VZCZCXRO6896
PP RUEHDA
DE RUEHAK #0699 1051115
ZNR UUUUU ZZH
P 141115Z APR 08
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 5896
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL PRIORITY 4116
RUEHDA/AMCONSUL ADANA PRIORITY 2851
RUEHRC/USDA FAS WASHDC

UNCLAS ANKARA 000699 
 
SIPDIS 
 
DEPT PASS USTR FOR MMOWREY 
TREASURY FOR OASIA 
USDOC/ITA/MAC/KNAJDI 
DEPT PASS EXIM FOR MARGARET KOSTIC 
USDA OSEC FOR DEP U/S TERPSTRA 
USDA FAS FOR OA YOST; ITP/SHEIKH; FAA/DEVER 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ECON BEXP TU
SUBJECT: TURKISH CONSTITUTIONAL COURT BANS FUTURE REAL ESTATE 
PURCHASES BY FOREIGNERS 
 
¶1. Summary: On March 11, Turkey's Constitutional Court annulled the 
section of the Foreign Investment Law that authorized property sales 
to foreigners in Turkey.  The ruling will enter into force 6 months 
following the issuance of the court reasoning, and it will not be 
retroactive.  The GOT is expected to prepare an amendment to the 
related legislation as soon as the Court issues its reasoning.  This 
decision is the latest in a series of Constitutional Court rulings 
against foreign land ownership, and illustrates well why foreign 
investors cite legal uncertainty as one of their top concerns about 
investing in Turkey.  End Summary. 
 
¶2. On March 11, the Turkish Constitutional Court annulled Article 
3(d) of the Foreign Investment Law No: 4875 that afforded national 
treatment to foreign individuals and companies registered under the 
Turkish Commercial Code when they acquire real estate in Turkey. 
The Court decision came in a lawsuit filed by two members of the 
main opposition party, the Republican People's Party (CHP), in 2003. 
 The ruling is not retroactive and will enter into force six months 
after the Court publishes its reasoning in the Official Gazette. It 
had not done so by April 10. 
 
¶3. The Constitutional Court previously has ruled on numerous 
occasions against property ownership by foreign individuals.  In 
those instances, plaintiffs argued that the GOT should observe the 
principle of reciprocity when granting access to property in Turkey 
and limit property acquisition in village centers and militarily 
sensitive areas.  After each of these rulings, Turkey's Parliament 
enacted new legislation to overrule the Court's decisions.  The most 
recent Constitutional Court decision, in April 2007, annulled a 
provision in the Title Deed Law that authorized the Cabinet to 
increase the legal limit on land ownership by foreigners from 2.5 
hectares to 30 hectares. Since the 2.5 hectare limit defined in the 
law was sufficient for individual investors, and larger 
institutional investors' access to property was regulated under 
different regulations, the GOT did not take immediate action to 
overrule that ruling. 
 
¶4. The March 11 Constitutional Court ruling that blocks foreign 
individuals and companies from acquiring any real property in Turkey 
was reportedly motivated by the widespread suspicion that some 
foreign individuals/entities were using a related article of the law 
to acquire real property in Turkey through shell companies.  Turks 
are historically sensitive about land acquisitions by nationals of 
certain countries, such as Greeks buying property in the Marmara and 
Aegean regions, and Syrians purchasing property in the Southeast. 
 
¶5. Criticizing the Court ruling, Finance Minister Unakitan said 
these types of decisions would not help increase investment flows to 
Turkey.  Unakitan said the GOT was trying to implement an investment 
policy that is open to the world, and the GOT would decide on a 
course of action after examining in detail the reasoning for the 
ruling.  Foreign Investors Association (YASED) Secretary General 
Mustafa Alper urged the GOT to start preparing a new amendment to 
address the Court ruling and argued this ruling would endanger 
Turkey's $20 billion FDI target for 2008.  In press interviews, 
investment bankers commented that this ruling could cause investors 
to reconsider their investment plans in Turkey.  Combined with 
negative global economic trends, this ruling could result in a 20- 
25% reduction in investment flows to Turkey, according to investment 
experts. 
 
¶6. This is a good example of why foreign investors cite legal 
uncertainties as one of their major concerns about investing in 
Turkey (including in a YASED investor survey last year). Once the 
legal reasoning is published, it will be up to the GOT to reverse 
the ruling within the six month deadline.   End Comment. 
 
WILSON