The bid for EU accession is forcing Turkey to rethink its unfriendly attitude to foreign law firms. Julia Berris reports
Last month, Barack Obama campaigned for Turkey’s accession to the EU on a trip to Istanbul. The US President’s support is welcomed by the Turkish government, which has long suffered a challenging route to entering the European political system.
But although Obama supports the country’s accession, opposition to it is widespread.
Turkey has come under fire for its political instability and poor human rights record, casting doubts on its EU aspirations.
For law firms, Turkey’s accession is hugely significant and the journey to get there has changed the legal landscape. If Turkey were to accede it would push the country towards a more liberalised legal market, creating expansion opportunities for international firms.
Local and international firms are subjected to stringent rules to gain approval to practice. Until recent years international law firms were unable to register formally with the Turkish Bar Counsel.
While some progress has been made, there has not been an influx of international law firms into the jurisdictions.
“The Turkish bar regulations are among the toughest in Europe,” says Denton Wilde Sapte Istanbul-based partner Brett Hailey. “The registration process is complicated and hard to understand. It’s very challenging for international law firms.”
There are four main international law firms present on the ground in Turkey – Gide Loyrette Nouel, Salans, Denton Wilde Sapte and White & Case.
All have local associations, as required by the Turkish Bar Council. Core practice areas include project finance and infrastructure, as well as media and telecoms.
The desire for accession to the EU has prompted the Turkish government to create industry regulators, helping to attract foreign investment and bring Turkish laws more in line with the country’s European counterparts.
The creation of an energy regulator in Turkey was viewed as groundbreaking and a big step in the right direction.
“Having independent regulators is crucial,” says White & Case Istanbul-based partner Asli Basgoz. “Doing deals in an environment without a regulator is very difficult. This has helped the energy sector and makes Turkey much more appealing to international investors.”
Turkey has come a long way, with laws being implemented in various sectors, including competition and energy and infrastructure, as well as the introduction of a commercial code of conduct.
Despite the shift, lawyers argue that more needs to be done to create a more sophisticated legal market that is genuinely in line with the rest of Europe.
“There’s been harmonisation but only in niche areas,” says Hailey. “Progress is being made but it’s a very slow process. Not being a part of the EU has not been a hindrance for us, but the liberalisation of the legal market that accession would bring would have an impact on how we develop and would attract more international firms to Turkey.”
It is thought that progress is being hindered by the Turkish bar’s reluctance to modernise and allow more international firms to enter the country.
Doing so will see these firms competing directly with local law firms for inbound and outbound legal mandates.
“The changes that have happened have not been out of choice,” says one Istanbul-based partner. “The bar has had to do it because of the desire for EU accession. If Turkey wants in, it has to change.”
Globalisation and increased volume of cross-border deals has also forced Turkey’s hand. International business is now unavoidable and regulation to assist the increase in trading is required from Turkey itself.
One thing is certain – law firms will welcome any developments. Hourly rates can be as much as 50 per cent lower than those commonly found in Western Europe and the US.
“Liberalising the market would help improve rates,” says Hailie. “We’d definitely welcome more international law firms in Turkey and hope the necessary changes are made.”
But the wait could be a little longer yet. The credit crisis has caused most international firms to hunker down and concentrate on domestic matters. Turkey’s day is still to come.
Turkey: Eu accession timeline
1963 Turkey signs an agreement for association with the then European Economic Community (EEC).
1978-79 EEC recommends that Turkey applies for membership.
1980 Military rule of Turkey is imposed after the army overthrows the government. The EEC relationship is damaged.
1983 Military rule ends after parliamentary elections are held. European relations are improved.
1987 Turkey applies for full EEC membership.
2003 The EU demands that Turkey strips the military-controlled National Security Council of its executive powers.
2005 Turkey expands its customs union with the Euh to new member state Cyprus. Accession talks with Turkey are officially launched.
2006 Eight of the 35 policy areas into which negotiations are divided are suspended by EU foreign ministers.
2007 Turkey declares to international community that it is committed to amending laws by 2013 to enable it to join. Membership talks with Turkey are then extended by the EU to new policy areas.
Discussions on monetary and economic policy are not involved.
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