WORLD TRADE
ORGANIZATIONWT/WGTI/W/51
18 September 1998
(98-3573)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM TURKEY
The following communication, dated 5 August 1998, has been received from the Permanent
Mission of Turkey with the request that it be circulated to Members.
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Turkey's Experience with Bilateral Investment Treaties
The expansion of foreign direct investment (FDI) has increased the importance of investment
on the world economy.  In parallel with this trend, a need for a common framework to promote
predictability for enterprises and to further increase FDI has arisen.  Thus, bilateral investment treaties(BITs) have become one of the most important legal instruments affecting private foreign investment.
Turkey began to negotiate BITs with a view to creating and maintaining favourable
conditions for foreign investment to foster its economic growth in the second half of the 1980s, when
a liberal and flexible foreign investment policy was adopted as a part of the programme of economic
transformation which was launched at the beginning of that decade.  The main objective of this policy
action was to provide fair, predictable and transparent non-discriminatory treatment for foreigninvestment.
Turkey has signed, to date, 53 BITs, 28 of which have entered into force (Table 1).  The
objective of Turkey to conclude BITs has changed over time.  As investments of Turkish enterprises
abroad have increased, BITs became one of the main instruments to provide better conditions forTurkish investors abroad, since most of the host countries lacked a predictable and transparent FDI
regime.  Currently, negotiations with ten countries are going on.
BITs concluded by Turkey establish identical rights and obligations for both parties.  The
provisions typically focus on the treatment to be accorded to foreign investors by the host country andcontain substantive obligations on host governments for the treatment of investors once admitted, and
strict rules for investment protection.  This is based on the fact that a long-term engagement in the
form of foreign investment needs certainty, predictability and certain guarantees in order to balance
the risk of investing abroad.  These obligations typically include:
- a "general treatment" clause incorporating international law standards ("fair and
equitable treatment" or similar clauses);
- a national treatment/MFN obligation which accords to investors and their investments
the best of national treatment or MFN.WT/WGTI/W/51
Page 2
These obligations do not affect the right to gove rn the admission of foreign investors.  The
parties can usually maintain any limitations or controls on the admission that are in place.  Exceptions
allow the participants to safeguard vital interests, such as national security or public order.  The BITs
concluded by Turkey generally cover the following issues:
- Definition of investment and investor.  Agreements broadly define investment
(movable and immovable property, shares, stocks and other forms of participation in
business enterprises or companies, claims to money invested for the purpose of
creating economic values related to investments, copyrights, rights to industrial
property, rights conferred by law or under contract to conduct economic including
commercial activity related in particular to exploration, development, extraction, and
exploitation of natural resources), including intellectual property and other assets,both tangible and intangible.  All sectors and industries are assumed to be covered
under the agreement.
- Promotion and protection of investments.  Each party commits to accord MFN
treatment to the investors and investments of its partner.
- Treatment of investments.  Parties accept to accord fair and equitable treatment to the
investors and investments of its partner.
- Expropriation.  Conditions and rules for expropriation are stated.  Expropriation or
nationalization is allowed for a public purpose, and on condition of being
non-discriminatory and of prompt adequate and effective compensation in line with
customary international law.
- Compensation for losses.  Losses in the territory of the contracting parties owing to
war, civil disturbance or other similar events are accorded MFN treatment.
- Transfers.  Free transfer of payments abroad in connection with investments and, in
particular, returns to investors are guaranteed.  It is underlined that any transfer right
is subject to the applicable deductions (e.g. taxes).  Investors have the right to transfer
funds into and out of the country without delay using a market rate of exchange.
- Settlement of disputes between the contracting parties and an investor of the other
contracting party.  Parties should first seek a settlement to a dispute in an amicable
manner.  In case the dispute cannot be settled in this manner, it will be submitted for
consideration to a competent court of arbitration tribunal of the contracting party in
the territory of which the investments were made, or to the Institute of Arbitration ofthe Chamber of Commerce of Stockholm, or to an ad hoc  arbitration tribunal in
accordance with the Arbitration Rules of the United Nations Commission on
International Trade Law (UNCITRAL).  In vestors may choose between local courts
or international arbitration when disputes between the investor and state arise.  The
arbitral award shall be definitive and bind ing upon both parties to the dispute.  Each
contracting party shall undertake to enforce this award in accordance with its
legislation.
