Turkey: Rage of reason

Lawyers say investors remain resolute despite a summer of demonstrations in Istanbul and the impact of the Syrian conflict on Turkey’s border regions

After several years of stability and consistent, solid economic growth, the news in June coming from the streets of Istanbul took some by surprise. For several weeks this summer, and continuing intermittently ever since, protestors have been taking to the streets, demonstrating initially against development plans in the centre of the city and since then in support of democracy.

Turkey protest2

The protests saw the arrest of a number of lawyers demonstrating outside Istanbul’s courthouse and the Istanbul Bar Association also got involved by organising its own demonstration.

Meanwhile, the Syrian conflict is intensifying on Turkey’s southern borders, with refugee numbers rising. In mid-September a car bomb exploded on the border between Turkey and Syria, killing several people and wounding many more.

Politically, therefore, it has been a torrid summer for the country. Any political tension always has the potential to unnerve investors, but Turkey’s corporate lawyers report a fairly minimal impact on business.

 Damage limited

Hergüner Bilgen Özeke co-managing partner Ender Özeke says the protests have affected some sectors, but to a limited extent.

“Having said that, living in this part of the world we’re not unaccustomed to these things,” he adds. “Business confidence is affected by the lack of predictability and in these types of circumstances we see some deals being called off because the investor doesn’t have the foresight to go ahead and close the deal.”

He points to sectors such as tourism and hospitality in particular as being affected by the turmoil, as well as fast-moving consumer goods.

Others believe the impact of the protests followed by the Syrian situation was confined to general uncertainty on the part of clients.

“The legal market is driven by foreign investment and neither of these things has had a demonstrable impact so far on inflows into Turkey and therefore the work,” says Bener Law Office partner Win Michaelsen. “We probably answered a few queries about whether there was a long-term change from what was considered a more stable market to a less stable one.”

Investment into Turkey traditionally has come from the West, but in recent years investors from a wider range of countries – including Russia, other parts of the Middle East and the Far East – are starting to come in greater numbers. Michaelsen believes this trend has accelerated in the past 18 months or so, although he does not necessarily attribute it to the instability, but rather a change in the world economy.

“That market tends to be less concerned about political instability because they’re from places that are either more unstable or they’re accustomed to the political risks
involved in an emerging market – money from Europe and the US tended to look a bit more cautiously at these events,” he points out.

Ismail Esin, managing partner of Baker & McKenzie’s associated Turkish firm Esin Attorney Partnership, says: “Turkey’s a democratic country and, of course, in democratic countries things happen from time to time and may repeat themselves. In the end, the Turkish economy and the world economy are still ongoing.”

The main danger is of lasting reputational damage, says Noyan Göksu of Göksu Avukatlık Bürosu, Pinsent Masons’ local associated firm.

“What I’m worried about most is the question of reputation,” says Göksu. “Investment decisions are made by human beings. Whether it feels safe and investment-friendly to board members isn’t something you can decide by looking at metrics and ranking reports.”

 A relatively safe haven

Mehmet Gün & Partners managing partner Mehmet Gün says that despite the demonstrations, Turkey is still seen as a safe place to do
business.

“The politically unstable countries are looking at stable countries and Turkey offers this,” he adds. “Economically troubled countries are looking for growth areas and they’re looking at Turkey for this kind of opportunity to build their business.”

Gün says that the Middle East is increasingly a source of money for Turkey, with the government making renewed efforts to highlight the jurisdiction’s historical and cultural links with its neighbours.

“What we’ve seen in the past couple of years is that the Arab Spring has made Arabic people realise there’s a strong cultural ally nearby, and that’s Turkey,” Gün asserts.

For Esin, the recent addition of Dubai to Bakers’ global roster of offices is a boon, with plenty of links to explore and clients in common, while Özeke points to Iraq as another source of money.

He notes that in 2003 Iraq was as unstable as Syria is now, but as the country has stabilised and begun to capitalise again on its natural resources it has grown in importance for Turkey. In particular, Özeke says slowly improving relations between Turkey and Kurdistan are a positive thing.

“Iraq now is one of our largest trading partners and also a significant target for outbound Turkish investment because of the huge demand that was pent up there,” he adds.

 Pick-up in work

Most firms report a pick-up in work after the summer, although Esin puts this down to normal activity rather than having any connection with the protests. He says there has been no significant variation in the proportion of revenues for his firm – which traditionally relies on M&A work for about 60 per cent of turnover – and also that no deals have been cancelled since June.

Özeke reports a few cancelled deals, but in contrast says finance work has picked up.

“On the financing side we’re seeing pretty much activity as usual,” he says. “International financing has been scarce for a long time for a number of other reasons, but Turkish banks are lending. Over the summer we had a record number of new deals on the financing side.”

Contentious work is also continuing, says Göksu, although he adds that some infrastructure projects have been delayed.

“Litigation never stops – you always have litigation and arbitration, but in these times the amount of litigation increased,” he adds.

For Gün, real estate and construction work is an area of potential. “The country is dedicated to renewing its structure of house and office buildings,” he says. “We’re seeing numerous projects transforming the cities. Istanbul is gaining height.”

