Expropriation
"What protections exist against expropriation for foreign investors in Turkey?"
Quick Answer
Expropriation in Türkiye is governed by the Constitution (Art. 46) and Law No. 2942, allowing state acquisition only for public interest with fair compensation; foreign investors also benefit from Foreign Direct Investment Law No. 4875 and Bilateral Investment Treaties (BITs).
Expropriation and Investment Protection in Türkiye
Expropriation in Türkiye is primarily governed by the Turkish Constitution (especially Article 46) and Expropriation Law No. 2942. These rules allow the state to expropriate private property only for public interest, following a statutory procedure, and subject to compensation and judicial review. For foreign investors, additional protections may arise under the Foreign Direct Investment Law No. 4875 and applicable bilateral investment treaties (BITs).
Key Points to Remember
- Expropriation must be based on public interest and follow the statutory procedure (Constitution Art. 46; Law No. 2942).
- Compensation and valuation are central issues and are frequently litigated before Turkish courts.
- Owners have procedural rights, including notice, objection, and the right to challenge valuation and other aspects in court.
- Foreign investors may also rely on treaty-based protections (e.g., BIT standards and dispute settlement routes) depending on the investment structure.
Practical Risk and Dispute Considerations
Key risk points include how the asset is held (direct ownership vs. SPV), the documentation of investment value, and whether the measure could be argued as direct or indirect expropriation under treaty standards. Early evidence collection (valuation reports, cash-flow records, permits, correspondence) often becomes decisive in compensation disputes.
Foreign investors should focus less on ‘reciprocity’ (which is mainly a property-acquisition issue) and more on (i) whether a BIT applies, (ii) whether the investment qualifies under that BIT, and (iii) what dispute resolution options exist (local courts vs. treaty/contract-based arbitration, if available).
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