- Settlement of disputes between the contracting parties.  Settlement of disputes
between the contracting parties concerning the interpretation and application of an
agreement will be settled by direct and meaningful negotiations.  If the dispute cannot
be settled in this way, it shall, upon the request of either contracting party, be
submitted to an arbitral tribunal.  Such an arbitral tribunal shall be constituted for
each individual case.WT/WGTI/W/51
Page 3
With regard to the influence of BITs on FDI inflows to Turkey, little is known about how it
has contributed to the growth of FDI, since BITs are only one among several confidence-building
measures that can be used to improve a host country's investment climate.  However, looking at the
trend of investment authorizations according to the country of origin, it can be argued that BITs have
no remarkable effect on the growth of  FDI inflows to Turkey (Table 2).
Concerning efficiency of protection standards brought by BITs, there is very little practical
experience to make an evaluation of the use of BITs.  However, it is observed that BIT provisions for
dispute settlement induce settlement through negotiations and thus prevent disputes from maturing.
The picture to emerge from the analysis of Turkey's experience with BITs reveals that BITs
do not automatically produce an increase in FDI inflows.  However, these agreements are important as
an imperative for including foreign firms at least to consider undertaking investments in a given
country.WT/WGTI/W/51
Page 4
TABLE 1
List of Concluded and Signed Bilateral Investment Treaties by Turkey
STATE SIGNATURE ENTRY INTO FORCE STATE SIGNATURE
Albania 01.06.1992 26.12.1996 Algeria 03.06.1998
Austria 16.09.1988 01.01.1992 Argentina 18.05.1992
Bangladesh 12.11.1987 21.06.1990 Azerbaijan 09.02.1994
Belarus 08.08.1995 20.02.1997 Bosnia-
Herzegovina21.01.1998
Belgium-
Luxembourg30.06.1989 04.05.1990 Croatia 12.02.1996
Bulgaria 06.07.1994 22.09.1997 Cuba 22.12.1997
China 13.11.1990 20.05.1994 Czech Republic 30.04.1992
Denmark 07.02.1990 01.08.1992 Egypt 04.10.1996
Finland 13.05.1993 23.04.1995 Estonia 04.06.1997
Germany 20.06.1962 05.12.1965 Georgia 30.07.1992
Hungary 14.01.1992 22.02.1995 Indonesia 25.02.1997
Japan 12.02.1992 12.03.1993 Iran 21.12.1996
Kazakstan 01.05.1992 10.08.1995 Israel 14.03.1996
Kuwait 27.10.1988 25.04.1992 Italy 22.03.1995
Kyrgyz Republic 28.04.1992 31.10.1996 Jordan 02.08.1993
Former Yugoslav
Republic ofMacedonia14.07.1995 27.10.1997 Latvia 18.02.1997
Moldova 14.02.1994 16.05.1997 Lithuania 11.07.1994
Netherlands 27.03.1986 14.11.1989 Malaysia 25.02.1998
Pakistan 16.03.1995 03.09.1997 Morocco 08.04.1997
Poland 21.08.1991 19.08.1994 Nigeria 08.10.1996
Romania 24.01.1991 07.04.1996 Russian
Federation15.12.1997
South Korea 14.05.1991 04.06.1994 Spain 15.02.1996
Switzerland 03.03.1988 21.02.1990 Sweden 11.04.1997
Tunisia 29.05.1991 07.02.1993 Tajikistan 06.05.1996
