TURKEY: Court setback for BOT projects

23 February 1996

A final ruling that build-operate-transfer (BOT) projects represent concessions and not commercial contracts is likely to be announced soon by the constitutional court, industry sources say. This would be another legal setback particularly for foreign companies in BOT ventures, they add.

The final ruling is likely on advice from the country's supreme administrative court, the Council of State or Danistay, say the sources. It follows convoluted legal wrangling during 1994 and 1995 in the constitutional court in cases brought by opponents of privatisation.

Concession status would rule out access to international arbitration in cases of contractual dispute, making the Danistay the highest court of appeal, the sources add. The Danistay advised the constitutional court to rule for concession status after reviewing six BOT power projects.

However, Energy Ministry officials hope the constitutional court will exempt power projects from the scope of its final ruling.

The ministry is currently considering 71 BOT power projects with a variety of energy sources, including a $1,000 million, gas-fired power plant at Aliaga near Izmir on the Aegean planned by the US together with the local Otak (MEED 9:2:96).

The officials also add that the expected ruling should not affect 16 BOT projects cleared as commercial contracts by the Danistay in May 1995. These include the DM 2,300 million ($1,500 million) 672-MW Birecik hydroelectric dam on the Euphrates, and the $750 million Izmit water supply scheme (MEED 5:1:96). Financing agreements were concluded for these prolects in the last quarter of 1995.

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