regard to unpaid leave, the employer must agree with the employees on its terms, and in the event that the employees do not agree to take unpaid leave, the employer is not entitled to force them to take it.

Moreover, even if employees accept unpaid leave, written approval must be obtained from them. Employees are also entitled to terminate their employment contracts on legitimate grounds, if the employer forces them to accept unpaid leave.

2- Corona's repercussions on the rental law:
There is no doubt that many workplaces - such as stores in shopping centers - were severely affected by the crisis resulting from the outbreak of the Corona epidemic, given the financial difficulties related to lease contracts.

To alleviate these difficulties, the Turkish Parliament passed a law on March 26, 2020 allowing tenants to postpone the rental fee that covers the period from March 01, 2020 until June 30, 2020. It is important to note that this opportunity is only available to workplaces, It does not apply to rental contracts for the purpose of housing.

3- Corona's Implications for Contract Law:
- According to the previous decisions of the Turkish Court of Appeal, major epidemics are a legitimate cause, and accordingly, the outbreak of the Coruna virus can theoretically be considered a legitimate cause in respect of fulfilling contractual obligations.

There is still no general accreditation system that is implemented by the Turkish authorities, although some other governments have begun to provide verification certificates regarding the legitimate cause of companies, for use within the framework of their contractual obligations.

Therefore, it is necessary - at the present time - an evaluation of each case separately in Turkey, to determine whether the Contracting Parties can resort to the excuse of a compelling reason, in light of the circumstances related to that case. For these reasons, one has to be very careful when using this excuse to postpone the fulfillment of his contractual obligations.

Perhaps the best way in this case is to negotiate with the other party at the outset and seek a compromise with him, and if the negotiations fail, one of the parties can apply to the Civil Peace Court in order to request that the contract be adapted to the new circumstances. Of course, some requirements must be met before doing this, and one can get details of this procedure by consulting a lawyer.

- In light of the outbreak of the Corona epidemic, many Turkish banks decided to postpone the repayment of bank loan debts, especially public banks, which provides some important flexibility for debtors.

4- Corona's Repercussions on Legal and Law Enforcement Actions:
All legal deadlines and debt enforcement (including bankruptcy proceedings) have been suspended until April 30, 2020, with few exceptions.