Project Finance 2024 Comparisons

Most project finance deals in Türkiye are recourse or limited recourse deals rather than non-recourse. Shareholders usually act as sponsors who provide suretyship, corporate guarantees, completion guarantees and cash-injection commitments. 

In addition to the private sector entities that are shareholders of the borrower, the government may also act as a sponsor in PPP models.

Both local and international commercial banks act as lenders. Participation banks, development banks, international financial institutions, and export credit agencies also act as sole lenders or as part of a syndicate.

The public private partnership (PPP) model is encouraged in Türkiye and incentivised by the government through government guarantees for payment, tax incentives, allocation of land and minimum revenue guarantees.

The new Istanbul Airport, Yavuz Sultan Selim Bridge, Gebze-Orhangazi-İzmir Motorway, Eurasia Tunnel and 1915 Çanakkale Bridge are some of the major PPP projects realised in Türkiye in the last eight years.

According to the data provided by the Presidency of the Republic of Türkiye – Investment Office, Türkiye has implemented 207 PPP projects with a total value of USD204 billion in a variety of sectors. As Türkiye’s population is rapidly growing, its need for investment in infrastructure is also growing. It is anticipated that USD975 billion in investment will be needed in Türkiye between 2022 and 2040, with most of this need expected to arise from transportation and energy investments.

There is no single PPP law. There are several pieces of legislation governing different PPP models: build-operate-transfer and transfer-of-operating-rights models, build-operate, and build-lease-transfer.

Debt financing, the issuance of bonds, and PPP models are the most commonly used funding techniques in Türkiye. In recent years, public offerings have also been used as a financing method for companies. It is also possible to issue project-based securities for the financing of public services projects such as transportation, healthcare, energy, etc.

Apart from the financial assessments to be made with respect to the borrower and the project, key factors that need to be considered while structuring a project finance deal in Türkiye are:

• the regulatory framework applicable to the project;
• any guarantees or incentives provided to such projects by the government;
• the tax implications;
• ESG issues;
• the rights held by the lenders under the regulations of the country (especially in case of foreclosure or bankruptcy);
• foreclosure procedures for the security interests;
• available security interests and collateral;
• the dynamics of the relevant sector in the country; and
• the involvement of the sponsors – as non-recourse financing is very rare in Türkiye, the borrower’s financial strength and the project sponsors’ financial strength play an important role in the decision of the lenders.

Infrastructure Development

Türkiye’s commitment to modernising its infrastructure is likely to drive significant project finance activity. The transportation sector is poised for substantial growth, with a focus on enhancing connectivity across the country. Investments in high-speed rail networks, expansion of highway systems, and upgrades to airport facilities are anticipated. These projects will improve both domestic travel and international logistics capabilities.

Energy Transition

The Turkish government’s push towards renewable energy sources is expected to catalyse project finance in the energy sector. As the country strives to reduce its dependence on fossil fuels, there is likely to be an uptick in financing for solar and wind power installations. Additionally, investments in energy storage technologies and grid modernisation will be crucial to support this transition.

Healthcare Expansion

Türkiye’s healthcare sector is set to continue its growth trajectory, with a focus on increasing capacity and improving services. Project finance is likely to play a key role in the development of new medical facilities and the modernisation of existing ones. This expansion aims to enhance healthcare accessibility and quality across the nation.

Maritime and Logistics

Given Türkiye’s strategic geographic position, the maritime sector is primed for development and project finance opportunities in port expansion and modernisation projects are anticipated. These initiatives will be directed at boosting Türkiye’s role as a key player in international trade and enhancing its logistics capabilities.

Water Infrastructure

Water management is becoming increasingly critical, and it is anticipated that project finance will flow into water infrastructure projects. This may include initiatives to improve water supply systems, develop wastewater treatment facilities, and enhance overall water resource management across the country.

Security interests available to a lender under Turkish law (if not prohibited by case-specific regulations) are:

• a mortgage over land or a mortgage over usufruct rights over the land;
• a pledge over movable assets such as ships, aircraft, motor vehicles, equipment and machinery, etc;
• a pledge over rights and receivables;
• a share pledge;
• an account pledge on the bank accounts;
• an assignment of receivables; and
• a guarantee or suretyship.

A mortgage agreement must be signed before the land registry and be registered with the title deed.

