The European Lawyer

Turkey All Practice Area

18 Mar 2011

Global Business and Human Rights - Turkey

Editors: Ferhat Pekin, Duygu Ayas & Insu Tezkan, Pekin & Bayar

Turkey

Pekin & Bayar  Ferhat Pekin, Duygu Ayas & Insu Tezkan

LOCAL HUMAN RIGHTS ENVIRONMENT

Turkey is a party to the various main international human rights treaties and conventions. Based on the provisions of such treaties, which have become part of the domestic legislation, statutory and regulatory rules directly or indirectly covering human rights issues, such as those related to labour, the environment, consumer protection, political rights and freedoms, health, economic, social, cultural and civil rights, have been adopted and implemented.

The main starting point with respect to human rights and the role of international treaties is the Turkish Constitution dated 1982, as amended intermittently. Article 90 of the Turkish Constitution states that ‘International treaties, which are duly put into effect, carry the force of law. No appeal to the Constitutional Court can be made with regard to these treaties on the ground that they are unconstitutional.’ The relevant Article 90 of the Turkish Constitution was amended in 2004, within the scope of the execution of the decisions of the European Court of Human Rights and the European Commission of Human Rights, and the following sentence was added: ‘The provisions of international treaties regarding fundamental rights and freedoms duly put into effect shall prevail in case of conflict between the provisions of treaties and domestic laws on the same subject matter’. Therefore, the Turkish Constitution provides effective protection for the provisions of international human rights treaties once such treaties are signed or ratified by the Republic of Turkey.

Among those international human rights treaties that Turkey is a party to, the most important documents are the Universal Declaration on Human Rights; the Convention for the Protection of Human Rights and Fundamental Freedoms; the International Covenant on Civil and Political Rights (ICCPR); and the International Covenant on Economic, Social and Cultural Rights (ICESCR).

The Universal Declaration on Human Rights is an essential instrument setting out human rights issues at an international level. In this respect, the Turkish Council of Ministers’ decree adopting the Universal Declaration on Human Rights was issued on 6 April 1949. Although the Universal Declaration on Human Rights is not legally binding, the Turkish Constitutional Court used it as the basis for its reference norms in several cases.

The Convention for the Protection of Human Rights and Fundamental Freedoms dated 1950, as promulgated by the Council of Europe, of which Turkey is a member, was signed by Turkey on the date it was opened for signatures. The Law on the Certification of the Convention for the Protection of Human Rights and Fundamental Freedoms and its additional protocol was passed on 10 March 1954. The rights and freedoms regulated under this Convention are supervised by the European Human Rights Commission and the European Court of Human Rights. Under the relevant Articles 34 and 35 of the Convention, the court may receive applications from any person, a non-governmental organisation or group of individuals claiming to be the victim of human rights violations provided that all domestic remedies have been exhausted. There have been many cases before the European Court of Human Rights concerning Turkey and the court has rendered various decisions on many occasions with respect to applications from Turkey or by Turkish citizens. In the scope of the implementation of such decisions, Turkey has made numerous amendments in its constitutional law and also especially in labour law, criminal law, civil law and procedural law.

The ICCPR, dated 16 December 1966, was signed by Turkey on 15 August 2000 with some covenants and reservations and entered into effect on 15 December 2003. The ICESCR dated 19 December 1966, which is supplementary to the ICCPR, was signed by Turkey on 15 August 2000 with some covenants and reservations and entered into effect on 23 December 2003.

Turkey is also a party to various treaties, conventions and rules of the International Labour Organisation. International conventions on labour have obtained the status of domestic law through various laws and regulations implemented over the years. The Turkish Labour Law, which was published in the Official Gazette dated 10 June 2003 and numbered 25134 (TLL), has been harmonised with the norms of ILO in order to enable the implementation of the provisions of such conventions on a national basis.

