Recent Development
In an effort to liberalize railway operations in Turkey and enable private companies to participate in the rail transportation business, the Law on the Liberalization of Rail Transport[1] (“Law“) was issued in 2013. The Law redefined the status of the Turkish State Railways (“TCDD“) and ended its monopoly over certain operations of the railways. On August 19, 2016, the Ministry of Transportation, Maritime Affairs and Communications (“Ministry“) issued the highly anticipated Regulation on Authorization of Railway Operations (“Regulation“)[2], providing guidelines on how private companies can operate in the sector.
Interested companies will be able to conduct seven different types of operations upon receiving one or more of the following permits issued by the Ministry:
- railway infrastructure operator permit (demiryolu altyapı işletmecisi yetki belgesi);
- passenger train operator permit (yolcu treni işletmecisi yetki belgesi);
- cargo train operator permit (yük treni işletmecisi yetki belgesi);
- railway terminal or station operator permit (gar veya istasyon işletmecisi yetki belgesi);
- organizer permit (organizatör yetki belgesi);
- agency permit (acente yetki belgesi); and
- broker permit (komisyoncu yetki belgesi).
What the Regulation brings
- Either private companies or TCDD Taşımacılık A.Ş., the TCDD subsidiary which will be incorporated in accordance with the Regulation, will conduct the railway operations listed above in railway areas assigned to them through the relevant permit. TCDD’s monopoly over the operation of the railway traffic on the national rail network will remain in place.
- The permits granted pursuant to the Regulation will be valid for ten years and may be renewed upon application to the Ministry. Companies holding a permit cannot cease its operations for more than a year.
- Permit fees set out in the Regulation vary from TRY 25,000 to TRY 100,000. These fees were recently criticized by potential investors as too expensive, and the criterion for each permit’s fee as too vague. For a full list of permit fees, please click here.
- Private companies may conduct more than one of the operations listed above by obtaining the relevant permits from the Ministry.
- The Regulation imposes certain capacity requirements to obtain a passenger train operator permit or cargo train operator permit. To obtain a passenger train operator permit, the company must own or lease at least six passenger wagons and two locomotives or two train sets. Similarly, obtaining a cargo train operator permit requires the company to own or lease wagons with a load-carrying capacity of at least 1,500 tons and at least two mainline locomotives. Alternatively, applicant companies may provide a written undertaking to the Ministry showing they will own or lease these vehicles prior to signing the access agreement.
- An insurance policy with a minimum amount of TRY 20,000,000 coverage per accident and valid for at least one year must be submitted to the Ministry.
- In addition to the required permits, private companies must install a safety management system and obtain a safety certificate from the Ministry to initiate their operations. This safety system must be installed within six months following the receipt of the relevant permit.
- Private companies cannot assign the permit to third parties; only the company granted the permit may use it. If a permit holder’s legal or financial status changes, particularly in case of a merger, it must obtain the Ministry’s prior approval. Similarly, if the company’s shareholding structure, directors and/or share capital change, it must notify the Ministry within 15 days following the change.
- The Ministry may cancel the permit if, among others, the permit holder company (i) is bankrupt; (ii) fails to meet insurance policy requirements; (iii) fails to initiate its operations within additional six-months-period; or (iv) fails to meet the minimum capacity requirements for the third time within a permit term of ten years.
Conclusion
This Regulation establishes the principles of the railway liberalization process and provides a clearer outlook for potential investors regarding their operations and prospective investments. Important key factors of the liberalization process, such as infrastructure access fees and energy utilization fees, still remain unclear; we expect future legislation to address these issues in 2017. The inclusion of private companies into the Turkish railway operations is expected to bring in a significant amount of new investments by 2023.
Please contact us if you have any questions about the implementation of the new Regulation.
[1] The law no. 6461 published in the Official Gazette no. 28634 on May 1, 2013.
[2] Published in the Official Gazette no. 29806 on August 19, 2016.