A pledge over movable assets is regulated under different laws and registration of the pledge with a registry may be required, depending on the type of asset and whether the pledged asset will be held by the pledgor or the pledgee. For example, although the general rule under Turkish law requires that the pledged movable asset be delivered to the pledgor, pledges can be established as per the Law on Pledges over Movable Assets in Commercial Transactions (the “Movable Pledge Law”), which allows otherwise. However, it requires that the pledge agreement be notarised or signed before the Movable Pledge Registry (“TARES”) officials and be registered with TARES.

Share pledges and account pledges are not registered with central registries. Share certificates representing pledged shares must be endorsed and delivered to the pledgor. Although not a requirement for perfection, share pledges are registered with the company’s share ledger and account pledges are notified to the bank where the account is held.

Security agent mechanism is not regulated under Turkish law. Although not tested before the courts, it is also common in Türkiye that syndicates of lenders appoint a security agent to hold the security interests on behalf of all the lenders.

The concept of “floating security interests” does not exist under Turkish law. However, it is possible to pledge all present and future assets of a company under the Movable Pledge Law. The Movable Pledge Law allows parties to establish a pledge over an entire enterprise (which would include all the current movable assets) or a part of the current movable assets or future movable assets of a company.

The following registration fees are applicable, depending on the type of security, such as:

• a mortgage – a mortgage fee of 4.55 per thousand of the loan amount is chargeable by the land registries for any mortgages established;
• a pledge over movables – a registration fee of TRY1,018 is applicable for movable pledge agreements registered with TARES in 2024; and
• a ship mortgage – a registration fee of 0.1138% of the loan amount secured with the mortgage is applicable.

The primary rule in Turkish law is that assets subject to a collateral must be properly defined.

This applies to a pledge over movable assets or assignments of receivables, future assets/receivables that are ascertainable.

Turkish law allows many forms of security interest to be provided to lenders. However, certain restrictions may be applicable depending on the type of security, the asset subject to the security and the transaction itself, for example:

• loans denominated in Turkish lira cannot be covered with a foreign currency-denominated mortgage;
• a general charge over the whole enterprise under the Movable Pledge Law can only be established where the value of the movable assets of the company are not enough to cover the loan; and
• strict legal requirements must be met for personal surety, including handwritten consent from the surety specifying the amount and type of the surety (if the guarantor is married, the spouse’s consent is also required unless the guarantor is a shareholder/manager of the borrower).

How to Know That The Assets Are Free of Encumbrance

As mentioned in 2.1 Assets Available as Collateral to Lenders, a mortgage over real property and a pledge over movable assets subject to the Movable Asset Pledge should be registered with the relevant registries.

Movable assets which are not pledged as per the Movable Pledge Law (but established as per Turkish Civil Law), are not registered with a central registry. However, for perfection of such pledge the pledged assets must be delivered to the pledgor. 

In addition, security interests over assets which are subject to special registries, such as motor vehicles or ships, must be registered with the relevant registries.

In the case of a share pledge, the share ledger of the company must be checked.

Lastly, for bank accounts, confirmation from the bank where the account is held may be obtained.

Mortgage

The mortgagor must apply to the title deed registry to release the mortgage.

Pledge Over Movable Assets

In the case of pledges established as per the Movable Pledge Law, the pledgor must apply to TARES for release of the pledge within a certain period of time (15 days for Turkish pledgors and 30 days for foreign pledgors) after payment of the obligations of the borrower. For other movable pledges, the pledgor must deliver the pledged asset to the pledgee.

Share Pledge

The pledged share certificates must be delivered to the pledgee and the notation in the share ledger must be cancelled.

Suretyship

Surety terminates automatically when the principal debt is discharged. However, if the suretyship is provided by a natural person, it automatically expires after ten years from the date the suretyship agreement was entered into, regardless of whether the obligations of the debtor have been fulfilled or not.

Guarantee Agreements

Guarantee agreements terminate under the conditions specified in the guarantee agreement, and no additional formalities are required to terminate the guarantee.

As a rule, a secured lender can foreclose the security in case of default by the borrower. However, a lender secured with a mortgage or a pledge must first foreclose the mortgage or pledge before enforcing any suretyship (other than the joint and several surety) it holds, if any.

Although not regulated under Turkish Law, it is generally accepted that the security agent can also enforce the collateral it holds on behalf of all the lenders.

As a rule, choice of foreign law or foreign jurisdiction is generally valid and enforceable, provided that the finance agreement or the project agreement contains a foreign element (eg, there is a foreign party). However, any rules conflicting with Turkish public order, mandatory provisions, or general morality would not be applicable.