The Freedom of Association and Protection of the Right to Organise Convention, dated 10 December 1948, was adopted with the law dated 25 November 1992. This convention regulates various fundamental principles such as the right to establish trade unions, right of association and right to organise and bargain collectively. In this respect, the Turkish Law on Trade Unions, dated 5 May 1983, regulates the principles of establishment of trade unions, membership of such unions, confederations and international organisations, their activities, inspection of the trade unions and the sanctions arising from the breach of law in compliance with the above mentioned convention. Furthermore, the law on Collective Bargaining Agreements, Strikes and Lock-outs determines the principles and procedures applicable to strikes and lock-outs, amicable dispute settlement and the execution of collective labour agreements in order to regulate the economic, social and work conditions of the employees and employers.

The Convention concerning Equal Remuneration for Men and Women Workers for Work of Equal Value, dated 29 June 1951, was adopted on 13 December 1966. The fundamental aim of this convention is to remove discrimination with regard to sex and to safeguard the right to remuneration, especially in the business world. The principles of this convention have been incorporated into TLL under the provision titled ‘Principle of Equal Treatment’, stating that application of special protective provisions due to the employees’ sex shall not justify paying them a lower wage.

The Convention concerning Discrimination in respect of Employment and Occupation dated 25 June 1958, which lays out the conditions that are deemed to be discriminatory, was adopted on 22 December 1966. The principles of the referred convention have been incorporated into TLL under the provision titled ‘Principle of Equal Treatment’, stating that dissimilar remuneration for similar jobs or for work of equal value is not permissible and that, in the event that the employer violates the principle of equal treatment in the execution or termination of the employment relationship, the employee may demand compensation.

The Convention Concerning Minimum Age for Admission to Employment, dated 26 June 1973, determining the minimum working age and also the lower age limits for exceptional cases, was adopted with the law dated 23 January 1998. The Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour of 1999, listing the conditions considered to be ‘worst forms of child labour’, was adopted with the law dated 25 January 2001. In this respect, TLL regulates the principles established in accordance with the aforementioned conventions under the provision entitled ‘Working Age and Restrictions on the Employment of Children’ and ‘Medical Certificate for Employees aged under Eighteen Years’.

Turkey also signed the Convention dated 28 January 1981, numbered 108, for ‘the Protection of Individuals with regard to Automatic Processing of Personal Data’, drafted by the European Council with respect to privacy, which is a fundamental human right recognised in the UN Declaration of Human Rights, ICCPR and in many other international treaties. The relevant Article of this Convention requires domestic legislation to enter into force in this respect in order for a member state to ratify the Convention. As a result, the Turkish Ministry of Justice has prepared a draft law on the Protection of Personal Data, which is currently on the agenda of the Justice Commission of the Turkish Grand National Assembly. According to the website of the Turkish Grand National Assembly, this Convention has not been ratified yet. Therefore, there is no specific law regarding data protection in force and customer data is protected under generally applicable provisions in Turkish laws. The Turkish Constitution, the Turkish Civil Code, the Turkish Criminal Code, Turkish Criminal Procedure Law, the Banking Law and the law on Debit Cards and Credit Cards and Communiqué of the Telecommunication Board regarding the Processing of Personal Information and Protection of Secrecy in the Telecommunication Sector, include the main legal rules and restrictions on collecting, storing and using personal data in Turkey.

The Consumer Protection Law numbered 4077 (the CPL) was amended by the law numbered 4822 in order to ensure its compliance with EU legislation. In the scope of the amendments, the definition and concept of the ‘goods’ has been enlarged. Pursuant to Article 1 of the CPL, the purpose of this law is to take measures in order to protect the health, safety and economic interests of consumers in line with the public good, building consumer awareness, indemnifying losses incurred by consumers and protecting them against environmental hazards to promote consumer initiatives in order to protect consumer interests and to encourage volunteer organisations aimed at devising consumer-related policies.

As provided above, there are various international treaties that Turkey is a party to and numerous domestic laws and regulations have been passed to protect human rights and freedoms at a general level. The implementation of such rules and the level of compliance have taken a slower route and Turkey has experienced problems at differing levels for enforcing human rights protections. This fact is also demonstrated by the number of cases filed by applicants before the European Court of Human Rights.

The above mentioned rules and provisions on the protection of human rights and fundamental freedoms are generally brought by individuals against public bodies for the violation of basic human rights and fundamental freedoms. On the other hand, corporate social responsibility (CSR) is not a concept defined under Turkish laws yet and the link between human rights violations and corporate responsibility has not been established at a theoretical level. Therefore, it is unprecedented for an individual to initiate a case against a company on the grounds that such company has violated human rights and fundamental freedoms.