 Middle-class revolt

Of course, city transformation was one of the catalysts of the summer protests, with the legal process surrounding construction work in Taksim Square and Gezi Park in the centre of Istanbul the reason for the demonstrations beginning (see ‘What the protests were all about’, top right). However, the force used by police against protestors, coupled with a viral social media campaign, soon meant the demonstration began to touch on wider, deep-seated issues with democracy in Turkey.

What differentiates the Turkish protests from those seen in other parts of Europe in recent times, including the 2011 summer riots in London or the unrest in Paris this summer, is that most protestors were well-educated professionals. Lawyers, doctors and bankers came out to join the demonstrations and all the firms interviewed for this piece had staff who joined in.

“The demonstrators in Turkey are well-educated people, they’re elite, modern and secular,” says Gün. “Lawyers from all firms have gone to the demonstrations. I sat here in the finance centre in Istanbul and knew that people left work at the end of the day and went down to Taksim Square.”

“In June many people were demonstrating at night and going to work the day after,” adds Esin.

Özeke notes that overseeing staff during the protests was tricky from a law firm management perspective, as his lawyers joined in. 

One Hergüner associate has an extra-special memory of the demonstrations, as she received a marriage proposal in Gezi Park.

Although after a month or so the protests became less frequent, the impact is likely to be long-lasting. Presidential elections are due in early 2014, with the outcome uncertain.

“There’s a feeling of demand from the public in terms of policies and that might have an impact on the economy,” says Özeke.

“To the extent the protests have a positive impact, the investment community benefits in the sense that everybody benefits,” adds Michaelsen. “A transparent democracy with more checks and balances in the long run bodes well for free markets and free expression.”

Gün says the government has looked closely at the protests and their cause, and is intent on learning lessons. 

“In a couple of years’ time we’ll see a lot of improvement in our democratic life,” he says.

Noisy neighbour

Syria is a different matter. It has little effect on the domestic life of Turkey, but as a foreign policy issue it is key. Prime minister Recep Tayyip Erdogan has said he supports military intervention.

Those in Istanbul point out that Turkey is so big geographically that Syria is pretty distant for the majority of urban Turks.

“People in the more economically developed western part of Turkey are hundreds, if not thousands, of miles from the frontier,” notes Özeke.

However, there is an impact for companies doing projects or business over in the south-eastern part of the country, which is geographically closer to Syria and in a less stable part of Turkey. At Bener, partner Maria Çelebi advises clients on corporate immigration issues, which she describes as an “increasingly complicated area of law in Turkey”.

Celebi
Celebi

“If you’re an established company that has a project on the eastern border you’re dealing with more issues of concern and security planning,” Çelebi says.

She works alongside security officers employed by businesses to explain where the legal issues are in running a project in these parts of Turkey, especially where expatriate staff are involved.

Çelebi was also called upon during the Gezi Park protests, due to the fact that the same government ministry controls immigration and security.

“Through the Gezi demonstrations that same core of police officers were on the streets controlling demonstrations,” adds Çelebi. “We had a tremendous backlog whereby foreigners were having difficulties getting permits to remain or travel.”

She adds that clients are still dealing with the ramifications of the demonstrations.

Security could still be an issue in Turkey’s urban centres if the Syrian situation gets worse. In the past Turkey has suffered terrorist attacks, and some are concerned that taking military action in Syria could prompt a recurrence of this.

 Optimism

But most lawyers are confident that the jurisdiction’s stability, built up over the past two decades, will support growth and protect against
regional turmoil.

“I’ve been around a while and I’ve been through many turbulent times in this country,” says Esin. “The people are hard-working and smart. This country has faced many difficulties and tough challenges, and will survive any challenge in the future.” 

“There’s no threat against investors,” adds Gün. “Turkey will be more and more popular. Turkey is the door that opens to the Western world.” 

He concedes that Turkey must continue to support its human capital and find a way to balance its export deficit, particularly in energy, but, overall, takes a positive view of the future.

Local firms believe the arrival of international firms will continue, although the stream has slowed in the past few months.

“The legal market is transforming and there are a number of challenges, but at the same time there are more opportunities,” Özeke says. 

He is one of those calling for a revision of Turkey’s bar rules which still restrict what local firms can do when it comes to marketing themselves.

Partners at Bener say international firms are still approaching domestic outfits. Michaelsen thinks the influx has had a significant impact on competition in recent years.

“It’s more competitive in terms of pricing and winning business as a result of more international firms, and there’ll still be a trickle of firms coming in over the next year or so,” he adds.

Pinsent Masons is one of the latest firms in, launching its Istanbul office in association with former Hergüner arbitration lawyer Göksu. Göksu’s firm has a focus on infrastructure, energy and litigation which he says sets it apart from the bulk of internationally focused practices in Turkey.

“Will there be more firms that offer something new – that’s the question,” he suggests. “I’m not sure we need another M&A law firm or another corporate finance law firm.”

Gün reports that his firm’s decade-long effort to “institutionalise” itself has paid off and he feels confident it can compete with the internationals.