Examples of exceptions include:

• PPP agreements must be governed by Turkish law and referred to Turkish courts or local/international arbitration;
• consumer contracts;
• inheritance issues;
• rights related to immovable properties; and
• bankruptcy matters.

Additionally, the selection of a foreign jurisdiction does not eliminate the exclusive jurisdiction of Turkish courts.

A judgment rendered by a foreign court would be enforced by the courts in the Republic of Türkiye without re-trial or re-examination of the merits, subject to the following conditions being fulfilled:

• the judgment has become final and binding;
• the judgment is not deemed to have been conducted by a court with no relevance to the parties or the subject matter of the judgment;
• there is reciprocity between the Republic of Türkiye and the jurisdiction of the judgment;
• the subject matter of the judgment does not fall under Turkish courts’ exclusive jurisdiction;
• the judgment is not against Turkish public policy rules; and
• due process is conducted under the rules of the jurisdiction of the judgment.

An arbitral award can also be enforced in Türkiye. Türkiye is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”). Thus, a foreign arbitral award rendered in a seat in a country that is a signatory of the Convention will be recognised and enforced by the Turkish courts in accordance with the Convention, without re-examination of the merits of the case, provided that the subject matter of the award is a commercial dispute and the award is not against Turkish public policy rules.

As to arbitral awards outside the scope of the Convention, Turkish International Private Law and Procedural Law (the “International Private Law”) applies. The International Private Law sets forth very similar conditions to those of the Convention regarding conditions of enforcement of arbitral awards.

In the case of a legal action or proceeding, to ensure the enforceability or admissibility in evidence of a financing agreement before the Turkish courts, the following must be fulfilled:

• a certified Turkish translation of non-Turkish documents must be submitted;
• statutory court fees, expenses and applicable statutory charges and stamp taxes must be paid;
• lawyers’ fees must be paid in accordance with the most recent tariff in force at the time of judgment, as published in the Official Gazette; and 
• a security for costs (cautio judicatum solvi) must be deposited, at the court’s discretion, unless the court waives such requirement, where the plaintiff is a national of a contracting state of the Hague Convention; or a national of a state that is a party to a bilateral treaty with Türkiye, containing a waiver of the cautio judicatum solvi requirement.

Foreign lenders in Türkiye can grant loans to Turkish companies. As a rule, these loans should be utilised through a Turkish intermediary bank.

However, there are certain restrictions on foreign currency loans to be obtained by Turkish entities. Turkish entities can obtain foreign currency loans provided that they have a foreign currency income. Certain entities and loans are exempt from this restriction, including:

• public authorities and institutions;
• Turkish banks, and other financial institutions;
• Turkish entities with an outstanding loan balance of USD15 million or more at the time of utilisation;
• entities holding investment incentive certificates or financing certain machinery and equipment listed under relevant regulations;
• winning bidders of tenders in Türkiye which have been internationally announced;
• contractors of defence industry projects approved by the Presidency of the Defence Industry;
• entities conducting PPP projects; and
• entities that can prove their future foreign currency income based on their export activities.

If a Turkish entity with foreign currency income has a total loan balance of less than USD15 million, it cannot utilise a new foreign currency loan that is greater than its foreign currency income generated in the last three financial years.

There are no restrictions or special requirements regarding the granting of securities or guarantees to foreign lenders.

However, a Turkish guarantor or surety must notify the Ministry of Treasury and Finance if it provides a foreign lender with a guarantee or suretyship.

A Welcoming Environment for Foreign Investment

Türkiye offers a favourable climate for foreign direct investment (FDI), characterised by an open and liberal legal framework. The country’s FDI regime is founded on the principle of freedom to invest, with foreign and domestic investors treated equally under the law.

Key Features of the Investment Landscape

• Equal treatment: foreign investors enjoy the same rights and obligations as domestic investors, with few restrictions on acquisitions.
• Constitutional protection: foreign investments are safeguarded by the Turkish Constitution, the Foreign Direct Investment Law, and related regulations.
• International agreements: Türkiye is party to numerous bilateral investment treaties and double taxation agreements, enhancing investor protection.
• Streamlined processes: the country has implemented measures to simplify administrative procedures and strengthen intellectual property rights.

Strategic Sectors and Incentives

The government of Türkiye has identified key sectors for investment and offers comprehensive incentive programmes:

• Priority areas – finance, manufacturing, energy, ICT services, and transportation infrastructure are among the sectors attracting significant FDI.
• Incentive programmes – the country provides general, regional, strategic and project-based investment incentives to attract foreign capital.