INTEREST IN GLOBAL BUSINESS AND HUMAN RIGHTS

It is difficult to state that there is strong interest in Turkey regarding the relationship between global business and human rights. As mentioned above, the concept of CSR is a novelty. However, there is a strong prospect that the issue will take an important place in discussions over the coming years. On the other hand, there are numerous institutions, both public and NGOs, at various levels, whose work and studies are in areas related to CSR, social policies and impact of commercial operations on fundamental rights and freedoms.

The Human Rights Inquiry Committee was the first mechanism instituted by the Turkish Grand National Assembly at national level to protect human rights and freedoms in accordance with the standing orders of the Turkish Grand National Assembly and the relevant laws. The Committee works under the auspices of the protection accorded by the Turkish Constitution and various international treaties and declarations. The object of this committee is to investigate the conformity of the implementation of human rights within the Turkish Constitution and the international treaties that Turkey adheres to and improve their implementation. Preparing a report on annual activities and results, as well as the activities concerning human rights abroad, is one of the duties of the committee. The reports are mostly related to the issues regulated under the various international treaties. However, no report on global business concerning human rights has been issued to date.

The Turkish Bar Association Human Rights Centre is the only independent quasi-public institution dealing with human rights abuses and protection of fundamental freedoms. The Turkish Bar Association Human Rights Centre is made up of lawyers and academics. Its aim is to arrange vocational training programmes and panels and seminars and conferences on the right to a fair trial and to review and evaluate the international conventions in terms of the Turkish Constitution and legislation.

There are various non-governmental organisations (NGOs) active in Turkey on human rights issues, such as the Human Rights Foundation of Turkey, Human Rights Association and Turkish Economic and Social Studies Foundation (TESEV).

The Human Rights Association is a non-governmental, voluntary organisation that was founded in 1986. The Association monitors violations, prepares reports within the framework of these observations and announces them to the public, as well as making applications to the relevant national and international institutions and organisations. The Human Rights Association founded the Turkish Human Rights Foundation (HRFT), a non-governmental and non-profit organisation established in accordance with the Turkish Civil Code for treatment and rehabilitation of torture victims in 1990.

TESEV, which is another NGO active in Turkey, started the Good Governance Programme with the aim of including academia, civil society and its members in the process of enacting laws with respect to good governance. The principles of good governance, which are promulgated by TESEV, are listed as participation, accountability and transparency. TESEV’s Good Governance Programme is established in order to strengthen the relevance between civil society and public administration, to create joint initiatives on issues fundamental to social life and to inform the public. The Good Governance Programme also aims to contribute to administrative reform by designing projects. TESEV also has projects on public sector reform, local governments, the fight against corruption and the right to information, which are also supported by the United Nations Development Programme.

We have not identified any official correspondence between the special representative and the government of the Republic of Turkey to date.

CORPORATE AND DIRECTORS’ DUTIES

The fundamental piece of legislation that governs the transaction of corporate entities and the liabilities of directors are the provisions of the Turkish Commercial Code number 6762, published in the Official Gazette, number 9353, dated 9 July 1956 (TCC).

The TCC regulates the liabilities of corporate entities and the directors (ie, the members of the board of directors of a company) in general. Accordingly, there is no specific legislation that deals with the liabilities of corporate entities and directors from a perspective of human rights standards and compliance.

Pursuant to the relevant provisions of the TCC, in the event that the directors fail to perform their duties under the applicable laws or the articles of association of the relevant company, either intentionally or negligently, they would be liable towards the company. Furthermore, the directors have a general obligation to act diligently and loyally for the benefit of the company’s interests. The liability of the directors is based on the notion of ‘fault’. The directors shall be jointly liable for the damages resulting from the violation of their duties granted to them. Under Article 336 of the TCC, the directors are jointly liable for the failure to perform the duties imposed upon them by the applicable laws.