Uncertainty in the market remains and will do until the Syrian situation is calmed, but in the meantime Turkish lawyers are optimistic their clients have not been put off and that the work will keep flowing.

What the protests were all about

Turkey protest

Last year, Turkish prime minister Recep Tayyip Erdogan announced that the government planned to redevelop one of Istanbul’s squares – Taksim. The plans proposed extensive building work and the reduction in size of nearby Gezi Park, a sycamore-lined green space in the centre of Istanbul’s urban sprawl.

The announcement prompted widespread outrage because of the process used to approve the plans. There was limited public consultation and at the end of May 2013 bulldozers moved in, even though a judicial review application was still in the courts.

As soon as the building work began a small group of protestors occupied Gezi Park. Police moved in to shift them, using tear gas and water cannons, which sparked a much bigger protest that lasted until the end of June. The occupation expanded into Taksim Square and there were repeated clashes between police and protestors.

On 15 June police cleared Gezi Park and cordoned off the square the next day. While protests tailed off there have been several clashes since.

Last year, Turkish prime minister Recep Tayyip Erdogan announced that the government planned to redevelop one of Istanbul’s squares – Taksim. The plans proposed extensive building work and the reduction in size of nearby Gezi Park, a sycamore-lined green space in the centre of Istanbul’s urban sprawl.

The announcement prompted widespread outrage because of the process used to approve the plans. There was limited public consultation and at the end of May 2013 bulldozers moved in, even though a judicial review application was still in the courts.

As soon as the building work began a small group of protestors occupied Gezi Park. Police moved in to shift them, using tear gas and water cannons, which sparked a much bigger protest that lasted until the end of June. The occupation expanded into Taksim Square and there were repeated clashes between police and protestors.

On 15 June police cleared Gezi Park and cordoned off the square the next day. While protests tailed off there have been several clashes since.

A lawyer on the barricades

At the end of May lawyer Yegâne Güley joined the protests in Taksim Square. She wrote about her experiences on TheLawyer.com; this is an edited extract.

Having seen tear gas and police violence on peaceful demonstrations on television and social media, in the night of 29-30 May some 15 to 20 tents were put up in Gezi Park to continue the vigil in case bulldozers appeared in the wee hours again.

Sure enough, on 30 May at 5am police went into the tented area with tear gas and pushed out the environmentalists, after which police burnt their tents. This was captured on camera and found itself in thousands of peoples’ Facebook and Twitter timelines. After work, thousands went to Gezi Park and stayed overnight to stand up to police violence along with the environmentalists. I was one of them.

We stayed up all night. Around 5am police started to interfere again, with heavy use of tear gas, and people were once more pushed out of the park. This time people were throwing stones and bottles at the police as they charged into the park. Quickly, the park was emptied.

As we were going to the park again police fired tear gas and we were in the mist of it, which was painful.

To run out of the smoke I had to slide down an earth wall that was made just the day before by bulldozers. I am not sure how I managed to get down there without breaking a limb. Indeed, I am still surprised that no-one died that morning, considering where the people were pushed – right towards a construction area with iron bars and rocks sticking out of the ground. An old wall fell onto the escaping demonstrators, breaking legs and arms, but still that was an easy escape from the police attack.

We were pushed out of the park and police cordoned it off with iron barricades. The news spiralled and people started to come to Taksim in support. As soon as 15 or 20 people gathered together at Taksim, police used tear gas and water cannons to disperse us. This continued all day.

On 12 June a group of lawyers went to the main courthouse in Istanbul to protest the police violence on peaceful protestors. The public prosecutor in charge of the Istanbul courthouse ordered the police to take those lawyers in custody. 

When a lawyer resisted he said to the police: “I am a lawyer. You are breaking the law. You cannot arrest me like this.”

The policeman apparently replied: “Are you teaching me what the law is?” 

The lawyer’s robes were ripped off him and those who resisted the police were pulled to the ground and forcibly arrested and taken to police headquarters.

In all, 49 lawyers were arrested that day by force, despite the fact that they were not breaking any law. They were released after seven or eight hours without charge.

After 17 days, four deaths, hundreds injured and arrested, and a meeting with two groups of people, [prime minister] Erdogan finally said he would respect the decision of the Administrative Court [to halt the building work], and no work would be carried out until the court reached its final decision.

The blind eye to Gezi Park legal proceedings is only one example of Erdogan’s ‘rule of law’. Constitutional amendments on 12 September 2010 provided him with the tools to redesign the judiciary and legal system and, having achieved this, he is now simply uncontrollable. If a court’s decision is not what Erdogan or his clan wants the judges sitting to hear that particular case are replaced by those who will make the decisions the prime minister wants.

Erdogan must be stopped. His autocratic governing practices ignore one of the fundamentals of democracy: rule of law.

We do not want the West to interfere and topple Erdogan; we want them to stop supporting him. I am afraid that if we do not stand against Erdogan’s rule of law he will soon reach his final destination and get off the democracy train.

Yegâne Güley is a partner at Öztürk & Partners in Istanbul