Regulatory Considerations

While the investment regime is generally open, certain sectors have specific regulations:

• Banking and finance – this is subject to approval from the regulatory authorities.
• Energy – licensing requirements apply for generation and distribution activities.
• Real estate – some restrictions exist for foreign ownership in specific areas.

Future Outlook

Türkiye continues to enhance its investment environment as follows:

• the government is focused on aligning with international standards and digital transformation;
• efforts are under way to simplify bureaucratic procedures and strengthen legal assurances for investors; and
• a project-oriented incentive system is being developed to further attract quality FDI.

By emphasising these aspects, Türkiye aims to position itself as an attractive destination for foreign investment, leveraging its strategic location, young workforce and growing economy.

Freedom of Capital Movements

Türkiye maintains a generally liberal approach to foreign investment, including the transfer of funds. The country’s policies aim to facilitate the free flow of capital for foreign investors.

Repatriation of Profits and Capital

Foreign investors in Türkiye enjoy the following rights:

• Profit repatriation – investors are free to transfer profits, dividends and other investment-related income abroad.
• Capital repatriation – the transfer of proceeds from sales, liquidation payments or compensation is permitted.
• Loan repayments – capital and interest payments on external loans can be freely transferred.

Transfer Mechanisms

• Transfers are typically conducted through banks or other authorised financial institutions.
• There are no restrictions on the amount of foreign currency that can be brought into Türkiye.

Currency Considerations

• While the Turkish lira is fully convertible, most international transactions are denominated in US dollars or euros.
• Banks in Türkiye are allowed to lend and borrow in foreign currencies.

Recent Regulatory Changes

It is important to note some recent developments that may affect foreign exchange transactions:

• a settlement delay has been imposed on large foreign exchange purchases by individuals;
• the bank transaction tax on individual foreign exchange purchases has been increased; and
• limits have been placed on certain foreign exchange derivative transactions by local banks.

Sector-Specific Considerations

While the general policy is liberal, some sectors may have specific regulations:

• in strategic sectors like energy or banking, there might be additional oversight on large transfers.; and
• exporters are required to convert a portion of their foreign currency revenues into Turkish lira.

Compliance and Reporting

• Foreign investors should be aware of notification requirements for significant capital movements.
• Compliance with anti-money laundering regulations is essential for all international transfers.

Outlook

Türkiye continues to maintain its commitment to facilitating foreign investment and ensuring the free movement of capital. However, investors should stay informed about potential policy adjustments aimed at managing currency stability and economic goals. By highlighting these aspects, foreign investors can gain a clear understanding of Türkiye’s approach to capital movements, which generally supports the free flow of funds while maintaining necessary regulatory oversight.

Offshore Account Policies

Turkish businesses generally have freedom to establish and manage foreign currency accounts outside the country. This aligns with Türkiye’s overall approach to international financial transactions, which aims to support business growth and global competitiveness.

Corporate Considerations

When it comes to offshore accounts, Turkish companies should keep several factors in mind.

Regulatory landscape

While maintaining offshore accounts is permissible, this is governed by Türkiye’s foreign exchange laws. Companies should familiarise themselves with these regulations to ensure compliance.

Transparency requirements

Businesses must be prepared to disclose information about their offshore accounts to the Turkish authorities. This typically involves reporting significant transactions and including these accounts in financial statements.

Business rationale

Companies should be prepared to demonstrate that their offshore accounts serve legitimate business purposes, such as facilitating international trade or managing global investments.

Currency management

Offshore accounts can play a crucial role in a company’s currency risk management strategy, helping to mitigate exchange rate fluctuations.

Financial planning

These accounts can be valuable tools for managing international cash flow and optimising global financial operations.

Evolving Regulations

Türkiye’s financial landscape is dynamic, with occasional adjustments to currency policies. While these changes have not eliminated the ability to hold offshore accounts, they may influence how companies utilise them:

• some transactions might require conversion to Turkish lira; and
• certain types of foreign exchange dealings may face limitations.

Best Practices

To make the most of offshore accounts while staying compliant, companies should:

• regularly review their offshore account practices;
• maintain detailed records of all transactions; and
• stay informed about any regulatory changes that could impact their financial strategies.

By leveraging offshore foreign currency accounts responsibly, Turkish companies can enhance their global financial flexibility. However, it is crucial to balance this freedom with adherence to local regulations and transparency requirements. This approach allows businesses to optimise their international operations while maintaining good standing with the Turkish financial authorities.