Turkmenistan 02.05.1992 13.03.1997 Ukraine 27.11.1996
United States 03.12.1985 18.05.1990
United Kingdom 15.01.1991 22.10.1996
Uzbekistan 28.04.1992 18.05.1995
Countries with which Negotiations Continue
Chile
France
Mongolia
Norway
Portugal
Qatar
Singapore
Thailand
United Arab Emirates
UruguayWT/WGTI/W/51
Page 5TABLE 2
Breakdown of Authorized FDI According to Home Countries
(million US$)
Home Years
Countries 1980-84 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 TOTAL
France 43.08 14.92 8.31 33.11 43.71 233.42 669.06 249.18 353.75 223.15 255.29 476.05 2,370.35 103.94 5,077.32
US 268.20 21.71 24.53 61.07 129.75 137.49 127.84 460.87 197.55 248.34 158.32 231.37 179.44 174.48 2,420.96
Netherlands 39.28 8.70 2.40 20.40 68.30 149.21 34.11 280.30 272.90 179.42 194.02 559.32 338.61 206.11 2,353.08
Germany 144.66 22.49 45.26 105.58 101.61 130.95 145.88 196.41 202.46 146.37 223.46 392.13 226.47 281.59 2,364.32
Switzerland 233.34 20.01 53.29 82.52 115.49 167.22 127.74 109.08 203.51 136.11 54.29 327.75 156.84 50.28 1,837.47
UK 28.73 26.49 22.83 102.61 129.65 280.72 286.41 80.82 109.34 120.49 47.42 161.37 164.80 122.25 1,683.93
Italy 22.40 0.10 4.83 6.09 40.58 74.20 65.86 180.66 119.66 419.29 164.00 98.67 43.24 124.50 1,363.98
Japan 0.05 3.45 2.63 111.53 69.18 73.78 102.71 54.59 36.60 237.06 125.92 283.84 21.14 126.68 1,249.16
Saudi Arabia 4.95 4.36 75.77 7.27 17.32 11.05 4.63 43.95 34.07 15.08 8.44 11.81 8.98 10.11 257.79
Canada 7.52 0.00 5.54 0.58 9.76 6.21 2.24 51.26 22.63 58.31 37.37 41.33 1.42 0.38 244.55
Belgium 13.99 0.16 17.12 4.50 3.85 29.85 18.07 8.27 20.00 21.10 13.43 36.20 70.18 7.61 264.33
South Korea 0.00 0.00 0.20 1.65 0.48 1.01 17.25 0.94 10.29 93.30 0.53 15.94 30.99 17.88 190.46
Bahrain 3.33 6.00 0.95 0.04 1.07 0.58 4.35 6.92 49.70 26.92 11.95 6.44 18.44 4.46 140.15
Denmark 21.36 6.90 4.67 2.05 0.58 31.64 15.76 4.73 3.66 5.21 8.57 3.63 0.44 13.68 122.88
Singapore 0.00 0.00 0.00 0.00 0.05 29.73 25.83 9.67 14.07 16.03 1.32 18.13 6.17 8.35 128.35
Sweden 0.66 0.85 1.03 6.88 3.97 12.01 15.65 13.96 14.39 6.25 8.70 11.84 22.09 7.52 125.80
Iran 12.59 2.78 7.09 8.03 11.17 12.07 5.48 3. 23 8.95 5.80 3.96 5.63 5.35 9.58 101.71
International
FinanceCorporation(IFC)4.46 0.00 0.00 2.13 0.70 5.86 8.57 6. 09 10.47 1.70 20.98 9.76 7.30 3.62 81.64
Panama 0.89 0.67 20.36 2.06 16.10 3.73 3.02 1.74 2.55 0.58 2.11 17.53 0.13 0.00 74.47
Austria 2.82 0.16 0.90 1.06 4.85 8.15 6.53 8.36 8.83 5.55 3.59 32.82 11.20 8.42 103.34
U.A.E. 16.06 0.00 4.64 1.03 3.14 3.68 6.04 8.04 0.32 3.39 0.31 0.23 0.60 0.58 48.06
Syria 4.42 1.70 1.71 2.65 5.53 4.21 11.13 3.56 0.99 2.69 1.69 1.49 10.47 4.58 56.82
Others 102.82 93.04 59.94 92.40 43.68 105.17 157.00 184.63 123.27 91.25 131.94 195.04 142.32 391.60 1,914.10
TOTAL 975.61 234.49 364.00 655.24 820.52 1,511.94 1,861.16 1,967.26 1, 819.96 2,063.39 1,477.61 2,938.32 3,836.97 1,678.20 22,204.67
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