The main binding provisions on maritime trade in Türkiye are the Turkish Commercial Code (TCC), the Code of Obligations and regulations. Common disputes in maritime and transportation relations are disputes arising out of freight, bills of lading and charter contracts, collision, loss of cargo and compensation arising therefrom, insurance claims and maritime claims.
Due to its geographical location, Türkiye is a key member of the Black Sea Memorandum of Understanding (MOU) and the Port State Control Committee is the executive body of the Black Sea MOU. The Committee deals with matters of policy, finance and administration. Daily activity of the Black Sea MOU is supported by the permanent Secretariat located in Istanbul, Türkiye. Locally, incidents occurring in territorial waters in Türkiye are handled by the Port Authority, the General Directorate of Coastal Safety under the umbrella of the Ministry of Transport and Infrastructure, in addition to the Coast Guard Command under the Ministry of Interior.
Port Authorities are responsible for carrying out all maritime and maritime activities carried out within the administrative borders within the framework of national and international standards and legislation, making all kinds of measures and regulations for the safety of navigation, life, property and environment, and undertaking all kinds of measurements, inspections and technical inspections related to them, implementation and control of practices related to marine pollution, flag inspections of ships, inspection of companies providing pilotage and tugboat services, technical examination and reporting of marine accidents, tracking of all ships and marine vehicles, issuing anchoring and berthing permits and exit documents, protection of coasts, and coastal constructions, making a preliminary technical examination of maritime accidents occurring within the administrative borders and reporting to the Marine Accident Investigation Commission, ensure that seafarers can be contacted and information and documents are obtained in case of an accident. It is engaged in control and inspection, certification of port facilities by inspection, fisheries inspections, training and certification and inspection of the certificates of seafarers.
General Directorates of Coastal Safety provide ship traffic services, rescue and assistance, navigational aids, maritime communication, pilotage and tugboat services, increase navigational safety and protect marine traffic from possible adverse effects.
Coast Guard Command handles the execution of search and rescue activities within the Turkish search and rescue zone, co-ordination of medical evacuation and patient transport activities at sea and islands, security of ships carrying dangerous goods, economic patrol duties related to control at the borders of areas where sovereignty rights are exercised and at sea side borders, foreign military monitoring and controlling the activities of ships (if necessary), scientific research, exploration, drilling, cable and pipeline laying, fishing, fighting against smuggling, supervising all kinds of commercial and amateur fishing activities, and prevention of marine pollution. Furthermore, its remit encompasses inspection of illegal acts, ensuring the safety of life and property at sea, carrying out relevant procedures regarding persons entering/leaving the country illegally, conducting relevant inspections on passports, submarine security, water sports and enterprises, engaging in inspection of foreign merchant ships under international law in cases of suspected piracy, piracy on the high seas, smuggling of immigrants, human trafficking and drug smuggling, and prevention of unauthorised broadcasts from the high seas.
The Turkish Commercial Code, Turkish International Ship Registry Law and the Turkish International Ship Registry Regulation are the main pieces of local legislation applicable to ship registration. In practice, these works are carried out through the Port Authorities.
According to Turkish cabotage law, the operation of vessels in Turkish coastal waters and calling at a Turkish port must be carried out by Turkish persons. Where the owner of the vessel is a legal entity, it should be an entity incorporated under Turkish law. If such entity is a trade company, then the majority of the persons authorised to manage the company must be Turkish citizens and the majority of votes must be held by Turkish shareholders according to the company agreement. Additionally, in joint-stock companies and limited partnership companies with capital divided into shares, the majority of the shares must be registered and the transfer of the shares to a foreigner must be subject to permission of the board of directors of the company.
The prerequisite for registration in the National Ship Registry is that the ship is Turkish flagged and not registered in any other registry. However, ships brought from abroad for financial leasing are registered in a special section in the Turkish International Ship Registry. In addition to this information, temporary registration is available for bareboat charters as they have a special registry.
In order to establish a ship mortgage, the owner of the ship and the creditor must agree on the establishment of a mortgage on the ship and the mortgage must be registered in the ship registry. Contracts for the establishment of the mortgage must be made in writing. The agreement on the establishment of the mortgage will not be valid unless it is made in accordance with one of these forms.
Ownership and mortgages registries are open to the public. They can be examined by citizens by going to the relevant Port Authorities.
