During the globalization, the foreign capital investment has become more important for each and every country. A well-known expert is Robert C. FEENSTRA stated on Foreign Direct Investments (“FDI”), “FDI combines aspects of both international trade in goods and international financial flows, and it is a phenomenon more complex than either of these.”. Due to FDI contributes to economical growth, employment and technological development and exportation centered production of the country where invesments are made, the lawmaker decided to provide advantages for investors by legislation. Thus, the FDI is protected and motivated by the international treaties and national invesment regulations. Furthermore, FDI makes essential differences on developing relationships among remote countries.

In this process, The Republic of Turkey has also tried to take an active role in FDI as an invested country. After a series of studies, the legal principles of the FDI is regulated in Turkey by the Foreign Direct Investment Law  numbered 4875 on 17.06.2003. That legislation is designed as a legal guidebook for investors. FDI Law is formed from 7 articles that settle rights and obligations of international investors.

Besides the FDI Law, “Mutual Protection and Promotion of Investments Agreement” (“MPPI”) can be applied also for the rights and liabilities of foreign investors in Turkey. This mutual international agreement has been signed with other 80 countries included Turkey. However 64 of these agreements became effective which means the investors can only apply these mutual contract clauses.


The concepts of “FDI” and “foreign investor” are defined in the Article 2 of the FDI Law.

Foreign investment, in terms of word meaning, can be defined as passing of movable and immovable assets from one country to another. Thus the welfare of rich countries is contributed to invested countries.

According to Article 2 of the FDI Law, the concept of “foreign direct investment” refers to;

i) Establishing a new company or branch of a foreign company by foreign investor,

ii) Sharing acquisitions of a company established in Turkey (any percentage of shares acquired outside the stock exchange or 10 percent or more of the shares or voting power of a company acquired through the stock exchange)

The concept of foreign direct invesments is separated according to classification of assets. The first class of assets are acquired from abroad and the other class is acquired from Turkey by foreign investor. The both classes are prescribed by law in article 2.

i. Assets acquired from abroad by the foreign investor:

  • Capital in cash in the form of convertible currency bought and sold by the Central Bank of Turkey,
  • Stocks and bonds of foreign companies (excluding government bonds),
  • Machinery and equipment,
  • Industrial and intellectual property rights;

ii. Assets acquired from Turkey by foreign investor:

  • Reinvested earnings, revenues, financial claims, or any other investment-related rights of financial value,
  • Commercial rights for the exploration and extraction of natural resources.

Besides, the concept of “foreign investor” are seperated in two classes according to Article 2 of he FDI Law. The first class consists of real persons who possess foreign nationality and Turkish nationals residing abroad. The other class is foreign legal entities established under the laws of foreign countries and international institutions.


The fundamental principles which foreign investors shall be subject to, are regulated under the title of “Principles Regarding Foreign Direct Invesments” in Article 3 of the FDI Law.

Essentially, the freedom of invesment and principles of equal treatment are regulated into sub-paragraph (a) of Article 3. According to sub-paragraph, unless stipulated by international agreements and provisions of specific codes, foreign investors are free to make FDI in Turkey. The second part of the sub-paragraph is stated about equal treatment. In this way, the article indicates that foreign investors shall be subject to equal treatment with domestic investors.

As stated in sub-paragraph (b) of Article 3, foreign direct investments shall not be expropriated or nationalised, except for a public purpose and upon compensation in accordance with due process of law. Even though the restriction about expropriation and nationalisation is specifically regulated in Article 3 of the FDI Law, Article 46 and 47 of The Turkish Constitution are general principles for expropriation and nationalisation in Turkey. Moreover the Article 46 regulates that expropriation of privately owned real estate wholly or in part could be possible in accordance with the principles and procedures prescribed by the Code of Expropriation numbered 2942 dated of 4.11.1983 and the compensation for expropriation shall be pain in cash and in advance. The Article 47 of Turkish Constitution stated that private enterprises performing public services may be nationalized when this is required by public interest.

Furthermore, the principle of free transfer is stated in sub-paragraph (c) of Article 3 of the FDI Law. The article indicated that, ”Foreign investors can freely transfer abroad: profits, dividends, proceeds from the sale or liquidation of all or any part of an investment, compensation payments, amounts arising from license, management and similar agreements, and reimbursements and interest payments arising from foreign loans through banks or special financial institutions.”


The FDI Law was enacted to dispose of many problems relating to the foreign investors’ worry about their ownership rights in host countries. In line with this idea, the FDI Law correctly deals with foreign investors’ rights by latest international standarts.

The FDI Law contains many provisions of law which have been settled to make the invesment process easier in Turkey. Moreover, the FDI Law have an aim to eliminate the legal obstacles that foreign investors face while doing business in Turkey. Therefore, the lawmaker has regulated the specific articles in the Code, in order to make clear the legal issues.

One of the most important worry of foreign investors is about the valuation of non-cash capital issue which is regulated by Article 3 of the FDI Law. As stated in sub-paragraph (f) of Article 3, the principle regarding the foreign invesments is about value assesment of non-cash capital.

Non-cash capital is valued in accordance with the regulations of Turkish Commercial Law. Although, foreign investors bring the stocks and bonds of companies residing abroad to use as foreign capital, the values determined by the relevant authorities in home country. Besides, the experts appointed by courts of home country decide the value of them. Also, any other international institutions performing valuations will be accepted too.


One of the issues about FDI is determination of policies and data collection in FDI in Turkey. The power of procuration about this issue is on the Undersecretariat’s mandate. Taking into account the objectives of the development plans and annual programs, general economic status of the country, trends in international investments, the Undersecretariat is authorised to determine the general framework of policies regarding foreign direct investments.

Moreover, for establishing and developing an information system related to FDI, it has required to collect all the information from public institutions and private sector professional organisations. To transfer into practice this issue, the Undersecretariat is authorised to request statistical information on investments from all public institutions and private sector of professional organizations.

To start establishing and developing an information system related to FDI, the statistical information on foreign invesments has to be submitted by foreign investors to the Undersecretariat. As a natural consequence, the way of submission is regulated by the Undersecretariat. The procedures and principles of submission is determined by a legislation to be enacted by Undersecretariat. In addition to that, the lawmaker emphasis the importantance of protection about such an information that cannot be used as evidence or for any means other than for statistical purposes.

Hukuk Desteği (Legal Support)

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