Turkey is taking important legislative measures to combat the depreciation of Turkish Lira vis-a-vis the major currencies.

The amended Article 4 of Resolution No.32 obliges the Turkey residents to denominate the service fees in Turkish Lira (TL) in service contracts and undertaking contracts such as construction, repair and maintenance, architecture, artistic work and etc.

A recent communique exempts certain service contracts from this requirement. In order to benefit from this exemption the legal distinction among service agreements and construction or artistic work contracts should be carefully drawn.

Under the construction or artistic work contracts, the contractor has to construct or develop and deliver the work and the principal has to pay the relelvant contract fee. The most important distinction between such sort of contracts and other consulting or service contracts is the fact that the contractor is autonomous and is not subject to the instructons of the principal.

Whereas, under the service agreements, the consultant or the service provider is subject principal’s instructions and under a duty of obedience.

Consulting agreements are considered sui-generis and depending on the situation, with respect to the aspect of duty of obedience, consulting agreements maybe closer to service and representation agreements or construction agreements. In general, the consultant is also considered autonomous vis-a-vis the principal, the consultant is not subject to instructions of the principal and does not have a liability of obedience in the sense that of the service agrements. Consultants have fiduciary duties and deliver their promised results with duties of care and loyalty.

Consequently, consulting agreements should be evaluated on a case-by-case basis to determine whether the relevant agreement is akin to construction agreements or service and representation agreements. If the consulting agreement can be regarded as a representation or construction agreement, rather than a service agreement, in such case the contract fee can be denominated in foreign currency.

For more information please contact Duygu Kılıç.

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