Applicable international conventions include the following:
In local law, there is the Law on the Principles of Emergency Response and Compensation of Damages in Pollution of the Marine Environment with Petroleum and Other Harmful Substances, and relevant regulations in the Environmental Law.
The Convention on Limitation of Liability for Maritime Claims (LLMC), 1976, and the 1996 Protocol constitute the main international convention in which the liability of the ship-owner and other related persons are regulated. The liability of the ship-owner and other relevant persons arising from collision and salvage is regulated under Turkish legislation in the Turkish Commercial Code.
The LLMC 1976 is applicable in Türkiye. The LLMC and the 1996 Protocol are stipulated in Article 1328 of the Turkish Commercial Code No 6102 and Article 37 of the Law on the Enforcement and Implementation of the Turkish Commercial Code and have been incorporated into the Turkish legal system through domestic legal regulations.
In general, under Turkish law, the limitation of liability for maritime claims is possible up to a certain amount. There are two methods envisaged for this purpose:
In the defence method, which is a less preferred method, this right can be asserted in the event that one or more claimants assert their claims before a court with the same jurisdiction. The International Convention on the Limitation of Liability for Maritime Claims dated 19 November 1976 applies to the establishment of a limitation fund. The calculations and the parties are determined in accordance with the said convention.
Although Türkiye signed the Maritime Labour Convention (MLC) during the contract meetings at the International Maritime Organization (ILO), MLC has not yet been ratified and become a part of domestic law in accordance with the provisions as to the ratification of international agreements under Turkish Law. However, the provisions of MLC are applied as customary practices in terms of interpretation of Turkish domestic legislations and by the ship classification societies such as Turk Loydu. In addition, as a result of the provisions of MLC it is applied to the countries regardless of if it is ratified or not in terms of vessels’ compatibility with conditions set therein. The rights and safety conditions of seafarers are regulated by the international conventions to which Türkiye is a party, as well as laws, regulations, and decisions of relevant authorities. There are multiple conventions of ILO, of which Türkiye is currently a party, regulating the safety and rights of seafarers, such as No 55, 73, 134 and 69. No 854 of the Maritime Labour Law regulates employment issues of seafarers exclusively and differing from No 4857 of the Labour Law. No 8049 of the Occupational Health and Safety Law also covers seafarers.
Türkiye has not approved the Hague Rules, Rotterdam Rules or Hamburg Rules. However, the Turkish Commercial Code incorporates rules that are set to adapt the Hamburg Rules and Hague–Visby Rules.
Even though the right to sue depends on the type of claim, parties who have claims according to the bill of lading can bring claims to court, such as the carrier, the consignee and the shipper.
Pursuant to the TCC, the ship-owner is liable for the negligence of seafarers and pilots in the performance of their duties, the Master’s actions, the ship, freight rescued in joint carriage, collision and salvage, and marine pollution. It is possible to hold the ship-owner liable when the cargo is damaged due to one of these issues, if the ship-owner is the contractual or de facto carrier. The carrier shall be liable for loss of, damage to, or delay in delivery of the goods provided that the loss, damage or delay in delivery occurred while the goods were in the custody of the carrier. The amendments regarding the carrier’s liability are applicable for the aspects of the transportation where the actual carrier had directly carried the cargo by itself; however, the carrier is always liable for the whole transportation process even where it was assigned to another carrier.
It is stated in the TCC that the general type of the goods, the signs required for their recognition, if necessary, clear information on whether they are dangerous goods or not, the number of parcels or pieces and their weight or the amount expressed in another way shall be written on the bill of lading in accordance with the declaration of the shipper. Also, the shipper is obliged to make full and accurate declarations to the carrier about the goods. The shipper shall be liable to the carrier for damage arising from inaccurate declarations; the shipper shall be liable to other persons who are damaged thereby only if they are at fault.
All claims arising from ship lease agreements, time charter agreements and freight contracts or from the bill of lading or its issuance, and all kinds of liability for loss or damage to the cargo are time-barred after one year. If an instruction given by the consignor requests the cessation of transportation and the return of the goods, the statute of limitations starts to run from the date of actual delivery of the goods to the consignee. In the case of carriage in parts, the statute of limitations shall run from the date of delivery of the last part. If partial carriage is agreed upon, separate limitation periods shall run for each outgoing and arriving part.