Within the perspective of human rights requirements compliance, the question becomes whether compliance with human rights laws should be considered among the duties imposed upon the directors by the applicable laws, failure of which would cause certain liabilities for the directors. There may be an argument that, since, as stated above, the international covenants on human rights have the force of law in domestic legislation, they form part of applicable laws and, therefore, impose certain duties upon directors. This argument is obviously quite theoretical and it is not very easy to find a specific instance under the provisions of the international covenants on human rights that could create certain obligations or liabilities for directors. In practice, there has been no case brought before the Turkish commercial courts in this respect and there is currently no jurisprudence or precedent, which could indicate that such a link or relationship may be established. However, on a theoretical level, provided that a specific instance where violation of a provision of international covenants on human rights specifically imposed certain duties on the directors of a corporate entity can be established, it may be possible to develop an argument for a cause of action on that basis. 

CORPORATE REPORTING

There is currently no specific duty imposed on the directors or the shareholders of a company under Turkish laws to report on human rights, whether in annual accounts or elsewhere. The issue of the requirements of stock exchanges to report on human rights is discussed below.

DERIVATIVE ACTIONS

The TCC also regulates derivative actions against directors who do not comply with their duties. The relevant company is entitled to a cause of action in the event of the liability of directors. In order to allege the directors’ violation of their liabilities, a resolution of the general assembly of shareholders is required. Furthermore, the minority shareholders holding 10 per cent of the share capital (five per cent for publicly held companies), the statutory auditors or the recently appointed directors may bring a lawsuit against the directors, on behalf of the corporate entity and/or the creditors. The subject matter of the action is a claim for indemnification of the damages caused by the faulty actions of the directors.

As stated above, the liability of the directors for violation of human rights covenants, which have become domestic legislation, may be theoretically possible provided that a violation of a specific provision of law imposing duties on the directors can be established. Once the required element of violation of a specific provision of law imposing duties on the directors is present, the shareholders or the auditors may theoretically have a derivative cause of action. However, as mentioned before, to date, there has been no jurisprudence or court precedent with respect to the directors’ liability arising from the violation of human rights.

INSTITUTIONAL INVESTORS

The Istanbul Stock Exchange (ISE) works closely with the local and international business community to encourage discussion, research and implementation of environmental and social and corporate governance issues. There are already 191 Turkish institutions that participate in the UN Global Compact, the world’s largest voluntary corporate responsibility network, which established principles in the areas of human rights, labour, environment and anti-corruption for voluntary participation of all kinds of institutions. In this context, the Istanbul Stock Exchange has recently hosted the Responsible Investment Event with the Federation of Euro-Asian Stock Exchanges and has become a signatory to the Principles of Responsible Investment under the category of ‘Professional Service Partner’. This was considered an opportunity for Turkish investors to join the responsible investment network supported by the UN.

The UN Global Compact has also been organised on a national basis in order to increase the number of participants in the Global Compact. In this respect, in Turkey, the Global Compact Local Network (GCLN) was launched in 2002. The network unites a wide range of companies and organisations committed to the principles of responsible corporate citizenship. The GCLN has recently adopted a new sector-specific approach, which identifies key sector issues and ensures effective implementation of global compact principles by the companies in the sector. Accordingly, the relevant committee of the GCLN has selected three main sectors, namely pharmaceuticals, automotive and textiles. Furthermore, the GCLN organises workshops in order to involve all interested parties and sector representatives in identifying key issues for this specific sector in applying Global Compact principles in this industry and the challenges of applying each of the Global Compact principles in this specific sector, as well as potential solutions to these challenges. The GCLN aims to involve industry organisations in this effort in order to make it easier to raise awareness throughout the sector.

For obvious reasons, these efforts are not sufficient to foster a stronger impulse for institutional investors to adhere to CSR principles. To bring more awareness on this issue and to impose further obligations on institutional investors, further projects and workshops on legislative requirements, involving the market players and the regulatory authorities, would prove useful.