Financing or project agreements (other than certain security agreements as explained in 2.5 Restrictions on the Grant of Security or Guarantees and certain agreements of PPP projects) are not required to be registered or filed with an authority to be valid and enforceable. However, there are certain reporting/notification requirements:

• Certain Turkish entities are obliged to report their borrowings from local or foreign financial institutions periodically to the Turkish Central Bank. Failing to meet this obligation does not affect the enforceability of the financing agreements.
• A Turkish guarantor or a surety must notify the Ministry of Treasury and Finance of the guarantee or the suretyship it has provided to a foreign lender.

The ownership of land does not require a licence. However, acquisition of ownership or rights in rem over a real property by foreign entities are subject to certain restrictions.

The right of mining and exploitation of natural resources (eg, minerals, oil and gas, or natural waters) are subject to obtaining a licence. Foreign private entities may acquire licences to search for, extract, sell, import and export petroleum. However, foreign entities cannot hold licences with respect to other natural sources.

The security agent, trust and parallel debt mechanisms are not regulated under Turkish law.

Although there are some court precedents recognising the concept of an owner in trust (ie, inançlı işlem) in respect of immovable property, the concept of a security trustee or security agent is not really recognised under Turkish law. There does not appear to have been any test of the concepts of a security agent or parallel debt before the Turkish courts. 

Having said that, it is not uncommon to use parallel debt and/or security agent structures in financing agreements in Turkey.

Under Turkish law, creditors secured with pledges and mortgages have priority over the amounts recovered from the sale of the pledged/mortgaged assets. Ranking of the creditors depends on the type of security:

• In the case of a mortgage, a degree system is applicable. The mortgagee holding a preceding degree has priority.
• In the case of a pledge over movable assets, as a rule the priority is determined in chronological order. For example, for assets pledged as per the Law on Movable Pledges in Commercial Transactions No 6450, the parties may decide to apply the degree system. In addition, security interests to be established over certain assets are governed by the rules applicable to immovable assets (eg, ships) and thus they are subject to a mortgage and a degree system.

Contractual subordination is neither regulated nor prohibited under Turkish law. Therefore, contractual subordination is considered valid under Turkish law but merely as a contractual obligation between the parties. In the case of a foreclosure or bankruptcy, the rules of the Execution and Bankruptcy Law (Law No 2004) will apply and supersede any agreement between the parties in terms of subordination of receivables.

To mitigate this obstacle, an assignment of receivables agreement is often signed between the parties. Subordinated creditors assign their receivables to senior creditors based on certain conditions.

Foreign companies can conduct business in Türkiye without establishing a local SPV or a branch in Türkiye. However, in certain cases such as energy production licence holders, mining rights holders, or PPP companies, an SPV or branch must be established in Türkiye.

Typical legal forms preferred by investors are a joint stock company or a limited liability company. There may be specific requirements under the applicable laws or tender specifications of PPP projects for the project company to be established in the form of a joint stock company.

Under Turkish law, company reorganisation procedures are governed under the Bankruptcy Law:

• A concordat – this is a procedure where the bankruptcy of the debtor is avoided by providing the debtor with a chance to pay its debts under a plan, by providing a grace period to the debtor. During the grace period, no action can be taken by the creditors against the debtor. A concordat can be requested either by the borrower or the creditor and it is granted by the court.
• Financial restructuring – this procedure is similar to a concordat. However, it can only be requested by the debtor. The debtor invites its creditors to agree on a plan for payment of its debts. Such plan must also be approved by the relevant court as being effective against all creditors and prevailing over existing agreements.

If a borrower is going through a concordat, its creditors cannot take any action to collect their receivables, as explained in 6.1 Company Reorganisation Procedures. Clauses under the agreements, stating that requesting a concordat is an event of default, are not valid and binding under Turkish laws.

Where a borrower is declared bankrupt, all assets of the borrower are transferred to the bankruptcy estate (iflas masası) for liquidation by the bankruptcy administration. Thus, the lenders can collect their receivables only through the bankruptcy administration and in the order mentioned under the Bankruptcy Law (see 6.3 Priority of Creditors). At the time of declaration of the bankruptcy, the debts of the borrower become due and payable, other than the debts secured with a mortgage.

In the case of a technical insolvency, under certain circumstances it may be necessary to apply to a competent court for a declaration of bankruptcy.