Currently, there are no international conventions applicable in Türkiye regarding ship arrest. However, the Turkish Commercial Code covers ship arrests in line with international conventions such as the Geneva Convention of 1999.
Maritime liens might be demanded for certain maritime claims which are regulated under Article 1352 of the Turkish Commercial Code and which include but are not limited to the following:
Maritime liens are applicable for maritime claims.
The ship-owner and the charterer are subject to liability for their own acts or omissions as would any other person according to the general principles of private law and are subject to general provisions pursuant to personal fault liability according to the Commercial Code. The liabilities of the ship-owner are specifically regulated in the legislation, as the ship-owner is liable to third parties as a result of fault committed by the seafarers while performing their duties. In addition to this, the ship-owner can incur debts like anyone else, and is liable for the actions of the Master, the rescued ships in joint average and the cause of freight loss, and is liable for collision and salvage. Furthermore, the ship-owner is strictly liable for marine pollution.
The option to arrest the vessel is only available for maritime claims; and, regardless of whether a charterparty has been arranged, any dispute arising from any contract for the carriage of goods or passengers on board is considered a maritime claim. If there is provision in the contract on the matter, arrest is possible. Parties’ rights to claim shall be considered according to the authorisation specified in the transportation documents and liabilities mentioned therein.
Arrest of a ship against which a maritime claim is asserted is only possible in the following circumstances:
Further, to secure a maritime claim, the party seeking an arrest is required to provide security in amount of 10,000 Special Drawing Rights (SDR). (The amount may be increased by the request of the counterparty and decreased by the request of the claimant.) In addition, evidence of maritime claims and their monetary value must be submitted to the court. After the evidence is presented and a lawsuit is filed in the relevant court, the creditor is obliged to request the execution of the decision from the enforcement office in the jurisdiction of the court that issued the decision or where the ship is located within three business days from the date of the precautionary attachment decision. Otherwise, the precautionary attachment order is automatically cancelled.
The whole procedure can be carried out with a power of attorney. Notarised documents are sufficient; and the documents must be translated. An amount for security deposit is required.
According to Article 1201 of the TCC, the carrier can claim right of retention on the bunker or the freight related to their receivables arising from the freight contract and the carrier shall use the right of retention pursuant to Articles 950–953. The right of retention continues if the goods are in the possession of the carrier.
As a result of the Turkish Commercial Code, sister-ship arrests are not possible in claims against the main ship.
Regular liens and mortgages can be imported to vessels as a way of obtaining security.
The opposing party may challenge the decision of the court regarding the arrest, and file another lawsuit claiming damages. Alternatively, the court may request the annulment of the decision if there is a deposited pledge, security or bond, or an immovable pledge or a valid bank surety. An unconditional letter from a Turkish bank issued for an unlimited period is sufficient as well.
Sales of arrested ships are regulated by the legislation of the country where the arrest ruling decision has been made. For vessels registered at the National Registry, there would be an auction process and then appraisal. The maintenance of seized goods is carried out by trustees.
A number of privileged creditors are defined by law:
After secured receivables, labour receivables within the scope of maritime claims are collected.
It is possible to appoint trustees to ships in bankruptcy cases and to manage the ship through trustees. Since bankruptcy cases are within the exclusive jurisdiction of Türkiye and bankruptcy judgments are not considered as “judgments in the nature of a writ” under the law, experience has shown that, in recognising bankruptcy judgments rendered by foreign courts in Turkish courts, the local court only recognises the enforceable financial sections of the judgment.
If the opposing party files a claim for damages, it is possible that they will be awarded for wrongful arrest.
The applicable laws and conventions are the 1974 Athens Convention, the Turkish Commercial Code, the Turkish Code of Obligations and Consumer Law. Although the time limits vary depending on the nature of the damage, in general terms, the right to sue for damages and civil liability for tort is valid for two years. The authors refer to the explanations provided in 4.2 Maritime Liens.
Turkish courts recognise and enforce law and jurisdiction clauses stated in bills of lading.
Turkish courts will recognise and enforce a law and arbitration clause of a charterparty incorporated into the relevant bill of lading.
The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is applicable in Türkiye. Under Turkish law, the recognition and enforcement of foreign arbitral awards are regulated under the provisions of Law No 5718 on Private International Law and Procedural Law.