SHAREHOLDER ENGAGEMENT

There is a draft proposal of the new TCC, which is currently under the review of the Justice Commission of the Turkish Grand National Assembly, and the referred new code is expected to enter into force within a number of years. Both the current TCC and the draft TCC should be taken into consideration in analysing shareholders’ rights, especially the rights of minority shareholders. Pursuant to the applicable provisions of the TCC, one or more shareholders, whose combined shareholding represent at least 10 per cent of the share capital in non-publicly held joint stock companies, are considered to constitute the minority. If the general assembly meeting of the shareholders has decided not to initiate any legal proceeding against the directors, and if the minority shareholders have voted at the general assembly meeting that a lawsuit action should be initiated, then the auditors must initiate legal proceedings (fidelity action) on behalf of the company against the directors within one month of the request of the minority shareholders.

The draft of the TCC will entitle the shareholders to request information with respect to the business of the company and the method and consequences of the audits, directly from the board of directors during the general assembly meeting. The shareholders who have not obtained any response to their requests, or whose requests have been rejected, can apply to the commercial court of first instance, to receive such information.

Pursuant to the TCC, the minority shareholders may request an extraordinary general assembly to be convened or for additional matters to be inserted into the agenda of a general assembly meeting. In addition, provisions may be inserted into the Articles of Association of the company, strengthening the rights and interests of the shareholders who do not hold the majority of the shares and increasing the meeting and/or decision quorums specified in the TCC.

Although the routine audits carried out in companies will not refer to any issues related to human rights and CSR, in the event that the general assembly of shareholders passes a resolution, the implementation of which will be clearly against the international human rights treaties that Turkey is a party to (ie, against domestic laws), the minority shareholders will be entitled to raise an objection during the meeting and, if the objection is not sustained, to have a cause of action to annul the resolution by a court judgment.

Similarly, minority shareholders are entitled to put forward resolutions for consideration at the general assembly meeting, as provided above, and some of those resolutions could include appropriate resolutions regarding human rights.

STOCK EXCHANGE INDICES

The main pieces of legislation that regulate publicly held companies in Turkey are the provisions of the Turkish Capital Markets Law number 2499 (the CML), and the communiqués issued by the Turkish Capital Markets Board (the CMB), as well as those issued by the relevant stock exchange. The listing requirements and principles for securities are regulated by the Istanbul Stock Exchange Listing Regulation. However, the Executive Council of the ISE may also determine such requirements and principles upon the approval of the CMB.

Securities may be delisted permanently or temporarily by decision of the Executive Council by consulting, or upon approval of, the listing committee under the circumstances listed in the above mentioned regulation. A company which does not comply with its written declaration stating that it shall comply with the public disclosure requirements and other regulations of the ISE may be delisted permanently or temporarily from the ISE.

The ISE established a ‘Watch List Market’, with the aim of providing an organised and liquid market for trading of stocks of companies in order to protect investors’ rights and public interest by preventing the disclosure of incomplete, inconsistent and/or untimely information to the public and providing compliance with the existing rules and regulations, as well as other situations leading to the delisting of stocks and/or dismissal from the related market temporarily or permanently.

However, it should be noted that companies may be delisted from the ISE only for their failure to comply with the regulations instituted by the ISE. Therefore, there are no sample cases or specific legislation regulating the delisting of companies due to their failure to comply with human rights standards.

REGULATORY ENFORCEMENT

The Turkish Industry and Business Association (TUSIAD) is an association with the purpose of contributing to the formation and development of a social order where institutions adhere to rules of the universal principles of human rights, freedom of thought, belief and association. The TUSIAD, being the largest business association in Turkey, effectively acts as a lobby group and engages in activities by communicating its opinions and proposals to the decision makers in order to ensure the connection between the Turkish industrialist and the decision makers on various subjects. Any real or legal person adopting the purposes of the association and fulfilling the requirements set forth in the by-laws of the association may become a full member. The member who no longer fulfils the requirements set forth in the law and the association’s by-laws, and/or who does not act in compliance with the by-laws of the association and business ethics principles, may be removed from the membership. TUSIAD has established different committees with different areas of expertise. The Company Affairs Committee is one of these committees and is composed of different working groups, namely the Corporate Governance Working Group, the Consumer Rights Working Group and the Company Management Working Group, etc.

With correct impetus and preparation, it may be possible for TUSIAD to implement CSR rules for its own institutional members and impose upon them certain internal rules or disciplinary actions to foster awareness of CSR and promote compliance with social policy considerations.