In the case of the insolvency of a debtor the following ranking applies:

• secured creditors;
• the state’s preferential right to collect public receivables in connection with the property;
• privileged creditors –
1. receivables of employees or receivables arising from family laws;
2. receivables arising from guardianship and trusteeship; and
3. privileged receivables set forth under specific laws; and
• all other receivables. 

In the case of bankruptcy of an obligor, all obligations of such obligor become due. The creditors must register their receivables with the bankruptcy administration, to be able to collect their receivables from the liquidation of the assets and to be entitled to certain rights provided to the creditors.

It is also possible that certain transactions of the obligor executed with the lender before the bankruptcy will be annulled. For example:

• any transaction executed within the five years prior to the commencement of bankruptcy/foreclosure proceedings if they are conducted in bad faith to harm the creditors, and provided that the counterparty to the transaction has not acted in good faith; and
• any payments made for undue debts, and any pledges established to secure claims other than those established through a prior undertaking of the debtor, made within the year prior to the commencement of bankruptcy proceedings or the insolvency of the debtor where the counterparty to the transaction cannot prove that it was unaware of the debtor’s financial situation.

Entities that are not subject to bankruptcy laws include government bodies, associations that do not carry out commercial activities, associations working for public affairs, foundations spending most of their income on public affairs, and entities which are being privatised by the government. There may also be other entities that are exempt from bankruptcy under the special laws applicable to them.

According to the Insurance Law, Turkish residents’ insurable interests located in Türkiye must be insured in Türkiye by Turkish insurance companies, save for the following insurance, which can be arranged abroad:

• transportation insurance for export and import goods;
• aircraft, ship and helicopter insurance where the aircraft, ship or helicopter has been purchased with a foreign loan, provided that the insurance is limited to the foreign loan amount and the duration is only until the foreign debt is repaid;
• boat insurance where the boat has been bought abroad via financial leasing, provided that the insurance is limited to the duration of the financial leasing period;
• liability insurance arising from the operation of ships;
• life insurance; and
• personal accident, incidental, health and motor vehicle insurances for the period that the insured persons temporarily reside/stay outside Türkiye, provided that the insurance is limited to this period.

Insurance proceeds can be payable to foreign creditors. It is also possible to establish a pledge over insurance proceeds for the benefit of foreign creditors.

Payments to Turkish financial institutions are not subject to withholding tax.

Likewise, no withholding tax is applicable to interest payments made to foreign financial institutions.

Other payments may be subject to withholding tax, depending on the double taxation treaty between Türkiye and the country of residence of the lender.

Tax Considerations in Respect of Project Finance Loans

Banking and insurance transactions tax (BITT) and the Resource Utilization Support Fund tax (RUSF) are applicable to loans granted to Turkish entities.

BITT is payable by Turkish banks and is applicable to the earnings from their transactions, such as interest and commissions at a rate of 5% (exemptions or reduced rates may be applicable, depending on the transaction).

RUSF is applicable to foreign financial institutions. The rate and calculation of RUSF depend on the maturity of the loan and whether it is foreign exchange denominated. For example, foreign currency loans extended by foreign financial institutions with a maturity of less than one year are subject to RUSF at a rate of 3%, and it is calculated on the principal amount. If the maturity of such loan is three years or more, the rate decreases to 0%. 

Documents with respect to loans granted by banks, foreign financial institutions and international institutions (ie, documents relating to granting, securing, repayment, transfer and assignment of receivables arising from such loans) are exempt from stamp tax.

There are no restrictions regarding interest rates applicable to commercial loans (eg, project finance loans) provided by the banks.

As a rule, parties can choose a foreign law to govern project contracts if there is a foreign element (eg, if one of the parties is non-Turkish). However, as per the relevant regulations, the implementation agreements under build-operate-transfer and build-lease-transfer models must be governed by Turkish law.

Parties usually prefer to choose Turkish law, or the laws of the contractor, as the governing law of EPC contracts. English law or Swiss law is also often the law of choice.

Although it depends on the transaction, if all the lenders are Turkish, the loan documentation is usually governed by Turkish Law. If there is an international lender, English law is commonly preferred. 

The governing law of the security documents is determined according to the type and place of the collateral assets, which is mostly Türkiye in case of a Turkish borrower. However, certain security documents, such as guarantees and share retention agreements, are usually governed by English law.

Although a foreign law may be selected, as explained in 3.2 Foreign Law, Turkish law is generally applicable in terms of security interests.

The establishment of a mortgage, share pledge over a Turkish entity, account pledge over a bank account in Türkiye and pledge over a movable property in Türkiye are subject to Turkish law.