The issue of jurisdiction shall be examined ex officio by the court, and no action shall be taken outside the competent court and jurisdiction. In cases where the lex fori is Türkiye, the location where the ship is moored/anchored becomes authorised, therefore a decision regarding the arrest can be ruled and implemented through a substantive proceeding in the local court. Finally, the designated jurisdiction/arbitration tribunal may rule on the matter.
Türkiye does not have a domestic arbitration institute that specialises in maritime claims.
The defendant may prevent the case from being examined on the merits by proving this claim within the framework of its first objections as “objection to jurisdiction” and “objection to arbitration” are considered as “first objections” that, if proved accordingly, result in the court dismissing the case without examining the merits.
Earnings derived from the operation and transfer of Turkish International Ship Registry (TISR) registered ships (over 3,000 deadweight tonnage (DWT) for imported ships) and yachts (except imported yachts) by local and foreign residents and companies established in Türkiye are exempt from income or corporate tax. In addition, purchase, sale, mortgage, registration, loan and freight contracts of these ships and yachts are exempt from stamp tax, fees and exempted from insurance transaction tax. Wages paid to employees working on ships and yachts registered to TISR, are exempt from income tax (except stamp tax) without any condition.
Deliveries of marine transportation vehicles made for this purpose to taxpayers whose activities are partially or wholly the rental or various forms of operation of marine transportation vehicles (including floating facilities and vehicles), deliveries and services related to the manufacture and construction of these vehicles and services arising in the form of their modification, repair and maintenance are exempt from tax. However, income tax is deducted from the earnings obtained through the company (corporation) if they are distributed to the shareholders. Owners of ships and yachts registered with TISR will only pay registration fees and annual tonnage fees.
According to the liability regulations under the TCC, the carrier shall not be liable for any damage caused where not arising from the intent or negligence of the carrier or its agents; also, the carrier shall bear the burden of proving that the intent or negligence of the carrier or its agents did not cause such damage. In this regard, the negligence or intent of the carrier or its agents will not be discussed in relation to the COVID-19 pandemic. Further, according to another article of the TCC, if the damage occurs as a result of the quarantine sanctions, the carrier and its agents shall not be deemed to be fault. In addition, even if there is no arrangement regarding force majeure in the contract, if there are conditions, the provisions of Article 136 of the Turkish Code of Obligations (TCO) on impossibility of performance, Article 137 on partial impossibility of performance and Article 138 on excessive difficulty of performance may be applied.
Both the first degree and the appeal courts have dealt with many matters related to the non-performance of contractual obligations due to the COVID-19 pandemic but there is no established jurisprudence regarding the force majeure of COVID-19, as, in Turkish law, each concrete case must be evaluated separately in order for a fact to be considered as a force majeure. Therefore, various court decisions accepted COVID-19 as force majeure, in cases where there was no force majeure clause in the contract, evaluating it within the scope of the above-mentioned excessive inability to perform. Finally, on the contrary, it has been interpreted that the situation created by COVID-19 does not individually constitute an obstacle to performance and that the contract should be performed.
In Türkiye, maritime communities, institutions and organisations have made evaluations, conferences and written articles on IMO 2020 and the Ministry of Transport has started to take some actions. In this respect, the Ministry has implemented the “Green Port” project to eliminate possible environmental problems and to bring more environmentally sensitive port facilities to the country. The Turkish Port Authority is responsible for the enforcement of the sulphur content limitation together with the Transportation and the Infrastructure Ministry.
In accordance with the MARPOL Convention and the Directive in Turkish legislation, the sulphur content in fuel is limited to 0.5% mass by mass (m/m) for ships not using approved pollution abatement methods and 0.1% m/m for ships sailing in SOx (Sulphur Oxide) Emission Control Areas. Vessels anchored in the administrative responsibility areas of the Port Authorities or docking at the coastal facility must immediately switch to the use of marine fuels whose sulphur content does not exceed 0.1% by mass and inspections are carried out in these areas. When the sulphur content found as a result of the analysis of the Fuel Delivery Sample is equal to or lower than the sulphur content application limits determined by MARPOL Annex VI or national legislation, the fuel is considered to meet the rules, and, when it is higher, the fuel is considered not to meet the rules.