LIABILITY OF TURKISH MULTINATIONAL PARENT COMPANIES FOR FOREIGN SUBSIDIARIES

The TCC adopts the ‘sole obligation principle’ with respect to the liabilities and obligations of the shareholders of joint stock companies. The sole obligation principles means that the only obligation of shareholders is to provide their share capital contributions and the shareholders’ liabilities are limited to the share capital amount that they have subscribed. Under the rules and provisions of the TCC, the shareholders will not be, directly or indirectly, encumbered with any further debts or obligations under any name whatsoever.

The issue of the liability of the parent companies is usually raised in matters related to tax legislation, mainly with respect to transfer pricing and disguised earnings, regarding the related party transactions between the parent and subsidiary.

Turkey is also one of the countries that harmonised various double taxation treaties it had executed by taking the Organisation for Economic Cooperation and Development model as a basis with its domestic legislation and, accordingly, the article of Turkish Corporate Tax Law concerning ‘disguised earnings’ has been amended and its scope has been extended in a way including the distribution of disguised earnings through transfer pricing.

There are no specific rules or regulations on the liabilities of parent companies under the current TCC. However, the draft TCC regulates the responsibility of the parent company and in the case of wholly owned subsidiaries, the responsibility of the organs of the subsidiary company. Accordingly, the responsibility of the parent company is based on ‘damages’ resulting from the abuse of its power. In other words, in the event that the subsidiary company takes advantage of and abuses its affiliation with the parent company, the related third party person who suffers damage from the actions of the subsidiary company shall be entitled to claim its damages from the parent company, as per the provisions of the draft TCC. As mentioned above, the organs of the subsidiary companies shall only be liable if such subsidiary is wholly owned by the parent company.

The provisions of the draft TCC are not yet in force and currently there is no rule or legislation imposing duties on a Turkish parent company. Therefore, generally speaking, a parent company will not be liable, as a matter of Turkish law, for any acts of its Turkish incorporated subsidiaries that may be alleged to have infringed the human rights of individuals overseas. To the extent the obligations of a parent as shareholder in a subsidiary are governed by laws other than Turkish laws, the law of the place of incorporation of a foreign subsidiary may provide different rules and regulations. On the other hand, a Turkish court will hear the objection of forum non conveniens where the Turkish parent company is sued in Turkey for the acts of its foreign subsidiary and may dismiss the action based on lack of jurisdiction.

CLASS ACTIONS

The class action issue is currently regulated under the CPL. Pursuant to Articles 23 and 24 of the CPL, a class action may be initiated by the Turkish Ministry of Commerce and Industry, consumers or consumer organisations. A provision on class actions has been set out in the draft Code of Civil Procedure. Within this framework, in order to protect the interest of the members of the organisations and other legal entities or the sector they represent, such organisations or legal entities may initiate a class action to determine the rights of the related parties on their behalf, removal of the illegal situation or the prevention of any future breach of their rights.

SECURITIES LAW ISSUES

In accordance with the Communiqué of the CMB Regarding Public Disclosures, serial VIII, number 54, all companies listed on the ISE are required to disclose their financial statements, explanatory notes, material events and all other disclosures via the Public Disclosure Platform on the internet. Pursuant to the Communiqué, any and all material events that may affect the value of capital markets instruments publicly traded on an exchange or investors’ investment decisions, or exercise of their rights shall be publicly disclosed. This platform was developed collectively by the CMB, ISE and the Scientific and Technological Research Council of Turkey (TUBITAK) and is managed by the ISE. The aim of imposing a public disclosure obligation is to ensure that the capital market operates in openness through a complete and accurate disclosure. To the extent that non-compliance with human rights requirements would have an effect on the value of the shares or investors’ decisions or would cause a potential legal liability, such fact, event or occurrence will be required to be disclosed.

The system allows all users access to both the current and past disclosures of a listed company and to access the current announcements and up-to-date general information about all listed companies on an equal and a timely basis and to enquire into basic comparisons or analyses among companies.

