VZCZCXRO1723
PP RUEHDA
DE RUEHAK #0723/01 1091143
ZNR UUUUU ZZH
P 181143Z APR 08
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 5936
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL PRIORITY 4137
RUEHDA/AMCONSUL ADANA PRIORITY 2866
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 000723 
 
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 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV ECON BEXP TU
SUBJECT: TURKEY: COURT RULINGS LEAVE FOREIGNERS' LAND PURCHASE 
RIGHTS IN DOUBT 
 
REF: ANKARA 699 
 
¶1. (SBU) Summary and comment: The Constitutional Court has issued 
two opinions this year striking down parts of two different laws 
that had allowed foreigners to purchase real estate in Turkey.  A 
January ruling struck down provisions of the Title Deed Law that 
allowed foreign individuals to purchase land, effective April 16.  A 
March ruling struck down provisions in the Foreign Investment Law 
that allowed foreign companies or Turkish companies with foreign 
capital to purchase land in Turkey, effective October 16 (reftel). 
The two rulings came for entirely different reasons, and neither is 
retroactive. 
 
¶2. (SBU) When the January ruling went into effect on April 16, the 
Land Registry Office announced it was barring land sales to foreign 
individuals, but emphasized that foreign corporations were still 
allowed to buy land.  Unfortunately, that same day, the Court 
published the legal reasoning for its March ruling that foreign 
corporations cannot buy land.  Even though the Land Registry 
announcement was legally correct -- the Court's March ruling barring 
land purchases by foreign corporations will not go into effect until 
October - it appeared to contradict the Court's ruling and created 
confusion about foreign land purchase rights.  The Ministry of 
Finance has submitted an amendment for Cabinet approval that would 
lift the Court ruling against land purchase by foreign individuals. 
We expect it also will propose amendments to overturn the ruling 
limiting sales to foreign corporations.  But the damage to Turkey's 
reputation may already be done.   End summary and comment. 
 
The January Decision Affecting Individuals 
--------------- ------------------ ------- 
 
¶3. (U) The Constitutional Court issued rulings in January and March 
striking down provisions of two different laws that allowed land 
purchases by foreigners in Turkey.  The January ruling struck down 
part of the Land Title Law that allows foreign individuals to buy 
property.  The Court annulled a provision that authorized the 
Cabinet to increase the legal limit on land ownership by foreigners 
from 2.5 hectares to 30 hectares.  The Court also canceled the 
article that set a 0.5% limit on the area foreigners could acquire 
in any one province, excluding forest and lake areas.  The Court 
reasoned that 0.5% of land in a province excluding lakes and forests 
was the entire remaining land area in some provinces.  The ruling 
took effect April 16, three months after the Court published its 
legal reasoning for the decision. 
 
¶4. (U) On April 16, the Turkish Land Registry Office announced that 
it would stop permitting property sales to foreign individuals 
pursuant to the January Court decision.  The Land Registry Office 
stated that the ban affects only foreign individuals, and that dual 
nationals and foreign companies registered under the Turkish 
Commercial Code could continue to buy property in Turkey.  The Land 
Registry Office also announced that it sent a draft amendment to the 
Prime Ministry that reportedly limits property ownership by 
foreigners to 2.5 hectares, removes the Cabinet's authority to 
increase this amount, and defines the provincial land acquisition 
limit as 0.5% of the development zone plan.  Criticizing this 
proposal, Finance Minister Unakitan announced that the GOT had 
submitted an amendment to the Cabinet that would overturn the 
January decision and clear the way for foreign individuals to once 
again purchase property in Turkey. 
 
The March Ruling Affecting Corporations 
---------------- ----------------- ----- 
 
¶5. (U) In March (see reftel), the Constitutional Court struck down 
provisions of the Foreign Investment Law that allowed foreign 
corporations, or Turkish corporations with foreign capital, to buy 
land in Turkey.  The ruling said it would go into effect six months 
after the Court published its legal reasoning in the case.  By 
chance, the Court published its reasoning on April 16, the same day 
that the Land Registry banned foreign individuals from buying land 
pursuant to the January Court decision. 
 
¶6. (SBU) To make matters even more confusing, the Court's legal 
reasoning for the Foreign Investment Law decision contradicts the 
statements by the Land Registry Office that Turkish companies with 
foreign capital could buy land.  The Court stated that the 
principles and procedures by which foreign investors can acquire 
property in Turkey must be well-defined by laws and regulations. 
 
ANKARA 00000723  002 OF 002 
 
 
The failure of the Foreign Investment Law to define the limits under 
which foreign companies can acquire property causes uncertainties, 
according to the Court.  Its decision applies not only to foreign 
corporations doing business in Turkey, but also to Turkish 
corporations registered with foreign capital. The GOT has until 
October 15 to amend the Foreign Investment Law before the Court's 
ruling takes effect. 
 
¶7. (SBU) Comment:  We expect that the GOT will push through 
amendments to both the Title Deed Law and the Foreign Investment Law 
to overturn these Court decisions.  But the damage these rulings 
have caused by creating confusion in an already skittish market 
about which classes of foreign investors have the right to purchase 
land in Turkey is already done.  The Land Registry Office's 
statement was legally correct but only confused matters further. 
The Court decisions could further complicate Turkey's efforts to 
attract enough foreign investment to finance its current account 
deficit.  This situation is yet another good example of why foreign 
investors cite the uncertainties, complexities and lack of 
transparency of the legal system as one of the main barriers to 
greater foreign investment in Turkey.  End comment. 
 
DEBLAUW