In the event that the amount of sulphur allowed to be present in maritime fuels within the scope of the Directive is exceeded or if it is detected during the inspection that the appropriate fuel transition procedures are not applied, administrative sanctions are imposed in accordance with the provisions of the first paragraph of Article 39 of the Ports Regulation in accordance with Article 2 of the Ports Law, and, if the ship is in port, the ship is not allowed to depart until the requirements are met. Taking into account the approved pollution abatement method on board and the existence and appropriateness of the Lack of Suitable Fuel Report, the use of fuels outside the application limits is not allowed and one of the following measures is applied:
In relation to the second bulleted measure, copies of the relevant parts of the log, soundings and other fuel-related information and documents are taken. The ship’s flag state and the port authority of the next port of destination are notified and the ship is allowed to sail.
UN Security Council (UNSC) sanctions resolutions are implemented in the Republic of Türkiye by a decision of the President of the Republic. UNSC resolutions can be implemented by legislative or administrative action in accordance with their content. In this regard, the Law No 6415 on the Prevention of the Financing of Terrorism was enacted. As a single state, Türkiye’s implementation of economic sanctions are also taken in the form of general administrative decisions. Türkiye has imposed sanctions on a few governments such as Iran, Syria and Egypt.
No sanctions were incorporated directly against Russia by the Turkish government. The decision to impose any secondary sanctions has not been taken by countries that have imposed sanctions on Russia so far during the Russia–Ukraine war. Therefore, the sanctions against Russian investors and businesses have no direct impact on people in Türkiye. Should any economic sanctions or exemptions be imposed, the Ministry of Trade is the authority in Türkiye that will implement them or grant the necessary authorisations.
Türkiye continued its relations with both Russia and Ukraine since the beginning of the war and has strived to end the conflict within the scope of mediation activities between the two countries. Therefore, it would be correct to state that Türkiye, in addition to its geopolitical importance in the maritime sector, is also one of the most important characters in the political field.
The maritime sector is one of the most affected sectors as a result of the war between Russia and Ukraine. The effects of the war led to a rise in freight and commodity prices; a decline in Russian energy export revenues; constituted impediments on Russian merchant ships’ access to the international market; and led other countries and companies connected to Russia to be indirectly affected by the relevant sanctions. As a result of all economic factors, physical impossibilities, and international sanctions, the ruble suffered a significant fall against the US dollar, resulting in many companies withdrawing from the Russian market. The impact of the sanctions resulted in Russia turning to alternative markets and maritime trade routes, changing the structure of maritime trade.
One of the most obvious effects of the war on Türkiye is that Turkish-flagged ships calling at and sailing off the ports of the Sea of Azov and the Black Sea ports of Ukraine and the Russian Federation have been upgraded to ISPS Code Security Level 2. The increase in the security level resulted in a weakening of trade in these regions and ports with a negative economic impact on companies.
In addition to the economic crises experienced in the ports in the region as a result of the war, it is known that physical problems have also arisen such as the immobilisation problems experienced in the ports and the strikes by the ship personnel. Legal and physical inabilities have caused both human suffering and commercial damage and loss. Although the agreement known as the Grain Corridor Agreement, which was concluded with the initiatives of Türkiye and the UN, aimed at protecting trade, this agreement, which was effective for a short period of time, lost its effect; in the process, the opening of an alternative humanitarian corridor for the ships and personnel stranded in the Black Sea ports of Ukraine was temporarily beneficial in both humanitarian and commercial terms.
According to the Turkish Commercial Code No 6102 (the TCC), in case of war, the parties of freight contracts have the right to terminate if the ship or cargo is not considered free due to the state of war and there is a danger of seizure and confiscation. In such cases, if the freight contract is terminated before the voyage, the parties are liable only for the performance of the debts/obligations incurred up to that moment, rather than paying compensation to each other, but if the contract is terminated after the voyage has started, in addition to the receivables already incurred, the expenses incurred until the right of termination is exercised and the calculated distance of the freight also have to be paid. In addition, within the scope of Article 1210 of the TCC, in the event that a ship becomes subject to a total loss due to an unexpected event after the voyage has commenced, along with the receivables that have arisen to the carrier until that moment, the “distance of freight” must also be paid, even if the goods salvaged and secured from the lost ship are brought to another port, and the calculation of the distance of freight is regulated in the continuation of the same article.
As can be seen, the TCC provides a balance for the parties to prevent physical impossibilities, to ensure the continuation of commercial life, and to fulfil their contractual responsibilities. Currently, there are no precedents issued by the Supreme Court on the indirect effects of the war, but the practices continue in accordance with the TCC.