The ISE also requires companies to incorporate statements relating to compliance with Corporate Governance Principles, which are promulgated by the CMB, in their annual reports and websites, if any, and to issue a corporate governance compliance report to reflect their position with respect to compliance with and implementation of such principles. As issued by the CMB, the Corporate Governance Principles are non-binding rules (comply or report approach) centred on the concepts of equality, transparency, accountability and responsibility and are applicable to all listed companies. Although they are not legally binding, non-compliance with Corporate Governance Principles requires the companies to provide an explanation for their non-compliance (the English text can be found at www.spk.gov.tr). The implementation of the principles is optional. However, an explanation concerning the implementation status of the principles, conflicts arising from inadequate implementation of these principles and explanations as to whether there is a plan for change in the company’s governance practices in the future, should all be included in the annual report and disclosed to the public.

A company seeking a listing on the ISE must issue a circular and prospectus as required by the CMB. There is no specific requirement for the prospectus to comment on human rights issues. However, the prospectus must contain, among other things, the information necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the issuer. Furthermore, upon an application to the CMB for the registration of the shares to be offered to the public, the draft Turkish prospectus is published on the website of the CMB. If an issuer was not in compliance with human rights requirements or in the event of a potential legal liability based on such non-compliance, then there could be a requirement to make appropriate disclosure in the risk factor of the prospectus. 

We are not aware, however, of any litigation in Turkey based on an allegation of misleading or incomplete disclosures about human rights issues in a prospectus.

The ISE is one of the institutions which have adopted the OECD guidelines, constituting a set of voluntary recommendations to multinational enterprises in all major areas of business ethics, including human rights, environment, information disclosure, combating bribery and consumer interests, etc.

Turkey is one of the 31-member countries maintaining a permanent delegation in the OECD. By being a member of the OECD, Turkey’s ambassador plays an important role in acting as a liaison between the organisation and national authorities. In this respect, the OECD has established two specialised offices in Turkey: the Centre for Private Sector Development in Istanbul, providing a central platform for co-operation between the OECD and emerging and transitional economies in Eastern Europe, Central Asia and the Caucasus on private sector development policies; and the OECD Multilateral Tax Centre in Ankara, which organises taxation workshops and seminars that contribute substantially to integrating transition economy countries in the process of liberalisation and the market economy.

Due to the fact that the OECD principles are non-binding and merely serve as a reference point, countries may define their own corporate governance principles within their own national legislative and regulatory framework.

PRODUCT LIABILITY ISSUES

The main instruments of social responsibility are corporate governance principles, multinational frame agreements and social labels.

Corporate governance principles are instruments for the internal management of enterprises and are used to impress global shareholders and to inform consumers in the areas of business relations, competition, human rights, environment, protection of consumers and corruption. Corporate governance principles determined by their own initiatives regulate the relationship between shareholders. Although these principles are not legally binding, they may be inserted into employment agreements or personnel regulations.

Multinational frame agreements mean the agreements executed between employers and labour organisations beyond the national limits. In general, union rights, collective bargaining rights, equal opportunities and labour safety constitute the scope of such agreements.

Social labels, one of the methods used for documentation of the corporate governance principles, is the information provided to consumers by the manufacturer or reseller. Social labels have the purpose of protecting consumers and employees.

The CPL and its implementing regulations provide specific protection for consumers regarding product liability. When it is compared to the Turkish Code of Obligations, the CPL and its implementing regulations extend the scope of product liability by increasing the number of persons who can be held liable and by providing for mandatory product warranty. Accordingly, several persons or entities such as the manufacturer, seller, agent and representative may be jointly or severally liable to the consumer. Such joint and several liabilities enable the consumer to sue the most promising person or entity and it further prevents manufacturers from escaping liability by using shell companies. The consumer may request a full price refund or a reduction in the price or substitution or repair of such defective product from the seller. In addition to these alternative remedies, in the event that a defective product causes death or injury or damages, the consumer is entitled to claim compensation from the manufacturer of such product.

The Regulation on Liability for Damages caused by Defective Products, published in the Official Gazette dated 13 June 2003, also gives a definition of defective products and explicitly clarifies that product liability is strict liability. This means that the producer, manufacturer or importer of the product does not have to be at fault in order to be held liable. With regard to product liability, the consumer simply has to establish the causality between the damage and defective product in order to claim material and moral compensation.

However, we are not aware of any litigation in Turkey based on the link between product liability and human rights issues.