05 March 2021

The draft law submitted to the Parliament on 1 March 2021 (the “Draft Law”) enables the Ministry of Transportation and Infrastructure (“MTI”) to be party to the debt assumption agreements in build-operate- transfer (“BOT”) projects for which debt assumption undertaking is provided by administrative authorities with special budgets affiliated with the MTI in accordance with the Law no. 3996 on Realization of Certain Investments and Services with Build-Operate-Transfer Model (“Law No. 3996”).  

Law No. 3996 and the relevant legislation enables assumption of foreign financing and financial obligations including those arising from derivative transactions entered into in relation to such foreign financing (“Debt Assumption”) by the Ministry of Treasury and Finance subject to the procedures and rules under the relevant legislation, in the event of termination of the implementation contract prior to its expiry and handing over of the relevant investment or services to the relevant administrative authorities in the projects realized in accordance with Law No. 3996, provided that the value of such investment and service is at least TRY 1 billion.  In the event that the value of the investment and service is less than TRY 1 billion, the Debt Assumption could only be undertaken by the relevant administrative authority launching the tender subject to the terms and procedures under the relevant legislation. 

The fact that under the current legislation in force, the authority launching the tender is an administrative authority with a special budget and the Debt Assumption can only be undertaken by such administrative authority in projects with a value less than TRY 1 billion, cause bankability concerns and could result in higher financial costs while procuring financing for the relevant projects. 

Draft Law’s preamble also provides that foreign creditors have concerns about administrative authorities with special budgets not being able to cover their obligations under the Debt Assumption undertakings due to risk of having higher spending than income because of the ongoing force majeure event caused by Covid-19 in BOT projects which cannot benefit from the Debt Assumption by the Ministry of Treasury and Finance which leads to difficulties while procuring financing for such projects.  

Under the Draft Law, in BOT projects:

  • which have been tendered after 15 March 2020; however, implementation contracts of which have not been signed by the time the Draft Law enters into force;
  • for which Debt Assumption undertaking is provided by administrative authorities with special budgets such as General Directorate of Highways; and
  • the financing of which will be procured from abroad;

in addition to administrative authorities with special budgets, the MTI can also become a party to the Debt Assumption agreement to ensure performance of the obligations of the relevant special administrative authority with special budgets thereunder. In other words, in the event the Draft Law is enacted, in BOT projects with a value of less than TRY 1 billion, even if the Debt Assumption is not undertaken by the Ministry of Treasury of Finance, it would be secured by another Ministry within the general budget and Turkish Republic’s state entity, which is the MTI.


For further information, please contact:

Attorneys at Law
+ 90 (212) 236 36 44

Levent Mah. Sülün Sok. N.23
34330, Beşiktaş/Istanbul

This client alert provides very brief and generic information on certain recent legislative developments, for informational purposes only and is not intended and should not be construed as a legal advice.