Cabotage Law
It is useful to mention the Cabotage Law, which is a regulation specific to Turkish legislation. According to the Turkish Cabotage Law, vessels operating in Turkish coastal water and calling at a Turkish port must fly the Turkish flag and the operations must be carried out by Turkish persons.
There are multiple conditions to be satisfied under the TCC for a vessel to fly Turkish flag. Where the owner of the vessel is a legal entity, these conditions are as follows.
In addition to the cabotage regulations, it is also useful to mention the bond requirement for foreign plaintiffs regulated under Article 48 of in Türkiye’s International Private and Procedural Law. According to the relevant article:
“Foreign natural and legal persons who file a lawsuit, participate in a lawsuit or pursue an enforcement proceeding before a Turkish court are obliged to show the security determined by the court in order to cover the costs of the proceedings and the damages and losses of the other party.”
According to the guarantee exemption regulated in the second paragraph of the Article, if the reciprocity condition is met between the countries that constitute the foreign element, that is, if a guarantee exemption is stipulated by bilateral or multilateral agreements or if Turkish citizens in a foreign country benefit from the same exemption, or if such a regulation is included in the law (the Hague Convention on Civil Procedure of 1954, to which Türkiye is a party, is an important example of this), then the obligation to pay a bond requirement for foreign plaintiffs is eliminated.
Notification in Disputes With a Foreign Element
Finally, notification to foreign countries in disputes with foreign elements should be explained. This is because notification to foreign countries is made either according to the provisions of bilateral or multilateral agreements to which Türkiye is a party, or according to the relevant provisions of the Notification Law and the Notification Regulation, and experience has shown that there are serious differences in terms of the procedures regulated in the laws and agreements in terms of the period of notification.
The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, 1965, to which Türkiye is a party, essentially provides for a simple procedure by stipulating that a central authority to which notification shall be made shall be determined in the party countries and that the notification shall be sent directly to this central authority by the issuing authority or person. Furthermore, it is also made possible to send the notification directly to the persons by mail, unless the country to which the notification is to be sent raises an objection. On the other hand, diplomatic notification, which will be applied to countries that are not party to the Hague Agreement, and which is regulated in Türkiye’s domestic law, is a much more complicated method and is carried out by sending the notification to the Ministry of Foreign Affairs by the Ministry to which the issuing authority is affiliated, and from there to the Turkish embassy or consulate. Therefore, diplomatic notification does not save time.
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Gbaltaci@baseak.com www.baseak.comEvaluation of Offshore Businesses From the Flagging Perspective
Overview and key effects of flagging on offshore businesses
The term “offshore” means “far from the shore”, describing the activities of a business entity operating in a country whose headquarters are located outside that country. Offshore can refer to a variety of foreign-based financial services, entities or accounts. Many individuals and companies profit from the favourable conditions of offshore locations such as tax avoidance, simplified regulations, reduced risks, and asset protections. The most popular offshore locations include the British Virgin Islands, Cyprus, Bermuda, Mauritius Islands and The Bahamas.
Ever-increasing mobility in offshore locations from different industries creates a critical need for physical transportation to these locations. Therefore, it is inevitable that the maritime sector would be active in the areas in question. From the perspective of the maritime industry, “offshore” refers to operations, structures, activities or areas that are located away from the coastline or in open waters, beyond the territorial waters of countries.
Due to the developing need in the sector, maritime activities have gone beyond countries’ territorial waters, giving rise to practice areas for establishing operations such as drilling and construction in offshore regions, providing energy production gains such as the exploration, production and transportation of natural resources, for instance, oil, gas, wind energy and providing support in the respective region with offshore support services.
As with every voyage, there are critical points to consider about vessels and personnel travelling to offshore areas. In addition to factors such as obtaining the relevant permits, technical preparation of the vessel, and ensuring that it is suitable, one of the most prominent points in voyages to offshore locations is “flagging”.
The flag of a vessel represents its nationality. Moreover, the flag ensures the international and maritime laws with which it complies within the open sea, and, therefore, the obligations of that vessel’s actions and the consequences that can be used to resolve a variety of ocean conflicts. The laws of the flag country that are conferred on the vessel procure various protections for the vessel, as well as enforcing treatments such as tax, certification and security. Every country is responsible for the vessels that are flying their respective flag, which imposes obligations to the nations as the flag countries are responsible for enforcing the signed international maritime treaties while ensuring the vessels conform to the international standards.
The right and conditions for “flagging” are subject to different terms and conditions of local legislation. Subsequently, each flag imposes different responsibilities on vessel-owners and crews with different practices in their respective countries. For this reason, the flag of the vessel shall be decided carefully in order to conclude a commercially profitable and safe voyage, without additional financial liabilities.
The concepts of “offshore” and “flagging” are heard more in global markets day by day, and various solutions, legislative changes, and measures for easing of operation are constantly on the agenda due to the fact that maritime operations in offshore locations are increasing rapidly. Vessel-owners as well as each vessel’s crew may face a variety of monetary fines, local enforcements, border policies, or restrictions if the issues related to “flagging” are not examined in depth.
Foreign investors and companies that desire to operate in effective and dynamic Turkish territorial waters or exclusive economic zones may face the “flagging” factor as well. For this reason, in the rest of this article, the authors will discuss the reflections on the issue under Turkish law and its solutions in addition to suggestions.
Legal background from the Turkish maritime law perspective
Turkish law requirements
In terms of engaging in maritime trade activities as a Turkish or non-Turkish company in Turkish territorial waters, the first subject to consider is the cabotage monopoly applied in Turkish territorial waters. As per the Turkish Cabotage Law No 815 (“Cabotage Law”), in principle, vessels operating in Turkish coastal waters and/or conducting carriage between Turkish ports must fly the Turkish flag, and the operations must be carried out by Turkish persons. As a result of the violation of the Cabotage Law, Masters of the vessels and non-Turkish owners of the watercraft that perform cabotage cruises between Turkish ports shall have an administrative fine imposed from TRY1,000 to TRY25,000. Vessels whose owners are non-Turkish persons shall be kept in a suitable port at their owners’ own expense until the administrative fine is collected.
Considering the increase in the population and growth rates of countries around the world, it is a fact that the energy sector still has a leading position in international trade activities. Fossil fuels, especially gas and coal, represent close to half of the total directly traded energy. Therefore, countries that own fossil fuel reserves started to feel the need to regulate exemptions in order to pave the way for energy trade on their land or coastal waters. In this respect, in terms of cabotage monopoly, there is an exemption regulated under Cabotage Law which allows vessels to operate in oil or gas research and production without flying the Turkish flag. In particular, vessels such as a Floating Storage Regasification Unit (FSRU) and a Floating Production Storage and Offloading (FPSO) unit are within this exemption and would not need to fly the Turkish flag to carry out oil and gas research operations in Turkish coastal waters. However, the permission of the Ministry of Transport, Maritime Affairs and Communications (“Ministry”) must be obtained to benefit from this exemption, for all kinds of vessels, which is not witnessed to be obtained so far as an unfortunate result of governmental strategies in practice and the Ministry tends to require the Turkish flag. To sum up, in light of the administrative actions, it is noted that flying the Turkish flag is currently essential in order to operate gas research and production in Turkish coastal waters.
There are multiple conditions to be satisfied under Article 940 of No 6102 of the Turkish Commercial Code (TCC) for a vessel to fly the Turkish flag regulated for both real persons and legal entities under separate terms. The vessels that acquired the right to fly the Turkish flag by being registered with the Turkish International Ship Registry (TISR) or Ship Registry for Specific Types of Ships must also satisfy the conditions explained below to benefit from the Cabotage Law regulations.
In case the owner of the vessel is a real person, the person must be a Turkish citizen for the vessel to fly the Turkish flag. If the owner of the vessel is a legal entity, the following conditions must be met.
Notwithstanding, there is another exemption regulated under Article 941/2 of the TCC which allows foreign vessels to fly the Turkish flag subject to certain conditions. Accordingly, “If a foreign vessel has been left to persons who may fly the Turkish flag to be operated by them for at least a year, the Ministry may authorise the vessel to fly the Turkish flag provided that the consent of the owner is obtained, the provisions of the Turkish legislation on captains and ship officers are complied with and there is no provision preventing this under the relevant foreign law. However, the person who has obtained the authorisation is obliged to prove every two years that the conditions required for the authorization continue to exist.” As a result of Article 941/2, for a foreign vessel to fly the Turkish flag, the company that will be registered as the bareboat charterer of the vessel must be a Turkish company and more than 50% of those authorised to manage the company must be Turkish citizens, and as per the articles of association, the majority of voting rights must be held by Turkish shareholders. If this Article shall be applied, the vessel will be registered under a special registry kept by the Ministry. Accordingly, a Provisional Register Certificate which substitutes the Flag Certificate will be issued by the Ministry pursuant to Article 944 of the TCC. In addition, as a result of the cabotage monopoly impacts and common practice, the captain and more than 50% of the crew members must be Turkish citizens.
A bareboat charter, which is regulated by Articles 1119 to 1131 of the TCC, is an agreement for the chartering of a vessel for which no crew or provisions are included as part of the agreement and the possession of the vessel is released to the bareboat charterer. Within the scope of a bareboat charter, no administration or technical maintenance is included as part of the agreement, the bareboat charterer obtains the total commercial control of the vessel along with the legal and financial liability. Pursuant to Article 1061 of the TCC, regarding a bareboat charter, the bareboat charterer takes the title of the vessel-owner and is deemed as the owner of the vessel in its relationship with third parties, and as a result, it is subject to the provisions of the owner’s liability.
Possible ownership structures
In respect of the explanations above, it must be noted that to carry out trade activities in Turkish coastal waters, flying the Turkish flag is required even if the vessel satisfies the conditions as per the exemptions. Therefore, it is mandatory for non-Turkish companies to build certain ownership structures to satisfy the aforementioned conditions.
In light of the common practice, the purpose of the regulations and the time and cost concerns of such trade activities, the authors are of the view that two alternative structures may be followed by non-Turkish companies to carry out trade activities in Turkish coastal waters by meeting the conditions of Cabotage Law.
Examples of employment impacts of flying the Turkish flag
“Flag state”, in a very simple definition, refers to the country whose flag the vessel flies. Vessels have the nationality of the country whose flag they are authorised to fly, and therefore jurisdiction over vessels offshore is, as a rule, exercised only by the flag state. Since the vessels that are flying the Turkish flag will be under the governance of Turkish law, there are numerous legal impacts which may arise accordingly.
Vessels over 3,000 DWT (deadweight tonnage) imported from outside Türkiye shall be registered to TISR. TISR Regulation stipulates that non-Turkish crew members are subject to the labour and social security laws of Türkiye by reserving certain exceptions arising from bilateral agreements.
In terms of employment law, in accordance with TISR Regulation, there are certain exemptions to the visa and work permit requirements for non-Turkish personnel. For example, the seafarer’s book recognised by the Ministry for foreign seafarers working on vessels registered to TISR shall replace passports, if reciprocity is observed. According to the International Labour Law regulations, under Turkish law, in accordance with Rule I/10 of the International Convention on Standards of Training Certification and Watchkeeping (STCW), foreign seafarers working on vessels registered at the TISR and operating outside the cabotage line, who have received a Certificate of Conformity from the Ministry in accordance with bilateral protocols with states, are considered within the scope of work permit exemption which is an official document issued by the Ministry of Labour that gives the foreigner the right to work and reside in Türkiye without a work permit within the validity period for the duration of the work or service contract, in principle. In accordance with the provisions of the Law on Foreigners and International Protection, foreign seafarers who have valid work permit exemption confirmation documents as of the date of entry to Türkiye are also within the scope of visa exemption to enter Türkiye.
To give another example of the exemptions, as a result of the Legislation of Protection of Value of Turkish Currency, employment contracts of seafarers may be concluded in foreign currency or indexed to foreign currency even though the salary of the regular employees must be paid in Turkish liras according to the same regulation.
However, it must be noted that these regimes may be changed as a result of the conditions of the concrete case and there are various exemptions regulated under Turkish Law based on, eg, the type of activity, rules under the bilateral protocols and nationalities of the seafarers.
Conclusion
As a result of Türkiye’s strategic position in the maritime trade and energy sectors, the importance of the conditions required for foreign individuals and companies to carry out commercial activities in Turkish coastal waters and/or with the Turkish flag has increased. Considering the details provided, current legal regulations make it almost mandatory to carry out commercial activities in Turkish coastal waters with a vessel that has the right to fly the Turkish flag and with the employment of a considerable number of Turkish seafarers.
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